Tax Hot Topics
From Grant Thornton's Washington National Tax Office

May 31, 2011 | THT 2011-10

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Contents

Grant Thornton insights
• Webcast:
CFO Insights: Strategically managing your state and local taxes

Compensation and benefits
• IRS announces 2012 inflation adjustments for Health Savings Accounts
• IRS rules employer not required to report reward points or discounts as compensation

Corporate transactions and operations
• Tax Court holds that S corporation income must be reported until final sale consummated
• IRS rules on REIT asset and income tests

Individual and private wealth services
• Tax Court determines claim values not ascertainable and deductible for estate tax

• IRS rules taxable termination occurs at child’s death if trust has separate shares

IRS practice and procedure
• IRS delays withholding on government contractor payments until 2013

• IRS provides de minimis exception for third-party network backup withholding

State and local tax
• North Dakota lowers income tax rates, passes mobile workforce legislation
• California enacts voluntary compliance initiative, tax shelter penalties, use tax tables
• New Jersey promotes job growth by changing two important tax provisions
• Michigan tax amnesty program begins on May 15
• Missouri governor signs law gradually phasing out corporate franchise tax

Tax legislative updates
• Repatriation holiday bill introduced in House
• Tax reform debate continues as House Republicans release new growth agenda

• Senate rejects bill to repeal oil and gas tax incentives

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GRANT THORNTON INSIGHTS

Webcast: CFO Insights: Strategically managing your state and local taxes
Tuesday, June 7, 2011 ~ 12:00-1:30 p.m. Eastern ~ 1.5 CPE
TechAmerica and Grant Thornton LLP are pleased to present the third webcast in our CFO Insights series. This webcast focuses on recent developments and best practices in state and local taxation, including how to reduce spending through smarter tax strategies; manage state and local tax liabilities effectively; understand evolving legislation in the area of nexus; determine whether your tax structure fits your business plan; and comprehend income sourcing for technology companies. Our featured presenters will include National Manager Partner for the Technology Industry Practice Cal Hackeman, SALT Senior Manager Brian Balingit, SALT Partner Terry Conley, and SALT Senior Manager Joel Waterfield. Visit our website for information on how to register.

Survey report: How companies are using IT to improve supply chain efficiency
After a significant drop in IT investment, manufacturing companies are looking to step up spending in the near term. Many are focusing on IT solutions that will enhance supply chain efficiency, most notably, customer relationship management systems, sales force automation, mobility applications and warehouse management systems. Cloud computing options are also poised for a rise in adoption. In the first of our 2011 Supply Chain Solution survey series, we delve in to supply chain executives' IT investment decisions during 2010 and their funding plans for the future. Visit our website to download the survey report.

Banking roundtable highlights
On May 4, 2011, Grant Thornton was joined by professionals from Promontory Financial Group; Cadwalader, Wickersham & Taft; and Keefe, Bruyette & Woods for a roundtable discussion in New York City on the major issues facing the industry. Highlights of roundtable include discussions on the Dodd-Frank Wall Street Reform and Consumer Protection Act, top regulatory exam issues, accounting and tax updates, and mergers and acquisitions. Download a summary document from our website.

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COMPENSATION AND BENEFITS

IRS announces 2012 inflation adjustments for Health Savings Accounts
The IRS has announced the inflation-adjusted amounts for contributions, plan deductibles and out-of-pocket expenses for health savings accounts (HSAs) for 2012.

Rev. Proc. 2011-32 sets the 2012 limit on HSA contributions at $3,100 for an individual with self-only coverage and $6,250 for an individual with family coverage. In order to qualify for an HSA, an individual’s coverage in a group health plan must be under a high deductible health plan (HDHP). The guidance provides that in 2012, HDHPs must have an annual deductible that is not less than $1,200 for self-only coverage or $2,400 for family coverage, and annual out-of-pocket expenses cannot exceed $6,050 for self-only coverage or $12,100 for family coverage.

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IRS rules employer not required to report reward points or discounts as compensation
The IRS has ruled (PLR 2011-17-014) that an employer was not required to report a third-party employee’s reward points and vendor discount program as income to its employees.

