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July 22, 2009

Federal Headlines

President Focuses on Health Care Cost Controls

 

President Obama assured members of the House Energy and Commerce Committee that health care reform legislation must be deficit-neutral in order for him to sign it, according to Committee Chairman Henry A. Waxman, D-Calif., following a White House meeting on July 21. Rep. Mike Ross, D-Ark., a leading member of the fiscally conservative Blue Dog Coalition, said the president wants final legislation to be deficit-neutral, reduce the rate of health care inflation, cover as many people as possible, make health care coverage affordable and include insurance reform so that pre-existing conditions can no longer preclude coverage.

 

Ross said the focus of the White House meeting was on reining in health care costs, but no final decisions were made on cost containment. He said rising health care costs must be brought down to the rate of inflation and that the first priority is to squeeze as many health care savings as possible before taking revenue-raising measures.

 

The president, in separate television interviews, indicated that the August deadline for the House and Senate to pass health care bills could slip under certain conditions and that he might be open to penalizing insurance companies that offer Cadillac, gold-plated health insurance plans. He also signaled his possible support for imposing additional taxes on those earning above $250,000.

 

"I think that ultimately what we're going to have is a package which will probably include some additional revenue from well-to-do people who can afford to pay a little more so that working families can have a little more security on their health care," Obama said in an interview on NBC's "Today Show" on July 21. On setting an August deadline, the president said that "if you don't set a deadline in this town, nothing happens."

 

White House Press Secretary Robert Gibbs, at a press briefing on July 21, said the August deadline was necessary to keep the process moving forward. However, when pressed about the issue in a July 20 interview on PBS's "News Hour With Jim Lehrer," Obama said, "If somebody comes to me and says, "It's basically done. It's going to spill over by a few days or a week," you know, that's different."

SFC Progress

 

Senate Finance Committee Chairman Max Baucus, D-Mont., and his team of negotiators spent the day discussing offsets, bringing in Joint Committee on Taxation (JCT) Chief of Staff Thomas A. Barthold to help with determining costs. Sen. Olympia J. Snowe, R-Maine, said discussions were productive and all involved were determined to produce a bipartisan bill. She said there was no talk of deadlines. Baucus described a discussion earlier in the day with President Obama as agreeable, and also pointed out that there was no mention of a timetable or the pace of negotiations. "He seemed very encouraged that progress was taking place," said Baucus.

 

Obama has not endorsed Senate Finance Committee financing options to change the exclusion on employer-sponsored health plans, but indicated that he was interested in measures to penalize insurance companies offering overly generous health care packages. "What's being talked about now, I understand, is the possibility of penalizing insurance companies who are offering super, gold-plated, Cadillac plans. I haven't seen the details of this yet, but it may be an approach that doesn't put additional burdens on middle-class families," Obama said in the "Newshour" interview.

PAYGO

 

Separately, the administration said it supports House passage of the Statutory Pay-As-You-Go (PAYGO) Bill of 2009 (HR 2920), in the form of a substitute that is expected to be considered by the House Rules Committee. "Statutory PAYGO would hold the federal government to a simple but important principle: new tax or entitlement legislation should be paid for," according to an administration-written policy statement.

 

By Jeff Carlson and Paula Cruickshank, CCH News Staff

SAP on HR 2920 --Statutory Pay-As-You-Go Act of 2009

 

Sale of Insurance Products Substantially Related to Credit Union's Tax-Exempt Purpose (Community First Credit Union, DC Wis.)

 

A tax-exempt credit union's sales of insurance products were substantially related to its tax-exempt purpose of encouraging thrift. Despite the government's expert witness' opinion that the insurance products were too expensive given their relatively low loss-ratios and that sale of the insurance products enriched lending institutions and insurers at the expense of consumers, the jury's conclusion to the contrary was not irrational. The jury could have interpreted "thrift" more broadly and concluded that, even if other kinds of insurance could accomplish the same goals at a lower price, members could nevertheless be engaged in thrift when obtaining insurance against possible losses. Moreover, considering the relatively low actual cost of the insurance products, the government's loss-ratio calculations and reverse competition claims were inconsequential.

Community First Credit Union, DC Wis., 2009-2 USTC ¶50,496

Other References:

 

Code Sec. 513

 

CCH Reference - 2009FED ¶22,846.37

 

Tax Research Consultant

 

CCH Reference - TRC EXEMPT: 12,202

CCH Reference - TRC EXEMPT: 15,056.05

 

IRS Offers 2009 Summertime Tax Tips

 

The IRS has posted the first of its 2009 Summertime Tax Tips for taxpayers. The tax tips provide helpful information and guidance regarding the following topics:

 

--Job seekers;

 

--Taxpayers starting a new business;

 

--Those arranging for child care during the school vacation;

 

--Recently married taxpayers;

 

--Students with summer jobs; and

 

--The IRS Spanish language web site, IRS.gov/Espanol.

