Daily Tax Update - April 26, 2012: Subcommittee Holds Hearing On “Tax Extenders”

SUBCOMMITTEE HOLDS HEARING ON "TAX EXTENDERS":   Today, the House Ways and Means Subcommittee on Select Revenue Measures held a hearing on expiring tax provisions (also known as "tax extenders").

  • Subcommittee Chairman Tiberi said, "I commend Chairman Camp for his leadership in working to overhaul the tax code.  As he said in the first hearing of this congress, tax reform will be a long process.  In the meantime we must continue our work on the current tax code.  And unfortunately, the current tax code is riddled with scores of provisions that have been enacted on a temporary basis.  I say riddled not because I believe all these provisions are bad but because – while there are rare occasions when it makes sense to enact temporary tax provisions, such as during an economic downturn – most of the temporary provisions were made temporary not for policy reasons, but because of arcane budget or Senate rules.  Making tax policy this way wreaks havoc on the ability of families and businesses to plan for the future with some certainty."  Tiberi added, "With a few exceptions, temporary tax provisions that are worthy should be made permanent.  Those that are not worthy should be terminated.  That kind of certainty might not happen until we pass comprehensive tax reform, but in the meantime today’s hearing provides a formal opportunity for the subcommittee to hear from our House colleagues about the merits of extending—or not extending—many of these tax policies."
  • Tiberi continued, "Last year, Congressman Neal and I introduced H.R. 749, which would permanently extend the Subpart F exception for active financing income.  A majority of the Members on the Ways & Means Committee are now cosponsors of the bill.  In my view, it is among the most important recently expired provisions that must be extended. Further extension of that provision, which simply extends to financial services businesses the same tax treatment as other active trades or businesses conducted outside the US, is essential to the competitiveness of US companies seeking to do business internationally."  Tiberi added, "Deferral of active foreign income is a fundamental component of the current US international tax code.  From 1909 through 1986, active foreign financial income received the benefit of deferral consistent with other types of active foreign income.  Indeed, in 1962 Congress chose not to subject active banking, financing or similar business income to immediate taxation when it crafted Subpart F.  For a brief period from 1986 to 1997, the active financing income exception was repealed.   However, in 1997 Congress again recognized that such income is active and should not be subjected to immediate taxation under Subpart F.   Since then, the exception has been extended six times: for one year in 1998, for two years in 1999, for five years in 2001, for two years in 2006, for one year in 2008, and for two years in 2010 (covering 2010 and 2011).  The exception should again be extended, as it is consistent with a fundamental principle of US international taxation that foreign earned active income should be eligible for deferral.  Also, extension of the subpart F exception for active financing income will create jobs here in America.  Many tens of thousands of jobs in the US are directly attributable to supporting financial services businesses conducted abroad or serving global customers.  Further, US manufacturers rely heavily on the active financing rules to provide competitive financing for the purchase of goods made in the US and exported."  Tiberi added, "The active financing exception is a poster child for tax extenders provisions whose temporary nature have no policy justification.  I look forward to discussing its permanency in the context of tax reform and I continue to support its temporary extension in the meantime."

MISCELLANEOUS GUIDANCE RELEASED:

Notice 2012-31 describes and requests comments on several possible approaches to determining whether health coverage under an eligible employer-sponsored plan provides minimum value.  Beginning in 2014, eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit under § 36B only if they are not eligible for other minimum essential coverage, including coverage under an employer-sponsored plan that is affordable and provides minimum value.  A plan fails to provide minimum value if the plan covers less than 60 percent of the total allowed costs of benefits provided under the plan.  If an employee receives a premium tax credit an applicable large employer may be liable for an assessable payment under § 4980H.

Notice 2012-32 invites comments on the reporting requirements under § 6055 of the Internal Revenue Code for health insurance issuers, government agencies, employers that sponsor self-insured plans, and other persons that provide minimum essential coverage to an individual.  Minimum essential coverage includes individual health insurance coverage, eligible employer-sponsored plans, and government-sponsored coverage such as Medicare, Medicaid, TRICARE, and veterans’ health care.  Entities  providing minimum essential coverage after January 1, 2014, must file annual returns reporting information for each individual covered.

Notice 2012-33 invites comments on reporting under § 6056 by applicable large employers (as defined in § 4980H(c)(2)) that are subject to § 4980H.  Section 6056 requires reporting of certain information on employer-provided health care coverage provided on or after January 1, 2014.  Notice 2012-33 advises the public that the Treasury and IRS intend to propose regulations implementing § 6056 and invites comments on issues arising under § 6056, including on possible approaches for coordinating and minimizing duplication between the information required to be reported and furnished by employers under § 6056 and information required to be reported and/or furnished by employers or other persons under other applicable Code provisions. 

TAX BILLS INTRODUCED APRIL 25TH:

1. [112th] H.R.4623 : To amend the Internal Revenue Code of 1986 to expand and make permanent rules related to investment by nonresident aliens in domestic mutual funds.
Sponsor: Rep Paulsen, Erik [MN-3] (introduced 4/25/2012)      Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 4/25/2012 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112th] H.R.4643 : To amend the Internal Revenue Code of 1986 to expand the availability of the cash method of accounting for small businesses, and for other purposes.
Sponsor: Rep Berg, Rick [ND] (introduced 4/25/2012)      Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 4/25/2012 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
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