CCH Weekly Report from Washington, D.C.

Before adjourning for a two-week recess, the House and Senate passed, and the president signed, legislation that temporarily extends federal highway spending and fuel taxes. The House also approved the Concurrent Resolution on the Budget for Fiscal Year 2013, which is expected to die in the Senate. The Senate, meanwhile, defeated a bill that would have repealed billions of dollars in tax breaks for the five largest oil and gas producers. IRS Deputy Commissioner Steven Miller, Service and Enforcement, stated the Service will remain focused on the large corporate sector in the future, but will aim to expend less time and fewer resources on examining compliant taxpayers.

White House

President Obama on March 30 signed the Surface Transportation Extension Act of 2012 (P.L. 112-102), a measure that grants a 90-day extension of federal highway spending and fuel taxes (TAXDAY, 2012/04/02, W.1). The legislation, which passed the House by a 266-to-158 margin and the Senate by a voice vote (TAXDAY, 2012/03/30, C.1), will give lawmakers time to work on a long-term, multi-year authorization of highway and transportation funding.

Congress

House. House GOP lawmakers approved the Concurrent Resolution on the Budget for Fiscal Year 2013 (HConRes112) on March 29 (TAXDAY, 2012/03/30, C.3). Called “The Path to Prosperity,” the Republican plan lays out spending and tax priorities for the coming fiscal year. The Senate is not expected to consider the House GOP budget, which calls for lowering corporate tax rates, eliminating deductions and extending the Bush-era tax cuts.

The House Ways and Means Committee on March 28 favorably reported the Small Business Tax Cut Bill (HR 9), a bill to provide businesses with a 20-percent tax cut in order to bolster job creation (TAXDAY, 2012/03/29, C.1). Introduced by House Majority Leader Eric Cantor, R-Va., the $45.9-billion measure passed the committee on a party-line vote of 21 to 14. The full House is expected to consider the bill in time for this year’s federal tax filing day in April. Under the bill, U.S. business with up to 500 employees would get a tax cut equal to 20 percent of their active business income.

Senate. Senate Democrats on March 26 unveiled a package of tax breaks geared toward promoting small business growth (TAXDAY, 2012/03/27, C.2). The Small Business Jobs and Tax Relief Bill of 2012 (Sen 2237) would provide a 10-percent income tax credit on new payroll, through either hiring or increased wages, in 2012, with a maximum increase in eligible wages of $5 million per employer and the amount of the credit capped at $500,000. In addition, the measure proposes extending 100-percent first-year depreciation for one year, effective for qualified property acquired and placed in service before January 1, 2013, or January 1, 2014, for certain longer-lived and transportation property.

The Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure on March 27 heard testimony on how recent and pending expirations of energy tax incentives affect deployment of renewable energy facilities, energy-efficiency measures and advanced biofuels (TAXDAY, 2012/03/28, C.1). Much of the focus was on the credit for wind energy, which expires at the end of 2012. Chairman Jeff Bingaman, D-N.M., chaired a similar hearing in December 2011 to consider the effects of short-term extensions and frequent expirations on the renewable energy industry. Almost all of the witnesses argued that intermittent incentives severely stunt the promise of clean energy in the United States, and illustrated how the constant threat of expiration prevents the build-out of a growing manufacturing sector and supply chain.

The Senate on March 29 defeated the Repeal Big Oil Subsidies Bill (Sen 2204) by a 51-to-47 margin (TAXDAY, 2012/03/30, C.2). The bill would have repealed billions of dollars in tax breaks for the five largest oil and gas producers. The measure fell short of the 60-vote threshold and was widely ridiculed by Senate GOP members who argued that the vote was largely a political maneuver by Democrats to cast Republicans as supporting tax breaks for wealthy oil-producing companies.

The Senate on March 29 recessed for two weeks and will reconvene on April 16. Senate lawmakers are slated to resume consideration of the motion to proceed to the Paying a Fair Share Bill (Sen 2230), which proposes a 30-percent tax on taxpayers’ income in excess of $1 million per year.

Treasury

IRS Volunteer Tax Prep Database. The Treasury Inspector General for Tax Administration (TIGTA) issued a report finding that the IRS’s new database for monitoring performance of volunteer return-preparation services to certain taxpayers has successfully integrated older legacy systems and improved the collection of data on these organizations (TAXDAY, 2012/03/27, T.1). However, because data must be manually entered, the new tool may create problems with timeliness and accuracy; additionally, it does not capture information necessary to compare expectations with accomplishments.

