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December 8, 2009

Federal Headlines


Rangel Introduces Tax Extenders Act of 2009

 

With time running out for the first session of the 111th Congress, House lawmakers are moving to consider legislation that would extend a $32-billion package of tax provisions that expire at the end of 2009. House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., introduced the Tax Extenders Bill of 2009 (HR 4213) on December 7. The measure includes dozens of provisions that would provide tax relief for small businesses and individuals. The House is expected to adjourn on December 18, giving Congress less than two weeks to complete work on the measure. A committee spokesperson said the House will vote on the bill on December 9.

 

The extenders tax legislation would be paid for by including the text of Foreign Account Tax Compliance Bill of 2009 (HR 3933, Sen 1934), which would raise $7.6 billion over the next decade. It also includes a plan to stop investment fund managers from paying taxes at the lower capital gains tax rates on funds received for their services and on income received as carried interest in an investment fund. That provision would raise $24.6 billion over 10 years.

 

Although the tax increases in the bill would raise revenue for a decade, all of the tax relief provisions would expire at the end of 2010 and require 10-year revenue offsets and budgetary estimates. For instance, the bill would provide a one-year extension of the deduction for state and local general sales taxes. According to the Ways and Means Committee, that provision would cost $1.8 billion over 10 years. In addition, extending the additional standard deduction for real property taxes would cost $1.4 billion over 10 years, and extension of the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and retail improvements would cost $5.390 billion over 10 years.

 

By Stephen K. Cooper, CCH News Staff

House Ways and Means Press Release: Chairman Rangel Introduces Tax Extenders Bill

Tax Extenders Act of 2009, HR 4213

Summary of the Tax Extenders Act of 2009 (HR 4213)

JCT Estimated Revenue Effects of HR 4213, the Tax Extenders Act of 2009, JCX-59-09

 

Senate Rejects Plan to Limit Deductions on Exec's Pay

 

The Senate on December 6 rejected, by a vote of 56-to-42, an amendment (TAXDAY, 2009/12/07, C.2) to the Patient Protection and Affordable Care Bill (HR 3590) that would have limited the deductibility of compensation for health insurance executives. The proposal called for setting the deductibility of executive salaries at $400,000 and directing the resulting revenues to the Medicare Trust Fund.

 

As the Senate continues to work toward a goal of completing work on the $848-billion health care reform bill by Christmas, Senate Majority Leader Harry Reid, D-Nev., hopes to file cloture on the measure by December 11, according to a Democratic leadership aide. If cloture is approved, the Senate would have a set time frame for debate and holding a final vote.

 

A group of approximately five Democratic moderates and five Democratic liberals haS been meeting in order to negotiate a compromise on a government-run insurance option that can garner the necessary 60 votes to ensure passage of the bill. White House Press Secretary Robert Gibbs noted that, by all accounts, the discussions are going well and they are making progress.

 

The lawmakers reported that they are considering a plan that would operate along the lines of the insurance benefits offered to federal employees and is administered by the Office of Personnel Management (OPM). The OPM negotiates and coordinates the health coverage offerings of private insurance companies that employees can then choose from.

Obama Meeting

 

Countering criticism that he was not engaged enough in the process, President Obama met with Senate Democrats on their on turf on December 6. In THE meeting on Capitol Hill, the president thanked the lawmakers for their hard work and encouraged them to move forward with legislation that will provide "stability and security for those who have insurance, affordable coverage for those who don't and bring down the cost of health care for families, small businesses and the government," according to White House Deputy Press Secretary Bill Burton. The president did not bring up controversial amendments related to the public option, Gibbs confirmed. He said the president's message to the senators was to reach the administration's health care reform goals and "to get something out of the Senate and passed."

 

By Jeff Carlson and Paula Cruickshank, CCH News Staff


Treasury Security Rate Set for Computing Current Plan Liability for December 2009 (Notice 2009-96)

 

For pension plan years beginning in December 2009, 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 2009, 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).

 

The corporate bond weighted average interest rate for plan years beginning in December 2009 is 6.42 percent; and the 90-percent to 100-percent permissible range is 5.78 percent to 6.42 percent. The annual rate of interest on 30-year Treasury securities for November 2009, used to determine the minimum present value of a participant's benefit under Code Sec. 417(e)(1) and (2), is 4.31 percent.

