CCH Weekly Report from Washington, D.C.

President Obama and House Speaker John Boehner, R-Ohio, met for 50 minutes in the early evening on December 13 to discuss the fiscal cliff before Boehner returned to Ohio for the weekend, representing only the second time the two leaders have met face-to-face since the new talks began. Sens. Charles E. Schumer, D-N.Y., and Robert Menendez, D-N.J., introduced comprehensive tax legislation to help individuals and businesses rebuild in the aftermath of Hurricane Sandy; House lawmakers are expected to introduce their own measure during the week of December 17. The IRS has extended, until January 1, 2014, the time for businesses to comply with the rules regarding proper treatment of service charges specified in Q&A 1 of Rev. Rul. 2012-18 . Guidance has also been issued to encourage low- and moderate-income workers to take advantage of the retirement savings credit in saving toward retirement.

Congress

After a meeting between the president and Boehner on December 13 (TAXDAY, 2012/12/14, C.1 ), both parties released terse statements saying the talks were frank and lines of communication remained open. The trip to the White House came just hours after Boehner criticized the president for failing to come up with a serious proposal on spending cuts. Prior to Boehner’s statements about fiscal cliff negotiations, House Minority Leader Nancy Pelosi, D-Calif., charged that Republicans were failing to make serious counter-offers. December 21 is the latest date that Congress can vote on a deal and head home for the holidays, otherwise members will have to return to Washington during the week between Christmas and New Year’s Day (TAXDAY, 2012/12/17, C.1 ).

The Senate Finance Subcommittee on Energy, Natural Resources & Infrastructure held a hearing on December 12 to examine tax reform and federal energy policy, and to consider incentives to promote the efficient use of energy resources (TAXDAY, 2012/12/13, C.2 ). Chairman Jeff Bingaman, D-N.M., said Congress has decided to reintroduce certain tax incentives that promote the efficient use of energy; however, with the possibility of comprehensive tax reform, and within the context of a contentious debate on how to close the federal deficit, lawmakers must assess existing policies to determine if their goals are worth the cost. Bingaman said there are currently three bills before Congress that reflect recent efforts of panel members to adhere to general principles that are consistent with the goals of tax reform. One focuses on the commercial buildings deduction, another focuses on tax credits for homeowners and one promotes efficiency in the industrial sector. All of the witnesses agreed that reform must include performance-based tax incentives.

Sens. Charles E. Schumer, D-N.Y., and Robert Menendez, D-N.J., on December 10 introduced comprehensive tax legislation to help individuals and businesses rebuild in the aftermath of Hurricane Sandy (TAXDAY, 2012/12/11, C.1 ). The senators said the changes build on existing laws and programs to maximize the speed with which aid gets to Sandy victims. The tax package includes provisions that would: allow for a full deduction for expenses paid or incurred as a result of disaster cleanup; waive penalties for individuals who withdraw from their retirement plan early; allow individuals who provided free housing to displaced individuals to claim additional exemptions; provide a worker retention credit for disaster-damaged businesses that continued to pay their employees’ wages even though their business was inoperable; and provide accelerated depreciation for business equipment. House lawmakers plan to introduce a similar bill as early as December 17 (TAXDAY, 2012/12/14, C.2 ).

IRS

Savers Credit Guidance. Guidance has been issued to encourage low- and moderate-income workers to take advantage of the retirement savings credit in saving toward retirement (IR-2012-101 ; TAXDAY, 2012/12/14, I.1 ). The special tax credit, known as the saver’s credit, is available in 2012 and future years. Eligible workers still have time to make qualifying retirement contributions in order to receive the credit on their 2012 tax returns.

Tips/Service Charge Compliance Extension. The IRS has extended, until January 1, 2014, the time for businesses to comply with the rules regarding proper treatment of service charges specified in Q&A 1 of Rev. Rul. 2012-18 , I.R.B. 2012-26, 1032 (TAXDAY, 2012/06/21, I.3 ) (Announcement 2012-50 ; TAXDAY, 2012/12/14, I.2 ). This extension is provided in order to allow businesses not currently in compliance with additional time to modify their business practices and make needed system changes.

Timber Industry ATG. A newly revised Audit Techniques Guide (ATG) on the hardwood timber industry has been issued, replacing one issued in 1998 (TAXDAY, 2012/12/13, I.1 ). The ATG is intended for examiners conducting audits in the hardwood timber industry, and is designed to assist with the most common timber/forest product issues.

Hurricane Sandy Relief/Plan Loans. A loan or a hardship distribution from a qualified employer plan for needs arising from Hurricane Sandy is still subject to Code Sec. 72(t) , clarified Erick Slack, acting manager, IRS Employee Plans Technical Guidance, during a December 11 IRS phone forum (TAXDAY, 2012/12/12, I.1 ). Slack answered this and other questions on IRS guidance issued in mid-November to assist certain Hurricane Sandy victims who would like to use retirement assets in qualified employer plans to alleviate hardships caused by the hurricane.

Cumulative List/Plan Qualification Changes. The IRS has published the 2012 Cumulative List of Changes in Plan Qualification Requirements (2012 Cumulative List) (Notice 2012-76 ; TAXDAY, 2012/12/10, I.2 ). The list reflects law changes made by several legislative acts, including the Pension Protection Act of 2006 (P.L. 109-280 ), the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act (P.L. 110-28 ), and the Small Business Jobs Act of 2010 (P.L. 111-240 ).

By Jeff Carlson 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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