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July 31, 2009

Federal Headlines

Health Reform Talks Stall, Grassley Warns Against Rushing Legislation; White House to Evaluate Nonprofit Co-ops as Possible Option to Public Plan

 

Senate negotiators failed to meet on July 30 as hopes of forging agreement on sweeping health care reform legislation before the Senate recesses for a month-long break on August 7 began to fade. The slow progress has frustrated Democratic leaders who believe that Senate Finance Committee Chairman Max Baucus, D-Mont., is devoting too much time to Republican concerns in hopes of producing a bipartisan bill. Republican leaders fear that Democrats are seeking to shut them out of the process.

 

That pressure led Finance Committee ranking member Charles E. Grassley, R-Iowa, to push back. In a tersely worded statement, Grassley warned that rushing a bill through committee without Republican backing would do more harm than good. "It'll be a lost opportunity if Democratic leaders in Congress and the administration force action on health care legislation that's not ready because of the complexity of the issue and the high stakes in getting it right," stated Grassley.

 

The situation in the House was not much better as liberal members threatened to withhold their backing of that chamber's health reform legislation. Still seething over a deal brokered by House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif., and conservative Democratic Blue Dogs (TAXDAY, 2009/07/30, C.1), members of the Congressional Progressive Caucus (CPC) held a press conference to reiterate their belief that any health care reform must include a public health plan option. The House Energy and Commerce Committee began to mark up its portion of the bill in hopes of wrapping up deliberations prior to the August break scheduled to begin in the House on July 31.

White House

 

With growing public wariness over a public health insurance option, the White House is signaling that an alternative to a government-run plan might be acceptable under certain conditions. White House Press Secretary Robert Gibbs, at a press briefing on July 30, said the administration has not drawn a line in the sand as long as the final plan meets President Obama's health care reform goal to ensure choice and competition.

 

While the relevant House and Senate Health, Education, Labor and Pensions committees include a public option, the Senate Finance Committee is widely expected to propose a network of nonprofit co-ops instead of a government-run plan. The White House will continue to evaluate each proposal to "see what commonality there might be," Gibbs said.

 

Obama has said he will not sign a bill that adds to the deficit in the long run and does not provide affordable and accessible health care insurance. Unless final legislation contains genuine insurance reform, the president will not sign it, Gibbs stressed.

 

By Jeff Carlson and Paula Cruickshank, CCH News Staff

Final Regulations Issued on Extension of Limitations Period Where Designated Summons Is Being Litigated (T.D. 9455)

 

The IRS has finalized proposed regulations (NPRM REG-208199-91), with one minor change, regarding the use of designated summonses and related summonses and the period of limitations on assessment under Code Sec. 6503(j) when a case is brought to enforce or quash such a summons. The regulations affect corporate taxpayers that are examined under the coordinated industry case (CIC) program and served with designated or related summonses, as well as third parties that are served with such summonses for information regarding the corporate examination.

 

The final regulations generally provide that the limitations period on assessment is suspended regarding any tax return of a corporation that is the subject of a designated or related summons if a court proceeding to enforce or quash is instituted with respect to that summons. The regulations include guidance on the judicial enforcement period, court proceeding, date when the proceeding is no longer pending, final resolution, compliance, and date when compliance occurs. In addition, the regulations provide special rules addressing the number of designated and related summonses that may be issued, the time within which a court challenge to a covered summons must be brought, the computation of the suspension period when there are multiple proceedings, the computation of the 60-day period when the final day falls on a weekend or holiday, and the interaction of this suspension period with other suspension provisions.

 

Regarding the date when compliance occurs, the IRS clarified in the final regulations that the examination team conducting the audit --and that team's management and supervisory chain of command --is the first point of inquiry for any examination matter. Those are the persons who will decide whether the summoned person's production satisfies the court's order.

 

Once the final regulations are effective, the IRS will issue Internal Revenue Manual (IRM) procedures under which the IRS will promptly inform the CIC taxpayer of whether the production of summoned information fully complies with the summons. The IRS noted that, even without such IRM procedures, the CIC taxpayer can contact the examining agent to determine when the IRS determined full compliance and when the suspension terminated.