The letter ruling addressed an employer who allows employees to participate in a rewards program established by a third party in which employees receive reward points. The employee can use these reward points to purchase products or services from vendors through an agreement with the third party. The reward points are not transferrable and cannot be redeemed for cash. The third party negotiates the discounts with the vendors and administers the rewards program. The employer does not know when, if ever, the employees redeem their points or the discounts they also receive. The employer does not pay an amount to the vendors, and the vendors do not pay any amounts to the employer related to the rewards program. The employer does maintain an online portal that displays the number of accumulated reward points and redemption opportunities for points.

The IRS ruled that the employer is merely offering employees the opportunity to engage in future discounted purchases of goods and services from unrelated third parties. Therefore, the employer is not providing any accessions to wealth under Section 61 to the employees. Section 6041 requires employers to report income to individuals on Form W-2 for employees and Form 1099 for independent contractors. The IRS held that the employer is not subject to income reporting obligations under Section 6041 by its involvement in the rewards program because it is not providing income to the employees.

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CORPORATE TRANSACTIONS AND OPERATIONS

Tax Court holds that S corporation income must be reported until final sale consummated
The Tax Court has issued a summary opinion in Rocchio v. Commissioner (T.C. Summary Opinion 2011-58) holding that a taxpayer’s interest in a family S corporation was not terminated when he filed for corporate dissolution and entered into a settlement agreement to sell his S corporation shares — and that he had to report income until the actual sale was consummated.

The taxpayer, Rocchio, and his three siblings each inherited a 12.5 percent interest in the family’s S corporation upon their mother’s death. Rochio’s father continued to own the remaining 50 percent interest. Rocchio and his siblings became estranged from their father when he remarried and ceased distributing proceeds from the S corporation to them. Rocchio and his siblings filed for judicial dissolution of the S corporation under applicable New York law. Rocchio’s father elected to purchase the shares held by his four children, a permissible alternative under state law. The purchase price under New York law in this situation was the fair value of the shares on the day immediately prior to the dissolution filing. The ultimate sale and share transfer, however, was not consummated until approximately two years later because of disputes over measuring fair value.

Rocchio argued that he was not liable for his pro-rata share of the S corporation’s income after the dissolution filing, because his interest in the S corporation was frozen statutorily and he was no longer entitled to participate in its management. The Tax Court relied on New York state law in holding that Rocchio remained a shareholder until payment was made upon the actual sale of Rocchio’s shares to his father. Consequently, Rocchio was required to report his pro-rata share of the S corporation’s income up until the actual sale.

The Tax Court ruled, however, that Rocchio was not subject to the 20 percent substantial understatement penalty under Section 6662. The Tax Court noted the complexities and challenges at issue in both the tax law and New York state law and held that Rocchio qualified for the reasonable cause and good faith exception to the penalty as provided in Section 6664.

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IRS rules on REIT asset and income tests
The IRS has ruled in PLR 2011-18-015 that a loan to a limited partnership owned by a real estate investment trust (REIT) was disregarded to the extent of the REIT’s ownership in the limited partnership.

Specifically, the IRS ruled that the loan was disregarded for determining whether the entity met the asset tests to qualify as a REIT under Section 856(c)(4), and the interest income related to the loan was disregarded for determining whether the entity met the income tests to qualify as a REIT under Sections 856(c)(2) and (3).

The letter ruling addressed a public corporation that had elected to be treated as a REIT for U.S. federal tax purposes. The REIT owned an interest in a limited partnership and conducted substantially all of its business in the limited partnership. The REIT planned to raise capital through a public debenture offering and use the proceeds of the offering to make a loan to the partnership with terms substantially similar to its debentures.

The asset tests under Section 856(c)(4) provide that the value of a REIT’s assets at the close of each quarter must consist of: (i) at least 75 percent of real estate assets, cash and cash items, and government securities; (ii) not more than 25 percent of nongovernment securities; (iii) not more than 25 percent of securities of one or more taxable REIT subsidiaries; (iv) not more than five percent of securities of any one issuer; (v) not more than 10 percent of the total voting power of the outstanding securities of any one issuer; and (vi) not more than 10 percent of total outstanding securities of any one issuer.

The income tests under Sections 856(c)(2) and (3) provide that a REIT (i) must derive at least 95 percent of its gross income from certain sources including dividend, interest and rents from real property; and (ii) must derive at least 75 percent of its gross income from certain real estate sources including rents from real property and qualified temporary investment income.

