Daily Tax Update - February 5, 2013: President Calls For Short-Term Fix and Tax Reform to Avert Sequester Cuts

PRESIDENT CALLS FOR SHORT-TERM FIX AND TAX REFORM TO AVERT SEQUESTER CUTS:  Today, President Obama called for a short-term fix, including new revenue and tax reform, to avert across-the-board spending cuts.  In remarks at the White House, President Obama said, “So we've made progress.  And I still believe that we can finish the job with a balanced mix of spending cuts and more tax reform.  The proposals that I put forward during the fiscal cliff negotiations in discussions with Speaker Boehner and others are still very much on the table.  I just want to repeat:  The deals that I put forward, the balanced approach of spending cuts and entitlement reform and tax reform that I put forward are still on the table.” The President continued, “But in order to achieve the full $4 trillion in deficit reductions that is the stated goal of economists and our elected leaders, these modest reforms in our social insurance programs have to go hand-in-hand with a process of tax reform, so that the wealthiest individuals and corporations can’t take advantage of loopholes and deductions that aren’t available to most Americans. Leaders in both parties have already identified the need to get rid of these loopholes and deductions.  There’s no reason why we should keep them at a time when we’re trying to cut down on our deficit.  And if we are going to close these loopholes, then there’s no reason we should use the savings that we obtain and turn around and spend that on new tax breaks for the wealthiest or for corporations.  If we’re serious about paying down the deficit, the savings we achieve from tax reform should be used to pay down the deficit, and potentially to make our businesses more competitive.”  The President said, “So if Congress can’t act immediately on a bigger package, if they can't get a bigger package done by the time the sequester is scheduled to go into effect, then I believe that they should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months until Congress finds a way to replace these cuts with a smarter solution. There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy should be put in jeopardy just because folks in Washington couldn’t come together to eliminate a few special interest tax loopholes or government programs that we agree need some reform. Congress is already working towards a budget that would permanently replace the sequester.  At the very least, we should give them the chance to come up with this budget instead of making indiscriminate cuts now that will cost us jobs and significantly slow down our recovery.”  

  • The sequester would cut approximately $85 billion from federal programs during the current fiscal year. The sequester is scheduled to begin taking effect March 1.
  • House Speaker John Boehner said, “It’s time for the Senate Democrats to do their work. It’s time for the president to offer his ideas for how to replace the sequester.”  Boehner added, “We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes. The president’s sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years.”
  • Ways and Means Chairman Dave Camp issued the following statement regarding the upcoming sequestration cuts: “Tax reform should be about making the code simpler and fairer for American families and helping employers create more jobs.  The President’s proposal is nothing more than another tax hike to pay for more Washington spending.  That is not what America needs.”
  • Senate Finance Chairman Max Baucus’ statement read, “I agree with the President that Congress must continue to work on plans to avoid the sequester and take a balanced approach to reducing our nation’s deficits and debt, including both spending cuts and revenue. When it comes to tax reform, we must avoid the urge for the quick fix.  We owe it to the American people to do a comprehensive review of the code to ensure it works for today’s economy and is flexible enough to adapt to the changing world. Tax reform is about more than revenues.  It is about simplifying peoples’ lives, encouraging businesses to invest and grow, and boosting innovation and education.  We are not going to have multiple bites at this apple.  I want to ensure that when we do tax reform, we do it right.”
  • The President’s remarks can be accessed here

WAYS AND MEANS TO HOLD HEARING ON TAX REFORM AND CHARITABLE CONTRIBUTIONS:  Congressman Dave Camp, Chairman of the Committee on Ways and Means, announced that the Committee will hold a hearing on February 14th to examine the itemized deduction for charitable contributions. In announcing this hearing, Chairman Camp said, “Public charities and private foundations perform invaluable services for our society, especially during this time of economic slowdown and high unemployment.  These organizations depend upon the goodwill of the American people – the most giving and charitable people in the world.  Because of the critical role that charities play, the Committee must hear directly from the charitable community before considering any proposals as part of comprehensive tax reform that might impact their ability to obtain the resources they need to fulfill their missions.”

MISCELLANEOUS GUIDANCE RELEASED:

Revenue Ruling 2013-5 holds that Eurex Deutschland, a regulated exchange of Germany, is a qualified board or exchange within the meaning of section 1256(g)(7)(C) of the Code.

Notice 2013-04 solicits comments regarding what modifications the Treasury Department should make to its method of determining adjusted applicable federal rates under section 1288(b) of the Internal Revenue Code and the adjusted Federal long-term rate under section 382(f) of the Internal Revenue Code.  The notice provides interim guidance describing the modifications to the method that will be in effect pending the issuance of further guidance.

TAX BILLS INTRODUCED FEBRUARY 5TH:

1. [113rd] H.R.474 : To amend the Internal Revenue Code of 1986 to allow a credit against income tax for qualified conservation contributions which include National Scenic Trails.
Sponsor: Rep Connolly, Gerald E. [VA-11] (introduced 2/4/2013)   Cosponsors (None)
Committees: House Ways and Means; House Natural Resources
Latest Major Action: 2/4/2013 Referred to House committee.
Status: Referred to the Committee on Ways and Means, and in addition to the Committee on Natural Resources, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

2. [113rd] H.R.475 : To amend the Internal Revenue Code of 1986 to include vaccines against seasonal influenza within the definition of taxable vaccines.
Sponsor: Rep Gerlach, Jim [PA-6] (introduced 2/4/2013)   Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 2/4/2013 Referred to House committee.
Status: Referred to the House Committee on Ways and Means.

3. [113rd] H.R.480 : To amend the Internal Revenue Code of 1986 to disallow a deduction for amounts paid or incurred by a responsible party relating to a discharge of oil.
Sponsor: Rep Hastings, Alcee L. [FL-20] (introduced 2/4/2013)   Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 2/4/2013 Referred to House committee.
Status: Referred to the House Committee on Ways and Means.

4. [113rd] S.213 : A bill to amend the Internal Revenue Code of 1986 to repeal the excise tax on telephone and other communication services.
Sponsor: Sen Heller, Dean [NV] (introduced 2/4/2013)   Cosponsors (None)
Committees: Senate Finance
Latest Major Action: 2/4/2013 Referred to Senate committee.
Status: Read twice and referred to the Committee on Finance.

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  Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country.  The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court.  The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving.  Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.