CCH Weekly Report from Washington, D.C.

The Joint Select Committee on Deficit Reduction failed to reach agreement on a deficit-reduction package by the November 21 deadline. President Obama noted that he is willing to work with Congress to prevent the across-the-board cuts if they reach agreement on a “balanced approach” that includes tax increases as well as discretionary and entitlement spending cuts. The president also signed the first portion of his jobs bill that was able to pass both chambers of Congress on November 20. He urged Congress to pass a one-year extension of the payroll tax cut with an expansion to include employers when lawmakers return from their Thanksgiving recess. The IRS, meanwhile, launched its new registered tax return preparer competency test and provided final rules regarding the user fee.

White House

President Obama on November 22 urged Congress to pass his proposed one-year extension of the payroll tax cut with an expansion to include employers when lawmakers return the week of November 28 from their Thanksgiving recess (TAXDAY, 2011/11/23, W.1). The two proposals are included in the American Jobs Bill, which the president has been pushing Congress to pass in piecemeal fashion since lawmakers have failed to take up the entire bill.

In remarks at a high school in Manchester, New Hampshire, the president portrayed the issue as a choice between increasing taxes on middle-class families and small businesses or raising them on wealthy taxpayers instead. The current law, which expires on December 31, 2011, provides the average family with a tax break of $1,000. In the jobs bill, Obama proposed to raise the tax break to $1,500 for the average family in 2012 and to cut payroll taxes in half for small businesses.

In an Air Force One briefing en route New Hampshire, White House Press Secretary Jay Carney told reporters there is “no wiggle room” in the president’s pledge to veto any attempt to undo the across-the-board sequester mandated by the Budget Control Act (P.L. 112-25). The budget law mandates $1.2 trillion in automatic cutbacks split evenly between defense and nondefense discretionary spending to take effect on January 1, 2013, since the Joint Select Committee on Deficit Reduction did not reach agreement on cutting at least that amount by its November 23 deadline (TAXDAY, 2011/11/22, C.1). On November 21 the supercommittee announced that it was unable to agree on a deficit package. Obama noted he is willing to work with Congress to prevent the sequester if they reach agreement on a “balanced approach” that includes tax increases as well as discretionary and entitlement spending cuts.

On November 20, the president signed legislation (P.L. 112-56) providing tax credits for businesses that hire military veterans and a repeal of the 3-percent withholding tax imposed on federal contractors (TAXDAY, 2011/11/21, W.1). The measure is the first portion of President Obama’s jobs package to receive full bipartisan support in the House and Senate. The $1.6-billion cost of the hiring provisions is offset by delaying scheduled fee reductions on mortgage applications for loans guaranteed by the Department of Veterans Affairs. The bill offers a tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months, as well as a $2,400 credit for veterans who are unemployed for more than four weeks but less than six months. The measure also calls for a tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months.

Treasury

The Treasury Inspector General for Tax Administration (TIGTA) reported that the IRS is successfully managing development of the Customer Account Data Engine 2 (CADE 2) database, which is intended to streamline online individual taxpayer account processing (TAXDAY, 2011/11/28, T.2). However, TIGTA recommended additional improvements to ensure the timely delivery of key activities and the consistent application of systems development processes and proper controls prior to initiating testing activities.

IRS

Return Preparer Competency. The IRS launched its new registered tax return preparer competency test, provided final rules regarding the user fee, and issued a fact sheet, which provides details about the test (IR-2011-111, T.D. 9559; TAXDAY 2011/11/23, I.1). Tax return preparers who currently have valid PTINs and are required to take the new test will have until December 31, 2013, to pass it.

Small Shareholder Segregation Rules. The IRS proposed amendments to the application of the segregation rules to public groups, as provided for under Code Sec. 382, Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change (NPRM REG-149625-10; TAXDAY 2011/11/23, I.3). The proposed regulations would generally make the segregation rules inoperative to transfers of loss corporation stock to small shareholders by entities or individuals who are 5-percent shareholders. In these cases, the stock transferred would be treated as being acquired proportionately by the public groups existing at the time of the transfer.

Basis for Securities Brokers/Debt Instruments. The IRS released proposed guidance for brokers of transactions related to debt instruments and options (NPRM REG-102988-11; TAXDAY 2011/11/23, I.5). The proposed regulations reflect recent legislation that requires brokers to include the customer’s adjusted basis in sold securities and to classify any gain or loss as long-term or short-term when reporting the sale of securities to the IRS.

SOI Bulletin. The IRS released its Fall 2011 issue of the Statistics of Income Bulletin, which features data for 140.5-million individual income tax returns filed for the 2009 tax year (IR-2011-110; TAXDAY 2011/11/22, I.1). The new issue of the bulletin contains articles on partnership returns filed for tax year 2009, municipal bonds issued in 2009 and charities’, social clubs’ and other tax-exempt organizations’ returns filed in 2008.

 

By Paula Cruickshank and Jennifer J. Rodibaugh, CCH News Staff

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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