A REIT that is a partner in a partnership is deemed under the regulations to own its proportionate share of the partnership assets and is entitled to the income attributable share of the partnership. For purposes of Section 856, the interest of a partner in the partnership’s assets is determined by the partner’s capital interest in the partnership. In addition, for all purposes of Section 856, the character of the partnership assets and the partnership income retain the same character in the hands of the partners.

The IRS ruled that the amount of the debentures that is proportionate to the REIT’s capital interest in the partnership will be disregarded for applying the asset tests, and the amount of interest income proportionate to the REIT’s capital interest in the partnership will be disregarded for applying the income tests.

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INDIVIDUAL AND PRIVATE WEALTH SERVICES

Tax Court determines claim values not ascertainable and deductible for estate tax
The Tax Court has determined in two recent cases that the value of claims against the estates was not ascertainable with reasonable certainty and as a result the claims were not deductible in determining each decedent’s taxable estate. Estate of Gertrude H. Saunders v. Commissioner (136 T. C. No. 18) involved a legal malpractice claim pending against the decedent at the time of his death. Estate of Ellen D. Foster v. Commissioner (T.C. Memo 2011-95) involved claims held by the estate as assets, as well as claims against the estate.

Pursuant to Section 2053(a), the value of a taxable estate is determined by deducting amounts (such as funeral and administration expenses) from the value of the gross estate. Section 2053(a)(3) allows a deduction for claims against a decedent’s estate. Neither Section 2053(a) nor the regulations thereunder contain a method for valuing a claim against an estate for estate tax purposes, and there has been little consistency among the courts regarding the extent to which post-death events are to be considered in valuing such claims. In general, the court decisions have floated between one line of cases that follows a date-of-death valuation approach and another line of cases that restricts deductible amounts to those amounts actually paid by the estate in satisfaction of the claim.

Final regulations, effective for estates of decedents dying after Oct. 20, 2009, reflect the IRS’s rejection of the date-of-death valuation approach and adopt rules based on the premise that an estate may only deduct amounts actually paid in settlement of claims against the estate. The final regulations “clarify” that events occurring after a decedent’s death are to be considered when determining the amount deductible under all provisions of Section 2053 and that such deductions are limited to amounts actually paid by the estate in satisfaction of deductible expenses and claims.

In both cases, the Tax Court applied the prior regulations that were in effect at the date of the decedent deaths. Under Treas. Reg. Sec. 20.2053-1(b)(3), a deduction for a claim may be taken even though its exact amount is not known provided it is ascertainable with reasonable certainty and will be paid, but no deduction may be taken upon the basis of a vague or uncertain estimate. That regulation section also provides that if a liability that is not deductible because it is not ascertainable subsequently becomes ascertainable, a deduction may be claimed at a later time. The Tax Court based its conclusion on these regulatory provisions and did not address whether post-death events should be considered.

In Saunders, the decedent’s estate had a pending claim against it stemming from a malpractice suit against the decedent’s previously deceased spouse. The suit claimed damages of $90 million. The estate valued the malpractice claim at $30 million based on an appraisal by the attorney handling the malpractice suit for the decedent’s estate. Ultimately, the claim was settled for $250,000. The IRS challenged the valuation and allowed a deduction of $1. The estate later obtained two additional valuations of the malpractice claims, which valued the claims at $19,300,000 and $22,500,000.

The Tax Court discussed the difference between valuing an asset versus valuing a liability in the decedent’s estate. A claim that is an asset in the estate can be valued using recognized methods by assuming various outcomes, assigning probabilities to those outcomes and quantifying the results. A stricter valuation standard is applicable for a claim that is a liability of the estate because of the regulatory requirement that the claim must be “ascertainable with reasonable certainty.” The Tax Court noted that the appraisals from the three different experts varied widely in methodology and valuation of the claim and did not opine as to whether the valued amount would actually be paid.

The Tax Court concluded that the claim was not ascertainable with reasonable certainty and would be deductible only when actually paid. As a result, the $30 million deduction claimed on the estate tax return was reduced to the $250,000 amount actually paid plus the $289,000 cost of litigation.