 

For plans electing not to use the transitional rule under Code Sec. 430(h)(2)(G), or for plans whose first year begins after 2009, the 24-month average segments rates for December 2009 are: 4.71 for the first segment; 6.67 for the second segment; and 6.77 for the third segment.

 

For plan years beginning in 2009, the funding transitional segment rates for December 2009 are: 5.28 for the first segment; 6.59 for the second segment; and 6.65 for the third segment.

 

For plan years beginning in 2009, the minimum present value transitional segment rates for November 2009 are: 3.53 for the first segment; 4.81 for the second segment; and 5.10 for the third segment.

Notice 2009-96, 2009FED ¶46,552

Other References:

 

Code Sec. 401

 

CCH Reference - 2009FED ¶17,730.40

 

Code Sec. 412

 

CCH Reference - 2009FED ¶19,125.505

 

Code Sec. 417

 

Code Sec. 430

 

CCH Reference - 2009FED ¶20,161.30

 

Tax Research Consultant

 

CCH Reference - TRC RETIRE: 15,304.05

CCH Reference - TRC RETIRE: 15,304.10

CCH Reference - TRC RETIRE: 30,556

 

Interim Guidance Provided on Credit for Production of Refined Coal (Notice 2009-90)

 

The IRS has issued interim guidance relating to the credit for the production of electricity from refined coal pending the issuance of regulations. Generally, a producer of refined coal who sells the coal to an unrelated party with the reasonable expectation that it will be used to produce steam used for the production of electricity may claim a credit under Code Sec. 45 so long as the refined coal is produced from a refined coal production facility placed in service after October 22, 2004, and before January 1, 2011. Refined coal means any liquid or solid fuel produced from coal that is certified as resulting in a qualified emission reduction.

 

The guidance clarifies that the credit is available regardless of whether the taxpayer owns the refined coal production facility in which the refined coal is produced. The taxpayer may lease or operate a facility owned by another person and claim a credit for refined coal that the taxpayer produces in the facility. However, if more than 20 percent of a refined coal production facility's total value is attributable to property placed in service before October 23, 2004, the facility will not be treated as placed in service after October 22, 2004. Thus, at least 80 percent of the total value of the facility must have been added or improved after October 22, 2004, for the taxpayer to qualify for the credit.

 

The interim guidance also clarifies what constitutes an emission reduction for purposes of the credit. Generally, the taxpayer must certify that the production of the refined coal results in a reduction of specified emissions when the fuel is used to produce steam as compared to emission when burning feedstock coal or comparable coal available in the marketplace as of January 1, 2003. Emission reductions are determined by comparing emissions that result when feedstock coal and refined coal are used to produce the same amounts of useful thermal energy. The emissions reduced may be determined using continuous emission monitoring system (CEMS) field testing that must be verified by a professional engineer unrelated to the taxpayer. Other testing methods are permitted; however, any testing method must occur at least every six months or when there is a change in the type of feedstock coal or a change in the process of producing refined coal from feedstock, whichever is earlier.

Notice 2009-90, 2009FED ¶46,553

Other References:

 

Code Sec. 45

 

CCH Reference - 2009FED ¶4415.15

 

Tax Research Consultant

 

CCH Reference - TRC BUSEXP: 54,550


 

State Headlines


Arizona --Unclaimed Property: Abandoned Property Dormancy Periods, Notification Requirements Revised

 

For unclaimed property purposes, Arizona has revised the dormancy periods for various classes of abandoned property, as follows:

 

-- traveler's checks --three years (previously, 15 years) after issuance;

 

-- money orders or similar written instruments, other than third-party bank checks --three years (previously, seven years) after issuance;

 

-- stock or other equity interests in a corporation, business association, or financial organization, including a security entitlement under Title 47, Chapter 8 --two years (previously, three years) following a specified event;

 

-- the principal on debt, other than a bearer bond or an original issue discount bond, of a corporation, business association, or financial organization --two years (previously, three years) after the maturity date, and the interest on the debt --two years (previously three years) after the payment date;

 

-- a demand, savings or time deposit, including a deposit that is automatically renewable, and any interest or dividends --three years (previously, five years) after the earlier of maturity or the date of the last indication by the owner of interest in the property;

 