 

Links to related forms, publications, and tax topics are included with the summertime tax tips.

2009 IRS Summertime Tax Tips 2009-01

2009 IRS Summertime Tax Tips 2009-02

2009 IRS Summertime Tax Tips 2009-03

2009 IRS Summertime Tax Tips 2009-04

2009 IRS Summertime Tax Tips 2009-05

2009 IRS Summertime Tax Tips 2009-06

 
 

State Headlines

All States --Corporate Income Tax: UDITPA Revision Abandoned by Uniform Law Commission

 

Facing significant opposition from large taxpayers and state legislators, the effort to revise the Uniform Division of Income for Tax Purposes Act (UDITPA) has been abandoned by the Uniform Law Commission (ULC). The ULC Scope and Program Committee and Executive Committee accepted the recent recommendations of the UDITPA study committee to end the latter's review of UDITPA without further action. (TAXDAY, 2009/07/01, S.1) Therefore, the study committee is discharged and the ULC will not establish a drafting committee on the topic of revising UDITPA.

 

The ULC, formerly known as the National Conference of Commissioners on Uniform State Laws (NCCUSL), is the organization that drafted UDITPA over 50 years ago. As such, the Multistate Tax Commission (MTC) asked the ULC to undertake the effort of revising the Act when the MTC concluded that a revision was necessary. Initially, the ULC accepted the request and formed a drafting committee. When that encountered opposition, the ULC downgraded the effort to a study committee. However, this action did not assuage the effort's opponents, who successfully pressed for a complete end to the ULC review.

 

The MTC is expected to continue its own project to revise portions of UDITPA.

Email, Uniform Law Commission, July 21, 2009

 

Oregon --Personal Income Tax: Rate Increase for High-Income Taxpayers Enacted

 

Gov. Ted Kulongoski has signed legislation that, as previously reported (TAXDAY, 2009/06/16, S.20), increases the Oregon personal income tax rate and phases out the deduction for federal income taxes paid for high-income taxpayers. The legislation also allows a subtraction from federal AGI of up to $2,400 of unemployment compensation received in the 2009 tax year. In effect, Oregon incorporates the exclusion enacted under the federal American Recovery and Reinvestment Act of 2009 (P.L. 111-5).

 

For tax years beginning after 2008 and before 2012, the personal income tax rate is 10.8% on taxable income over $125,000 but not over $250,000 and 11% on taxable income over $250,000. For tax years beginning after 2011, the highest tax rate will be 9.9% on taxable income over $125,000.

 

For tax years beginning after 2008, federal income taxes paid in excess of a specified limit, less refunds for which a tax benefit was received, must be added back to federal taxable income. The specified limit is reduced for high-income taxpayers to effectively phase out the amount of the federal income tax deduction allowed for Oregon personal income tax purposes.

 

Applicable to the 2009 tax year, the Oregon Department of Revenue will waive any penalty or interest that would otherwise apply to taxes due if the penalty or interest is based on underpayment or underreporting that results solely from the above-described law changes.

H.B. 2649, Laws 2009, effective September 28, 2009, applicable as noted

Oregon --Corporate Income Tax: Increased Tax Rate, Minimum Tax Enacted

 

Oregon Gov. Ted Kulongoski has signed legislation that, as previously reported (TAXDAY, 2009/06/16, S.19), increases the state corporation excise (income) tax rate, increases the minimum corporation excise tax rate, imposes a minimum tax on S corporations and partnerships, and increases various filing fees. For tax years beginning after 2008 and before 2011, the 6.6% corporate income tax rate that is imposed on C corporations is imposed on the first $250,000 of taxable income or fraction thereof, but a new rate of 7.9% is imposed on taxable income in excess of that amount. For tax years beginning after 2010 and before 2013, the rate on taxable income in excess of $250,000 decreases to 7.6%. For tax years beginning after 2012, the $250,000 threshold will increase to $10 million. Also, the previous minimum corporate income tax of $10 is increased ranging from $150 to $100,000 based on Oregon sales for tax years beginning after 2008, and a $150 minimum tax is imposed on S corporations and partnerships.

H.B. 3405, Laws 2009, effective September 28, 2009, applicable as noted

 
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