In Foster, the litigation claim against the decedent’s estate had been decided in favor of the decedent prior to her death, but an appeal of that decision was pending at the time of her death. The decedent’s estate discounted the assets of the marital trusts created by her previously deceased spouse and included in her estate 29 percent (approximately $14.7 million) attributable to the pending appeal. The plaintiffs in the litigation claim ultimately released the decedent’s estate from the claim. The decedent’s estate did not include the value of possible claims the estate may have had against the trustee of the marital trusts for breach of fiduciary duty and the attorney who drafted agreements related to the creation of an employee stock option agreement. The decedent’s estate settled its claims against the attorney for $850,000 and a jury awarded the decedent’s estate an award of $17 million against the trustee.

The IRS disallowed the discount regarding the marital trusts because the litigation claim against it was not a “sum certain” and was not “legally enforceable” at death. Alternatively, the IRS claimed the discount was a vague and uncertain estimate that was not reasonably certain. The IRS did not assert a deficiency for the claims the estate held against the attorney or the trustee; however, it later asserted a deficiency of $5.1 million regarding the estate’s claim against the trustees in pleadings filed prior to trial. The decedent’s estate submitted a valuation of the claim against the trustees of $33,000.

The Tax Court did not take into consideration any litigation discount or deduction under the same theory as applied in the Saunders case, i.e., the value was not established with reasonable certainty. With regard to the value of claims held by the estate, the Tax Court considered the methodology used by experts for both sides, made adjustments to the computations and arrived at a value of $930,000. The costs of the estate’s actual litigation expenses were deducted separately.

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IRS rules taxable termination occurs at child’s death if trust has separate shares
The IRS has issued a private letter ruling (PLR 2011-18-003) addressing the generation-skipping transfer (GST) tax consequences arising with respect to two trusts.

The trusts addressed by the ruling provided that upon the settlor’s death, all the net income is to be distributed annually in equal shares to the settlor’s five children. Upon the death of any child, that child’s share of the income is to be distributed to that child’s children per stirpes. No principal may be distributed from either trust until the trust terminates. Upon termination of each trust, the remaining assets are to be distributed per stirpes to the settlor’s grandchildren. No GST exemption was allocated to the transfers to either trust at the time of the settlor’s death. At the time the ruling request was submitted, two of the settlor’s children had deceased.

Section 2654(b) provides that substantially separate and independent shares of different beneficiaries in a trust are treated as separate trusts for purposes of the GST tax. Treas. Reg. Sec. 26.2654-1(a)(1) provides that the phrase “substantially separate and independent shares” generally has the same meaning as provided under the Section 663(c) regulations. However, a portion of a trust is not a separate share unless such share exists from, and at all times after, the creation of the trust.

Under the facts of the ruling request submission, all the income must be distributed currently to the appropriate beneficiaries, and no distributions of principal are permitted during the term of the trust. Upon the death of a child, that child’s share passes to the child’s children. The IRS concluded that each trust consists of five separate shares, one for the benefit of each of the settlor’s children and their children. As a result, at the death of a child there is a taxable termination with respect to that child’s share, and GST tax is due to be paid from the trust share.

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IRS PRACTICE AND PROCEDURE

IRS delays withholding on government contractor payments until 2013
The IRS on May 6 issued final regulations (T.D. 9524) that delay for one year the implementation of new rules that require three percent withholding on payments to government vendors.

The withholding requirements were added by the Tax Increase Prevention and Reconciliation Act of 2005 and were originally scheduled to take effect for payments beginning in 2012 (payments made after Dec. 31, 2011). Under the transition relief provided by the final regulations, withholding is not required until 2013. However, the IRS simultaneously proposed regulations (REG-151687-10) that would remove an exception in the final regulations for withholding on payments made under a pre-existing binding written contract that is not materially modified. Under the proposed regulations, these payments would be subject to withholding beginning in 2014.

Lawmakers have expressed interest in repealing or delaying the unpopular withholding rules, and it’s possible they will be repealed before they take effect. Several bills have been introduced in Congress that would fully repeal the requirements, and the White House has indicated it is open to a reasonable delay.

The new statute generally will require federal, state and local governments to withhold three percent on payments to any government vendor for services or property, with specific exceptions that include:

  • interest payments;

  • payments for real property;

  • payments to any government entity, foreign government or tax-exempt organization;

  • welfare and public assistance program payments;

  • payments to government employees for services as an employee; and

  • payments from political subdivisions or instrumentalities with total annual payments under $100 million.

The final regulations provide that the withholding generally will not apply to any payment of less than $10,000. This threshold applies on a payment-by-payment basis, and payments will not be aggregated unless they fall under anti-abuse rules. The anti-abuse rules aim to capture payments divided purposely to avoid withholding, and they will apply if the government entity making the payment knew or should have known that the payment was divided for the primary purpose of avoidance.