-- credits owed to a customer as a result of a retail business transaction --three years (previously, five years) after the obligation accrued;

 

-- amounts owed by an insurance company on a life or endowment insurance policy or an annuity that has matured or terminated --three years (previously, five years) after the obligation to pay arose, or in the case of a policy or annuity that is payable on proof of death --one year (previously, two years) after the insured has attained, or would have attained if living, the limiting age under the mortality table on which the reserve is based;

 

-- a life or endowment insurance policy or annuity contract not matured by actual proof of the death of the insured or annuitant according to the company's records --one year (previously, two years) if certain conditions apply;

 

-- property that is held by a court, government or governmental subdivision, agency or instrumentality, except for support for spousal maintenance --two years (previously, three years) after the property becomes distributable;

 

-- property in an individual retirement account, defined benefit plan, or other account or plan that qualifies for tax deferral under federal income tax laws --two years (previously, three years) after a specified event occurs;

 

-- amounts payable on a check, draft, or similar instrument on which a financial organization or business association is directly liable, including a cashier's check and a certified check, that has been outstanding --three years (previously, five years) after the check, draft, or similar instrument was payable or after issuance, if payable on demand, unless within three years (previously, five years) the owner has communicated in writing with the financial organization or business association concerning the check, draft, or similar instrument or otherwise indicated an interest as evidenced by a memorandum or any other record on file and prepared by an employee of the financial organization or business association;

 

-- other property for which an abandonment period is not otherwise specified --three years (previously, five years) after the owner's right to demand the property or after the obligation to pay or distribute the property arises, whichever occurs first;

 

-- excess proceeds deposited with the county treasurer pursuant to Sec. 33-812 --two years (previously, three years) from the date of deposit, if there is no pending application for distribution; and

 

-- any dividend, profit, distribution, interest, redemption, payment on principal, or other sum held or owing by a business association for or to its shareholder, certificate holder, member, bondholder, or other security holder who has not claimed it, or corresponded in writing with the business association concerning it --two years (previously, three years) after the date prescribed for payment or delivery.

 

Also, in addition to existing notification requirements, the holder of property that is presumed abandoned must file a report before June 1, 2010, covering the last 12 months before July 1, 2009, and must send written notice to the apparent owner prior to 90 days before filing the report. The Department of Revenue may not grant any extensions of time to comply with these requirements.

Ch. 3 (S.B. 1003), Laws 2009, Fourth Special Session, generally effective November 23, 2009

 

Wisconsin --Corporate, Personal Income Taxes: Withholding Tax Update Issued

 

The Wisconsin Department of Revenue has issued a corporate and personal income tax withholding update that discusses a variety of topics, including the termination of reciprocity with Minnesota, the exemption for military spouse income, a new telefile option, a new late filing fee, and pass-through entity withholding.

 

The income tax reciprocity agreement between Wisconsin and Minnesota will end on January 1, 2010. Starting on that date, Wisconsin employers should (1) begin withholding Wisconsin income taxes on personal service income of Minnesota residents working in Wisconsin, (2) ask those employees to complete Form WT-4, and (3) no longer accept Form W-222, Statement of Minnesota Residency.

 

Income for services performed in Wisconsin by a nonresident spouse of a service member is not taxable to Wisconsin if the spouse is in Wisconsin solely to be with the service member serving in Wisconsin under military orders. Military spouses claiming an exemption from withholding should complete Form W-221, Nonresident Military Spouse Withholding Exemption, and submit it to their employer.

 

Beginning in January 2010, taxpayers can use the new withholding telefile option to file and pay their WT-6 deposit reports and WT-7 annual reconciliation. No preregistration is necessary.

 

For taxable years beginning on or after January 1, 2010, any person who is required to file a withholding report and deposit withholding taxes and who fails to timely do so will be subject to a $50 late fee. For corporations taxed under subchapter IV and insurance companies taxed under subchapter VII, the late fee will be $150.

 

Among other topics covered in the update is the requirement for a pass-through entity to pay quarterly estimated withholding tax on a nonresident member's share of income attributable to Wisconsin.

Withholding Tax Update 2009-1, Wisconsin Department of Revenue, November 2009, ¶401-247

 

Other References:

 

Explanations at ¶16-620

 

Explanations at ¶89-104


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