 

The regulations are effective and applicable as of July 31, 2009.

T.D. 9455, 2009FED ¶47,024

Other References:

 

Code Sec. 6503

 

CCH Reference - 2009FED ¶39,037C

 

Tax Research Consultant

 

CCH Reference - TRC IRS: 21,114

CCH Reference -

TRC IRS: 30,218

CCH Reference - TRC IRS: 30,218.05

CCH Reference - TRC IRS: 45,204.35

 
 

State Headlines

California --Multiple Taxes: September Special Session Will Consider Tax System Recommendations

 

By executive order, California Gov. Arnold Schwarzenegger will call a special session of the state General Assembly in September 2009 to consider the recommendations made by the Commission on the 21st Century Economy to improve the state's tax system. The commission is scheduled to deliver a report to the governor and to the General Assembly by September 20 with recommendations to change laws to achieve the following goals:

 

(1) establish a 21st century tax structure that fits with the state's 21st century economy;

 

(2) stabilize state revenues and reduce volatility;

 

(3) promote the long-term economic prosperity of the state and its citizens;

 

(4) improve the state's ability to compete successfully with other states and nations for jobs and investments;

 

(5) reflect principles of sound tax policy, including simplicity, competitiveness, efficiency, predictability, stability, and ease of compliance and administration; and

 

(6) ensure that the tax structure is fair and equitable.

 

The initial version of the Commission was created by an order of the governor in 2008. (TAXDAY, 2008/10/31, S.3) The commission has been holding meetings throughout 2009. (TAXDAY, 2009/07/21, S.1)

 

Subscribers can view the governor's order that, in part, announces the special session.

 

 

Executive Order S-15-09, Office of California Governor Arnold Schwarznegger, July 29, 2009

 

New York --Corporate, Personal Income Taxes: Historic Preservation Credit Enhanced

 

Gov. David A. Paterson signed legislation amending the New York State historic preservation tax credit, available against the corporate and personal income tax. The rehabilitation tax credit program provides incentives to developers, municipalities, businesses and residents to make investments in distressed areas by rehabilitating historic properties that are listed on the State and National Registers of Historic Places. For qualified historic properties, the amended credit will

 

-- gradually increase over five years the cap on the commercial credit value from $100,000 to $5 million and the residential credit value from $25,000 to $50,000;

 

-- target the credit in "distressed areas" (those located within a Census tract identified at or below 100% of the median family income);

 

-- increase the share of qualified rehabilitation costs that commercial property owners can claim for the credit from 6% to 20%; and

 

-- offer the preservation tax credit as a rebate for lower income homeowners.

The program will apply to taxable years beginning on or after January 1, 2010, and will sunset in five years on December 31, 2014.

A.B. 9023, Laws 2009, effective July 29, 2009 and applicable as noted

Tennessee --Miscellaneous Tax: Drug Tax Held Unconstitutional

 

The Tennessee Supreme Court held that the Tennessee tax on possession of unauthorized substances is invalid because it exceeds the state's taxing authority under the Tennessee Constitution. The tax requires persons in possession of illegal drugs to purchase tax stamps. Because acquisition of the stamps is anonymous, and any information obtained by the Department of Revenue cannot be disclosed to law enforcement or used as part of a criminal investigation or prosecution, the tax does not violate the right against self-incrimination in the federal and state constitutions. The tax can be properly classified as a civil sanction rather than a criminal punishment, and thus does not violate constitutional double jeopardy provisions. However, the tax exceeds the state's taxing authority. Under the Tennessee Constitution, the legislature is authorized to impose taxes on merchants, peddlers, and privileges. Because the statute imposes the tax on the possession, and not on the transfer or sale, of unauthorized substances, the tax cannot be classified as a tax on merchants or peddlers. The tax is not a valid privilege tax because possession of unauthorized substances is an unlawful act and an unlawful act cannot be considered a "privilege."

Waters v. Farr, Tennessee Supreme Court, No. E2006-02225-SC-R11-CV, July 24, 2009, ¶401-335

 

Other References:

 

Explanation at ¶89-054
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