The final regulations allow government entities to exclude the amount of sales, value-added or excise tax from the withholding as long as it’s applied consistently to all payments of a given payee in a single year. The final regulations also provide an explicit exception for all grant payments, which the regulations define.

The IRS said it would determine in future guidance whether withholding will be required on credit and debit card transactions. The IRS indicated it planned to offer guidance on how governments can identify government entities, foreign governments, tax-exempt organizations and pass-throughs that are more than 80 percent owned by these entities — all of which are exempt from withholding under the regulations.

The IRS declined to offer an exception for utility payments, but did clarify that withholding only applies to payments made directly to a prime contractor and not to later payments from that contractor to subcontractors. The IRS also clarified that repayments of principal on a loan are not subject to withholding because they are not payments for property or services, and that the exception for real property extends to payments for leases of real property. The final regulations further provide an exception for payments to purchase stock, bonds and other negotiable instruments primarily for investment purposes.

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IRS provides de minimis exception for third-party network backup withholding
The IRS has issued interim guidance (Notice 2011-42) exempting third-party settlement organizations (TPSOs) from backup withholding on payment transactions subject to reporting under Section 6050W unless transactions with a merchant exceed 200.

Section 6050W was enacted in the Housing Assistance Tax Act of 2008 and requires payment processors, defined as payment settlement entities (PSEs), to report the total amount of payment card receipts (such as debit, credit or gift cards) received by every merchant each year. The PSE reporting also applies to TPSOs that settle third-party network transactions such as payments for online sales or hotel kiosk arrangements.

If a PSE or TPSO doesn’t receive a valid taxpayer identification number (TIN) from a payment recipient, it is generally required by Section 3406 to perform backup withholding on any payments. The statute under Section 6050W provides a de minimis reporting exception for TPSOs if the amount to be reported to a payee does not exceed $20,000 or the transactions do not exceed 200. But the withholding rules under Section 3406 apply generally to reportable transactions under a number of Code sections and do not include the Section 6050W de minimis exceptions.

The IRS said in Notice 2011-42 that it intends to amend the regulations under Section 3406 to provide that no backup withholding is required when the transactions between a TPSO and a payee do not exceed 200 within a calendar year. There is no monetary threshold applicable to this exception, and the Notice does not does not apply to payment card transactions. TPSOs may rely on the Notice until final regulations are issued.

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STATE AND LOCAL TAX

North Dakota lowers income tax rates, passes mobile workforce legislation
North Dakota has enacted legislation that lowers the corporate income tax, financial institutions tax and personal income tax rates for taxable years beginning after Dec. 31, 2010. The state also passed separate mobile workforce legislation under which an employer is generally not required to withhold North Dakota income tax on a nonresident’s wages if the individual works for no more than 20 days in North Dakota and the individual’s state of residence provides a substantially similar exemption or does not impose an income tax. Read more in our SALT Alert.

California enacts voluntary compliance initiative, tax shelter penalties, use tax tables
California Governor Jerry Brown has signed budget trailer legislation that directs the Franchise Tax Board to establish a voluntary compliance initiative (VCI) to operate from Aug. 1 to Oct. 31, 2011. It applies to taxpayers that have participated in transactions characterized as abusive tax avoidance transactions and offshore financial arrangements. The legislation also increases the already lengthy statute of limitations period during which a proposed deficiency assessment related to an abusive tax avoidance transaction may be mailed, and it amends some penalty provisions concerning tax shelters. Read more in our SALT Alert.

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New Jersey promotes job growth by changing two important tax provisions
New Jersey Governor Chris Christie has signed two bills in an attempt to promote business expansion and job growth by changing two important New Jersey tax provisions. The three-factor apportionment formula that businesses currently use to allocate income for purposes of the corporation business tax (CBT) will be phased out over three years and will eventually be replaced with a single sales factor formula. Also, small business owners that generate income from different types of business entities will be allowed to offset gains from one type of business with losses from another type of business for purposes of the gross income tax (GIT). Read more in our SALT Alert.

