The House Ways and Means and Senate Health, Education, Labor and Pensions (HELP) Committees each passed separate versions of health care reform legislation as President Obama made a Rose Garden appeal to Congress to pass House and Senate health care reform bills before the August recess. However, several impediments developed over the course of the week of July 13 that could delay his timetable. Settlement talks appear to be continuing between the IRS and Swiss banking giant UBS AG; a federal district court granted their request for additional time to resolve their dispute over the disclosure of account holders. In addition, the IRS updated its rosters of "listed transactions" and "transactions of interest." The Service also announced the first in a series of public meetings about its oversight of return preparers.
The Ways and Means Committee approved the America's Affordable Health Choices Bill of 2009 (HR 3200) early on July 17 by a vote of 23 to 18 (TAXDAY, 2009/07/20, C.1). The plan would overhaul the nation's health care system and impose a surtax of $544 billion on wealthier taxpayers. The measure now heads to the House Rules Committee, where it will be amended again before heading to the House floor.
Three Democrats, Reps. Earl Pomeroy, D-N.D, Ron Kind, D-Wis., and John Tanner, D-Tenn., voted with the Republicans against the measure. House Speaker Nancy Pelosi, D-Calif., told reporters that Democratic leaders are still negotiating to win support from the conservative members of the House Blue Dog Coalition, as well as freshmen Democratic lawmakers. The House provision to raise revenue to help pay for health care reform through a surtax on the wealthy is unlikely to gain any traction in the Senate as several members of the Senate Finance Committee on July 14 let it be known that the provision had little support among Democratic lawmakers.
The HELP Committee on July 15 passed its $615-billion version of a health care reform bill (TAXDAY, 2009/07/16, C.1). The Affordable Health Choices Bill was approved by a 13 to 10 margin and provides a public insurance option and a pay-or-play mandate for most employers that would require them to provide health insurance for their employees or face a stiff penalty. The measure will eventually be melded with the Senate Finance Committee (SFC) draft legislation before being taken up on the Senate floor.
The SFC inched closer to completing a draft of its health care reform legislation on July 16 despite news that all reform proposals to date would cause the federal government to spend more on health care more than it would save (TAXDAY, 2009/07/17, C.1). Appearing earlier in the day before the Senate Budget Committee, Congressional Budget Office Director Douglas Elmendorf told the panel that the legislation significantly expands the federal responsibility for health care costs. Elmendorf told lawmakers that the government, however, has two powerful levers for controlling costs: changing Medicare payment rules and limiting the tax exclusion for employer-sponsored insurance. Finance Committee Chairman Max Baucus, D-Mont., later suspended negotiations until July 20, thereby seriously jeopardizing hopes of passing health care reform in the Senate prior to the beginning of the month-long summer recess, which starts on August 7.
Although the president courted several lawmakers during the week of July 13, there were no visible sign of progress toward meeting his August deadline for completing health care reform. Following a White House meeting on July 16, Sen. Olympia J. Snowe, R-Maine, a swing voter on the Senate Finance Committee (SFC), said it was "overly ambitious" for the Senate to pass a bill before the summer recess. However, she believed it would be possible for the tax-writing panel to finish its mark before the August break and use the summer hiatus for melding the SFC and HELP Committee bills.
Late in the afternoon on July 17, the president made a brief statement maintaining that health reform will happen in 2009, but acknowledging there would be much debate over its cost and how to pay for it. He warned that failure to act now would lead to crushing long-term deficits and debt.
The House approved the IRS's fiscal year (FY) 2010 budget on July 16 by a vote of 219-208 (TAXDAY, 2009/07/20, C.2). Under the House bill, the government would allocate $12.1 billion to the IRS for FY 2010.
Real estate professionals told House lawmakers on July 15 that the first-time homebuyers tax credit enacted in 2008 was unfair to purchasers because less than eight months later Congress passed an even better homebuyer tax credit in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) that does not have to be repaid (TAXDAY, 2009/07/16, C.2). Charles McMillan, 2009 President of the National Association of Realtors (NAR), told the House Small Business Committee that the NAR questions whether the repayment scheme is sound tax policy, since it is not in the best interest of taxpayers or the IRS to maintain a 15-year repayment and/or recapture program for a provision that was in effect for only eight months.
Litigation. The IRS's dispute with UBS AG may be headed for resolution (TAXDAY, 2009/07/14, M.1). The U.S. and the Swiss Governments asked a federal district court for additional time to continue discussions about a settlement. The IRS wants the bank to disclose the names of individuals who may have allegedly used their accounts for tax evasion.
Listed Transactions. The IRS released updated rosters of listed transactions and transactions of interest (Notice 2009-55, TAXDAY, 2009/07/16, I.3; Notice 2009-59, TAXDAY, 2009/07/16, I.4). The listed transaction roster reflects additions and deletions made by the IRS since 2004.
Return Preparers. The IRS will hold a public meeting in Washington, D.C. on June 30 to hear opinions and suggestions about its oversight of return preparers (IR-2009-66; TAXDAY, 2009/07/15, I.1). Practitioner professional groups and consumer associations are scheduled to speak at the meeting.
In related news, Karen Hawkins, director of the IRS Office of Profession Responsibility (OPR), indicated that the IRS is taking a wide view of the return preparer community in its study (TAXDAY, 2009/07/15, I.2). The study will focus on preparers but will also look at software manufacturers and banks that engage in refund anticipation loans, Hawkins reported.
Research Tax Credit. Proposed regulations would simplify the election of the reduced research credit (NPRM REG-130200-08; TAXDAY, 2009/07/16, I.1). The proposed regulations explain that the election is made on Form 6765, Credit for Increasing Research Activities, which should be attached to the return instead of requiring the election to be made "on an original return."
Offers-in-Compromise. The IRS has revised Form 656, Offer in Compromise, into two new forms to aid ease of use by taxpayers (TAXDAY, 2009/07/16, I.6). The new forms are Form 656, Offer in Compromise, and Form 656-B, Offer in Compromise Booklet.
Nonprofits. Recent guidance from the IRS should prove helpful to nonprofits, Jane M. Searing, CPA, shareholder, Clark Nuber, PS, Bellevue, Wash., told CCH. In Rev. Proc. 2009-32, I.R.B. 2009-28, 142 (TAXDAY, 2009/07/01, I.2), the IRS issued reliance criteria for private foundations and sponsoring organizations with donor advised funds to determine if a grantee is a public charity and if the grantee is a Type I, II or III supporting organization for purposes of excise taxes imposed on grants by the Pension Protection Act of 2006 (PPA) (P.L. 109-280).
"We have been telling clients that the IRS Business Master File (BMF) was the best source currently, although not previously cited as an acceptable source," Searing noted. "It is interesting to me that the IRS is allowing organizations to rely upon third party providers to get this information," Searing added. "Organizations obtaining the information this way should include in the contract with the third party that the third party understands how the foundation or donor advised fund sponsor is using the data, that the data will be in the required format, and that the third party will indemnify them from any penalties incurred as a result of relying upon these third party reports for these purposes."
By Jeff Carlson, Stephen K. Cooper, Paula Cruickshank and George L. Yaksick, Jr., CCH News Staff
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