CCH Weekly Report from Washington, D.C. |

The House is expected to vote during the week of July 30 on a Republican measure that would temporarily extend the Bush-era tax cuts for one year and stop the alternative minimum tax (AMT) from affecting middle-class taxpayers for two years, as well as a Democratic alternative. The Senate, meanwhile, passed a measure that would extend current tax rates through 2013 on incomes up to $250,000, but the bill is unlikely to make it past the Republican-controlled House. The Treasury Department has released a model intergovernmental agreement to facilitate compliance with the Foreign Account Tax Compliance Act (FATCA) as enacted in the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (P.L. 111-147 .

Congress

House . During the week of July 30, the House is expected to consider GOP legislation, the Job Protection and Recession Prevention Bill of 2012 (HR 8 ), that would temporarily extend the Bush-era tax cuts for one year and stop the alternative minimum tax (AMT) from affecting middle-class taxpayers for two years (TAXDAY, 2012/07/25, C.1 ). An alternative Democratic measure that would extend current tax law only for those earning $250,000 will also be considered. Introduced by Ways and Means Chairman Dave Camp, R-Mich., HR 8 would extend through December 31, 2013, the tax provisions included in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (P.L. 107-16 ) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) (P.L. 108-27 ). These provisions, which are set to expire in December, were last extended under Obama as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312 ).

The House is also likely to vote on a GOP measure that would set up an expedited process for considering comprehensive tax reform legislation, called the Pathway to Job Creation through a Simpler, Fairer Tax Code Bill of 2012 (HR 6169 ).

Tax reform legislation could include provisions that address tax compliance issues faced by public charities, according to Ways and Means Oversight Subcommittee Chairman Charles Boustany, Jr., R-La. (TAXDAY, 2012/07/26, C.2 ). Boustany said lawmakers are especially concerned by regulatory confusion over the unrelated business taxable income (UBTI) of tax-exempt organizations. Ranking member John Lewis, D-La., stated that he was also concerned about whether public charities are engaging in for-profit businesses that are not part of their charitable mission.

Senate. The Senate on July 25 passed a Democratic measure that would extend current tax rates through 2013 on incomes up to $250,000, but the bill is unlikely to make it past the Republican-controlled House (TAXDAY, 2012/07/26, C.1 ). A last-minute decision by Senate leaders allowed for a simple majority vote and lawmakers, voting mainly along partisan lines, approved the Middle Class Tax Cut Bill (Sen 3412 ) by a vote of 51 to 48. The Senate earlier rejected a Republican proposal, the Tax Hike Prevention Bill of 2012 (Sen 3413 ), that would have extended the 2001 and 2003 tax rates for current rates on income, capital gains, dividends and the estate tax, for a year by a margin of 45 to 54.

Witnesses told the Senate Finance Committee on July 25 that Congress will have to address the complexity of education tax benefits when they turn to tax reform if they want the incentives to increase access to higher education (TAXDAY, 2012/07/26, C.3 ). The comments came during a hearing that examined how tax reform could improve educational opportunities. Senate Finance Committee Chairman Max Baucus, D-Mont., acknowledged at the start that the multitude of education tax benefits can result in complexity and confusion for many families. There are currently eight separate tax benefits related to higher education and those benefits use five different definitions of eligible expenses. Baucus said problems occur when taxpayers must calculate their taxes using each tax benefit to determine which one works best.

Treasury

FATCA Model Agreement. The Treasury Department on July 26 released a model intergovernmental agreement to facilitate compliance with the Foreign Account Tax Compliance Act (FATCA) as enacted in the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (P.L. 111-147 ) (TDNR TG-1653 ; TAXDAY, 2012/07/27, T.2 ). A senior Treasury official also told reporters in Washington, D.C., that much-anticipated FATCA final regulations are expected to be issued this fall.

The Treasury Inspector General for Tax Administration (TIGTA) issued the following reports:

TIGTA reviewed the IRS?s Federal Financial Management Improvement Act (FFMIA) remediation plan to address the material weakness relating to information security (TAXDAY, 2012/07/27, T.1 ). TIGTA reviewed the IRS?s FFMIA remediation plan to address the material weakness in CADE 2 relating to information security.

The IRS delayed processing 43,295 adoption credit claims and approved more than $11 million in erroneous claims because of incomplete or missing documentation (TAXDAY, 2012/07/25, T.1 ). TIGTA said that math error authority would have allowed the IRS to deny the credit during the processing of the tax return if required documentation was not provided.

The number of S corporation audits the IRS closes with no recommended adjustments (no change) is very high (TAXDAY, 2012/07/27, T.2 ). IRS statistics show that 62 percent of the S corporation returns selected by DIF for audit were closed by the IRS with no changes in fiscal year 2011.

IRS procedures provide its employees with sufficient guidance for handling joint filer collection activity information requests (TAXDAY, 2012/07/23, T.1 ). However, TIGTA could not determine whether the IRS fully complied with Code Sec. 6103(e)(8) when responding to written collection activity requests from joint filers because IRS information systems do not separately record joint filer requests.

IRS

Form 8655 Guidance. The IRS has updated the procedure for completing Form 8655, Reporting Agent Authorization (Rev. Proc. 2012-32 ; TAXDAY, 2012/07/27, I.2 ). The new revenue procedure makes several changes to the former procedure, such as requiring the Reporting Agent to use the Electronic Federal Tax Payment System (EFTPS) or the Federal Tax Application to make deposits or payments.

Batch Provider Procedures. The IRS has provided mandatory procedures for Batch Providers and Bulk Providers (Providers), such as banks and financial institutions, that submit enrollments and make federal tax deposits (FTDs) and federal tax payments (FTPs) on behalf of multiple taxpayers via EFTPS (Rev. Proc. 2012-33 ; TAXDAY, 2012/07/27, I.3 ).

August Per Diem Travel Rates. The U.S. State Department has released a listing of maximum travel per diem allowances for travel in foreign areas (TAXDAY, 2012/07/25, I.1 ). The rates apply to all government employees and contractors, and are effective as of August 1, 2012.

Code Sec. 48A Credits. The IRS has issued the results of the Code Sec. 48A Phase I program and established a third phase of the qualifying advanced coal project program to distribute the Phase I credits that are available for allocation after the conclusion of the Phase I program (Notice 2012-51 ; TAXDAY, 2012/07/23, I.1 ). The new procedures apply only to Phase I credits that are available for reallocation after the last allocation under the Phase I program.

By Jeff Carlson, Stephen K. Cooper and Jennifer J. Rodibaugh, CCH News Staff

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