IRS

Noncommercial Flight Mileage Rates. The IRS released the applicable terminal charge and the Standard Industry Fare Level (SILF) mileage rates for determining the value of noncommercial flights on employer-provided aircraft in effect for the first half of 2012 for purposes of the taxation of fringe benefits (Rev. Rul. 2012-10; TAXDAY, 2012/03/30, I.1).

Corporate Acquisition Regulations. An IRS official stated that final regulations concerning a new Code Sec. 338(e) election may be issued at the end of the 2012 calendar year (TAXDAY, 2012/03/30, I.2). No official release date has been set, however.

COBRA Audit Guide. The IRS has issued a newly revised Audit Techniques Guide (ATG) addressing the examination of COBRA cases (TAXDAY, 2012/03/29, I.1). The revision reflects changes made in the responsible IRS divisions, the transition of public correspondence and telephone inquiries to a new IRS campus, finalized 2001 interim and proposed rules, and updated audit/compliance requirements.

2012 Resident Population Estimates. State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt, private activity bonds have been provided with a listing of the proper population figures to be used when making certain calculations (Notice 2012-22; TAXDAY, 2012/03/29, I.2). These would include: the 2012 population-based component of the state housing credit ceiling; the 2012 private activity bond volume cap; and the 2012 exempt facility bond volume limit.

Energy-Efficient Buildings. The IRS renumbered and re-released February guidance on energy-efficient commercial buildings under Code Sec. 179D as Notice 2012-26 (TAXDAY, 2012/03/29, I.3). Under the “permanent rule,” property that would be energy-efficient commercial property but for the failure to achieve the target 50-percent reduction in energy and power costs required by Code Sec. 179(c)(1)(D) is partially qualifying commercial building property if it is installed as part of a system that satisfies the applicable energy savings percentage.

TAP Charter. IRS Commissioner Douglas H. Shulman signed the charter for the Taxpayer Advocacy Panel (TAP) for another two years (TAXDAY, 2012/03/29, I.5).

April Per Diem Rates. The U.S. State Department has released a listing of maximum travel per diem allowances for travel in foreign areas (TAXDAY, 2012/03/28, I.2). The rates apply to all government employees and contractors, and are effective as of April 1, 2012.

West Virginia Disaster Relief. Certain deadlines falling on or after March 15, 2012, and on or before May 31, 2012, have been postponed to May 31, 2012, for victims of severe storms, flooding, mudslides and landslides in parts of West Virginia, resulting in Logan County being declared a federal disaster area (WVA-2012-2; TAXDAY, 2012/03/28, I.3). The extensions include the April 17 deadline for filing individual income tax returns for 2011, and for making income tax payments and 2011 contributions to IRA plans.

APMA Program. The IRS has announced that, as of February 26, 2012, the Advance Pricing Agreement (APA) Program and the competent authority functions (including mutual agreement procedures) related to transfer pricing and other allocation issues, as well as determinations of permanent establishment status, are realigned and consolidated into the Advance Pricing and Mutual Agreement (APMA) Program, within the Large Business & International (LB&I) Division (IR-2012-38; TAXDAY, 2012/03/28, I.4).

Consolidated Groups. A domestic corporation that was the common parent of a consolidated group could not take a Code Sec. 243 dividends-received deduction because it diminished its risk of loss through various arrangements and agreements and, therefore, failed to satisfy the holding period requirement of Code Sec. 246(c) (FAA 20121201F; TAXDAY, 2012/03/27, I.3).

Large Business Audits. IRS Deputy Commissioner Steven Miller, Service and Enforcement, stated the IRS would remain focused on the large corporate sector in the future, but will aim to expend less time and fewer resources on examining compliant taxpayers (TAXDAY, 2012/03/27, I.4). Miller recommended in particular a review of the IRS’s Coordinated Industry Case (CIC) program.

Form 8802 User Fee. In a posting to its website, the IRS has changed the user fee schedule contained in Rev. Proc. 2006-35, 2006-2 CB 434, for processing Form 8802, Application for United States Residency Certification (TAXDAY, 2012/03/26, I.4). According to the posting, for all Form 8802 applications received with a postmark date that is on or after April 1, 2012, a flat rate fee of $85.00 per application will be charged, regardless of the number of certificates requested.

By Jeff Carlson, Stephen K. Cooper 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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