Michigan tax amnesty program begins on May 15
Michigan is offering a tax amnesty program from May 15 through June 30, 2011. The amnesty program applies to all taxes administered by the Michigan Department of Treasury for all tax periods ending on or before Dec. 31, 2009. For successful participants in the program, the Department will waive penalties on qualifying taxes and interest that are paid under the amnesty program and not seek civil or criminal penalties or prosecution. Read more in our SALT Alert.

Missouri governor signs law gradually phasing out corporate franchise tax
Missouri will slowly phase out, over a five-year period, the corporate franchise tax on businesses with more than a $10 million post-apportioned franchise tax base. Read more in our SALT Alert.

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TAX LEGISLATIVE UPDATES

Repatriation holiday bill introduced in House
House members Kevin Brady, R-Texas, and Jim Matheson, D-Utah, have introduced legislation (H.R. 4834) that would provide another short-term 85 percent dividend deduction on earnings repatriated from foreign subsidiaries.

The bill is based on the 2004 provision that allowed U.S. corporations a one-year opportunity to deduct 85 percent of qualifying dividends received from their controlled foreign corporations. The new proposal does not include the restrictions from the 2004 version on reinvesting the dividends domestically but would instead impose a penalty for employment reductions equal to $25,000 multiplied by the number of employees by which average employment dropped in the 23 months following the repatriation event.

The proposal has generated serious interest among lawmakers looking for a way inject money trapped overseas back into the U.S. economy. But many policy makers have expressed a preference for dealing with this issue as part of broader tax reform efforts, and the bill is hindered by a high cost estimate. The Joint Committee on Taxation recently estimated that a similar repatriation provision would cost almost $80 billion over 10 years.

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Tax reform debate continues as House Republicans release new growth agenda
House Republicans have unveiled an economic growth agenda that envisions enacting tax reform to lower the corporate and individual tax rates to 25 percent.

Like the House Republican Budget blueprint, the plan contains few details but generally proposes to repeal unspecified tax expenditures. However, the growth agenda also proposes to reform the international tax income to allow companies to repatriate foreign income without paying U.S. tax. Details on how the proposed new rules would operate were not offered.

The new Republican platform adds to the ongoing debate over tax reform on Capitol Hill. Treasury Secretary Timothy Geithner said recently that the administration intends to release a report with revenue neutral corporate tax reform options later this year, but that it would not be available before the debate over raising the federal debt limit is completed. No information has been officially released, but the administration has quietly floated ideas among policy makers. The White House is apparently considering a proposal to tax pass-through entities with over $50 million in annual receipts as C corporations as part of reaching a goal of cutting the corporate rate to between 26 percent and 28 percent.

A bipartisan Senate “Gang of Six” that had been working on its own deficit and tax reform plan was recently dealt a blow when conservative Sen. Tom Coburn, R-Okla., left the group saying an agreement was not possible. Many lawmakers had been looking to the group to forge a bipartisan plan that could be accepted by both parties. Senate Democrats have conducted their own discussions to try and agree on a Senate budget proposal; they have indicated that an unspecified “millionaire surtax” could be under consideration.

Tax reform could also be considered in the context of the debt ceiling debate. Treasury is expected to default on its loans by Aug. 2 unless Congress raises the federal debt limit. Republicans and Democrats are currently negotiating a deficit reduction package to accompany a debt limit increase. The focus for now is primarily on spending cuts rather than revenue. Lawmakers are working to trim up to $1 trillion in spending, but tax increases could also enter negotiations as Democrats push to include the repeal of tax incentives for the largest oil companies.

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Senate rejects bill to repeal oil and gas tax incentives
The Senate has rejected legislation that would have repealed tax incentives for the top five major integrated oil companies.

The bill received 52 votes, but needed 60 to advance. Although further action on the legislation in its present form is considered unlikely, eliminating or modifying provisions that benefit the oil and gas industry will continue to be discussed. In the short-term, these discussions are likely to be in the context of deficit reduction and will probably be limited to the larger integrated oil companies. Over the longer term, provisions benefiting the oil and gas industry could be targeted in connection with tax reform proposals to reduce rates and eliminate tax expenditures, and repeal or modification efforts could apply to the entire oil and gas industry regardless of the size of the taxpayer.

For additional details, please see Tax Insights: Senate rejects bill to repeal oil and gas tax incentives.

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This document supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document we encourage you to contact us or an independent tax advisor to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended by Grant Thornton to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or opinion provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs, and may require consideration of non-tax factors and tax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as
amended.


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