The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” including greater detail on the Obama administration’s proposed tax provisions, plans for tax relief, and efforts to boost IRS enforcement budgets. The “Green Book” also explains tax rate increases, measures to close loopeholes in the tax code, and broad international tax changes, that would collectively bring in over $900 billion of tax revenue over 10 years.
CCH (http://tax.cchgroup.com/) reports:
The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” (“Green Book”), which provides details of the tax provisions initially unveiled in the Obama administration’s budget outline on February 1. The Office of Management and Budget (OMB), meanwhile, updated its deficit projections, concluding that the federal deficit in fiscal year (FY) 2009 and FY 2010 will be $90 billion higher each year than the administration’s February estimates. The economic assumptions will be revisited as part of the OMB’s mid-session review in the summer. The Board of Trustees of the Social Security Trust Funds released a report indicating that expenses are outpacing income for the Medicare and Social Security programs, while a Senate Finance Committee hearing addressed health care proposals.
White House
The higher deficit numbers reported by the OMB are attributed largely to lower projected receipts and new data on the administration’s financial stabilization efforts undertaken through the Troubled Asset Relief Program and the FDIC (TAXDAY, 2009/05/12, T.1). OMB Director Peter Orszag maintained that the updated deficit forecast has not changed the administration’s key priorities to invest in education, health care reform and clean energy or its goals to cut the federal deficit in half over the next four years and provide a middle-class tax cut for 95 percent of U.S. taxpayers.
Congress
The Board of Trustees of the Social Security Trust Funds released its annual report on May 12 that shows that expenses are outpacing income for the Medicare and Social Security programs (TAXDAY, 2009/05/13, C.2). In order to make up the shortfall, the report suggests either cutting benefits or raising payroll taxes. The report notes that the financial imbalance has been made worse by the current economic recession. In addition, the report projects a two-year drop in the Medicare solvency date, from 2019 to 2017. According to the report, Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 16-percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two.
Senate Subcommittee on Aviation Operations, Safety, and Security Chairman Byron L. Dorgan, D-N.D., said on May 13 that Senate lawmakers are just beginning the process of drafting their version of the FAA Reauthorization Bill of 2009 (HR 915) (TAXDAY, 2009/05/14, C.1). Dorgan said he expects to have the process completed within the next few weeks and that the measure will likely be passed by the Senate during the 111th Congress. The House Transportation and Infrastructure Committee approved HR 915 on March 5. The bill would provide $70 billion to the FAA and federal aviation infrastructure programs for the next four years.
A bill aimed at boosting the financial stability of the Highway Trust Fund was introduced on May 13 by House Oversight Subcommittee Chairman John Lewis, D-Ga. (TAXDAY, 2009/05/15, C.1). The measure, called the Highway Trust Fund Fairness Bill of 2009 (HR 2391), would modify current law to allow any interest generated by trust fund monies to be retained by the fund. The measure would also shift credits for certain exemptions and repayments away from the responsibility of the trust fund into the Treasury general fund.
The Senate Finance Committee on May 12 looked at the current tax treatment of health care and considered, among other proposals, ways to modify the current unlimited exclusion for employer-provided health care as a means to raise revenue (TAXDAY, 2009/05/13, C.1). Chairman Max Baucus, D-Mont., said he also wantsto look at tax-preferred health accounts and the itemized deduction for health expenses in an attempt to make sure that those benefits are structured fairly and efficiently. Baucus made clear that elimination of the exclusion was off the table, but that there is room for modification. Witnesses said capping the exclusion or capping the deduction for the self-employed at the 90th percentile might be necessary. The Finance Committee is slated to determine revenue measures for health care reform during meetings in the week beginning May 18.
As the committee explored ways to pay for health care reform, including modifying the current unlimited exclusion for employer-based health insurance, White House Press Secretary Robert Gibbs maintained it is possible to make “sustainable progress in cutting the cost of health care without raising taxes.” He noted that President Obama opposed taxing employer-provided health insurance during the presidential campaign. Gibbs said that the president wants to preserve the employer-based health care system but in a way that “envisions significant reform in how we’re spending money.”
Treasury/IRS
The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” on May 11 (TAXDAY, 2009/05/12, T.1). The 132-page “Green Book” adds much-awaited detail to the tax provisions initially unveiled in the Obama administration’s budget outline released on February 1. While some provisions are not proposed to take effect until 2011 or later, others would be effective starting in 2010. A few, such as enhanced net operating loss carrybacks, would apply to 2009. In addition to providing greater detail onta the administration’s plans for tax relief, however, the Green Book also explains the tax rate increases, “loophole” closing measures, LIFO repeal and broad international tax changes, which, collectively, would bring over $900 billion into the Treasury over 10 years.
Withholding Adjustment for Pension Plans. The IRS released new withholding adjustment procedures that allow pension plans to raise withholding amounts now being taken from distributions to pension recipients (IR-2009-50; TAXDAY, 2009/05/15, I.1). The general withholding tables that have been used since April to reflect he making work pay credit have also been used for pension distributions, often inaccurately reflecting entitlement to the making work pay credit. The IRS is also encouraging pension payors who implement the new, optional withholding adjustment procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, to adjust for the change.
2010 Deduction Limits for HSAs. The IRS announced the 2010 inflation- adjusted amounts for health savings accounts. The annual limit on deductible contributions will rise to $3,050 for self-only coverage in 2010, up from a limit of $3,000 for 2009 ($6,150 for an individual with family coverage, up from $5,950). Likewise, the deduction floor for a “”high-deductible health plan” will rise to $1,200 for self-only coverage ($2,400 for families), and the out-of-pocket cap will increase to $5,950 ($11,900 for families) (Rev. Proc. 2009-29; TAXDAY, 2009/05/15, I.2).
2009 Renewable Electricity Production Credit Factors. The IRS published the inflation adjustment factors and reference prices to be used in computing the renewable electricity production credit for 2009. They apply to sales in calendar year 2009 of kilowatt hours of electricity produced in the United States or a U.S. possession from qualified energy resources (Notice 2009-40; TAXDAY, 2009/05/11, I.2).
Nonacquiescence. The IRS recommended nonacquiescence in a 2008 case in which the Tenth Circuit Court of Appeals held that an IRS Appeals officer was disqualified from conducting a Collection Due Process (CDP) hearing because of prior “involvement.” In the case, the officer had considered the taxpayers’ liabilities during a CDP hearing for a prior year (AOD 2009-01; TAXDAY, 2009/05/11, I.8).
Disaster Relief. The IRS extended return-filing and payment deadlines for victims of the severe storms, flooding, and tornadoes in certain counties in Alabama that were declared federal disaster areas on March 25, 2009 (TAXDAY, 2009/05/12, I.1). The IRS also updated notices released in April granting relief to victims of severe storms and flooding in Georgia (TAXDAY, 2009/05/11, I.10) and North Dakota (TAXDAY, 2009/05/15, I.3), severe storms and tornadoes in Arkansas (TAXDAY, 2009/05/11, I.10), and severe storms, flooding, tornadoes and straight-line winds in Florida (TAXDAY, 2009/05/13, I.1).
By Jeff Carlson, Stephen K. Cooper, Paula Cruickshank and George Jones, CCH News Staff
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