President Obama reiterated his call for a one-year extension of the Bush-era tax cuts for those earning under $250,000 per year, as Republicans continue to insist on a one-year extension for all taxpayers, including the wealthy. The Senate failed to advance a $28.5-billion small business tax break measure that would provide a one-year extension of 100-percent bonus depreciation and a tax credit for new hires. The IRS, meanwhile, confirmed its plans to develop a public database of registered tax return preparers.
President Obama on July 9 reiterated his call for a one-year extension of the Bush-era tax cuts for those earning under $250,000 per year, but it does not appear likely that Republicans will go along as they continue to insist on a one-year extension for all taxpayers, including the wealthy (TAXDAY, 2012/07/10, W.1 ). Senate Majority Leader Harry Reid, D-Nev., said he believed that Congress should extend tax cuts for those earning up to $250,000 per year immediately, and that he planned to discuss the steps necessary to bring the proposal up for a vote.
Senate Finance Committee members on July 10 considered the role of tax reform in improving future upward mobility of low-income households and heard from a panel of experts that government spending often does little to improve their circumstances (TAXDAY, 2012/07/11, C.3 ). Committee Chairman Max Baucus, D-Mont., acknowledged that current tax policies appeared to be failing. He cited provisions like the exclusion for employer-provided child care that provide more support for children with parents in high tax brackets than those with lower incomes. The American Opportunity Tax Credit, which refunds up to $2,500 for undergraduate education, does show how the tax code can foster greater likelihood of college attendance among low-income women, according to Johns Hopkins University professor Dr. Katherine S. Newman. She also called for an increase in the Life Time Learning Credit, which enables students to deduct 20 percent of their tuition payments.
The Senate on July 10 approved a motion to take-up a $28.5-billion small business tax break measure that would provide a one-year extension of 100-percent bonus depreciation and a tax credit for new hires (TAXDAY, 2012/07/11, C.1 ). Under Senate rules, the motion to begin debate on the Small Business Jobs and Tax Relief Act (Sen 2237 ), required a 60-vote threshold, which was easily reached by an 80-14 margin. However, on July 12, the Senate failed to advance the measure as lawmakers rejected a motion to end debate on one substitute amendment by a vote of 57 to 41, and on another substitute amendment by a vote of 53 to 44 (TAXDAY, 2012/07/16, C.1 ). The first amendment, offered by Sen. Mary Landrieu, D-La., proposed the same provisions included in the offering by Senate Majority Leader Harry Reid, D-Nev., plus an extension of the capital gains exemption for qualified investments in small businesses, an increased deduction for start-up expenses, and a five-year carryback period for general business credits. Landrieu’s amendment fell just three votes shy of the 60 votes needed to take up the bill.
House Ways and Means Committee Chairman Dave Camp, R-Mich., on July 10 declared that the Supreme Court’s ruling that the individual mandate in the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148 ) is constitutional will eventually allow Congress dangerous new taxing powers (TAXDAY, 2012/07/11, C.2 ). His comments came as the House Ways and Means Committee held a hearing to explore the implications of the ruling, particularly as it relates to Congress’s authority to lay and collect new taxes. Witnesses did not hold back in their condemnation of the ruling, with many in agreement that the implications could be dangerous.
Former Senate Finance Committee Chairman Sen. Charles E. Grassley, R-Iowa, is formally objecting to Senate consideration of two Treasury nominees until the Treasury and IRS provide responses to his June 21 letter on the IRS Whistleblower Office (TAXDAY, 2012/07/12, C.2 ). The nominees are Mark J. Mazur, to be an Assistant Secretary of the Treasury, and Matthew S. Rutherford to be an Assistant Secretary of the Treasury. Grassley wrote to Treasury Secretary Timothy F. Geithner and IRS Commissioner Douglas H. Shulman on June 21, the latest in a series of letters to explore the reasons for slow-going on whistleblower case processing and pay-outs. Grassley notified the Senate of his intention to object on June 27.
FinCEN Hearing. The Financial Crimes Enforcement Network (FinCEN) has announced the first in an intended series of public hearings to continue gathering information on its proposed rules on Customer Due Diligence (CDD) requirements for financial institutions (TAXDAY, 2012/07/11, T.1 ). The hearing will be held on July 31, 2012, at the U.S. Department of Treasury building from 9:30 a.m. to 5:00 p.m.
TIGTA/Tax Protestors. The Treasury Inspector General for Tax Administration (TIGTA) issued a report that a few IRS employees continue to refer to taxpayers as illegal tax protestors or similar designations in case narratives (TAXDAY, 2012/07/09, T.1 ). TIGTA made no new recommendations in this report since the IRS has long disagreed with TIGTA’s determination that in order to comply with the law, IRS employees should not designate taxpayers as illegal tax protesters in case histories.
Corporate Bond Interest Rate. For pension plan years beginning in July 2012, the IRS has released the corporate bond weighted average interest rate, the permissible range of interest rates used to calculate current plan liability and to determine the required contribution under Code Sec. 412(l) for plan years through 2012, and the current corporate bond yield curve and related segment rates for the purpose of establishing a plan’s funding target under Code Sec. 430(h)(2) (Notice 2012-47 ; TAXDAY, 2012/07/11, I.1 ).
Indian Tribal Govt. Hearing Witnesses at a July 10 IRS hearing asked the government to revise its anticipated proposed regulations (ANPRM REG-133223-08 ) to limit the classification of tribal government activities as commercial activities (TAXDAY, 2012/07/11, I.2 ). This change would allow more tribal pension plans to be treated as governmental plans under Code Sec. 414(d) and ERISA.
Public Return Preparer Database. An IRS spokesperson confirmed for CCH on July 10 that it plans to develop a public database of registered tax return preparers (TAXDAY, 2012/07/11, I.3 ). Recent news reports have indicated that the IRS intends to post the names of these preparers on its website http://www.irs.gov ), possibly in 2013.
Govt. Plans/ANPRM Hearing. IRS officials at a July 9 hearing on an advanced notice of proposed rulemaking concerning the determination of government plan status under Code Sec. 414(d) (ANPRM REG-157714-06 ) received numerous recommendations on how to revise the proposed rules (TAXDAY, 2012/07/10, I.1 ). In general these included suggestions that the IRS create safe harbors or grandfather certain entities.
Florida Disaster Relief. The IRS has extended return-filing and payment deadlines for certain victims of Tropical Storm Debby that began on June 23, 2012, in parts of Florida and resulting in the counties of Baker, Bradford, Clay, Columbia, Franklin, Hernando, Highlands, Pasco, Pinellas, Suwannee and Wakulla being declared a federal disaster area (FL-2012-07 ; TAXDAY, 2012/07/10, I.3 ).
By Jeff Carlson and Jennifer J. Rodibaugh, CCH News Staff