Financial Crisis News Center

UBS-IRS Bargain Noted by Committee Leadership

This story appeared in Bank Digest.

Two members of the Senate Finance Committee have commented on the agreement announced by the Justice Department between UBS AG and the Internal Revenue Service on account information. Committee Chairman Max Baucus, D-Mont., called it “an important step in the fight against offshore tax fraud.” On the other hand, Ranking Member Chuck Grassley, R-Iowa, said he needed more information before he would be willing to support the arrangement. Grassley questioned how the IRS reduced from 52,000 to 4,450 the number of accounts for which it wanted information and also called for more information on the use of financial institutions in countries other than Switzerland to avoid taxes.

Obama Tax Reform Proposals Would Repeal LIFO to Conform to IFRS; and Increase Taxes on Securities and Commodities Dealers

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

Anticipating SEC adoption of international financial reporting standards (IFRS), the Obama Administration proposed to repeal the last-in, first-out (LIFO) method of accounting for inventories. Since IFRS do not permit the use of the LIFO method, their adoption by the SEC would cause violations of the current LIFO book/tax conformity requirement. Repealing LIFO would remove this possible impediment to the implementation of IFRS in the United States.

Shulman Promotes EITC as Help for Taxpayers Stung by Recession

By George.Yaksick, Jr., CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Jan. 30, 2009.

IRS Commissioner Douglas H. Shulman repeated his pledge on January 30 to help taxpayers struggling during the recession and highlighted the Earned Income Tax Credit (EITC) as one way for qualifying individuals to pay less tax or get a refund. “We want to go the extra mile to ensure that taxpayers who are eligible for the EITC take the credit,” Shulman, who spoke during an IRS teleconference with reporters, said.

House-Passed Stimulus Bill Would Repeal IRS Notice 2008-83

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter

The House has passed an economic stimulus bill, H.R. 1, prospectively repealing IRS Notice 2008-83 that interprets Section 382 of the Internal Revenue Code to allow banks and other financial institutions pursuing acquisitions to write off acquired losses stemming from takeovers of other banks to offset future income. The bill would also exclude Fannie Mae, Freddie Mac and companies receiving TARP benefits from a five-year carryback of net operating losses for companies.

Geithner Promises Congress to Review IRS Ruling 2008-83

At his Senate confirmation hearings, Treasury Secretary Tim Geithner acknowledged that IRS Ruling 2008-83 favoring bank acquisitions raised complex issues about Treasury’s authority and differential treatment of the financial services industry. Under strong questioning from Finance Committee Member Charles Grassley, the Secretary promised to more closely examine the issue and work with the committee to resolve the issues raised by 2008-83.

Geithner Will Direct IRS to Examine Legislation Amending IRC 162(m)

At his confirmation hearings, Treasury Secretary Tim Geithner agreed to consider legislation to amend Section 162(m) of the Internal Revenue Code to eliminate the deduction of commissions and performance-based pay for a company’s most highly paid exexutives.The Emergency Economic Stabilization Act limited executive compensation for executives of companies that are participating in the Troubled Asset Relief Program (TARP). These restrictions include a limitation of $500,000 (instead of 162(m)’s $1 million cap) on the amount of compensation that can be deducted as an ordinary and necessary business expense. Also, the definition of compensation for TARP recipients was expanded to include performance pay and stock options. Senator John Kerry has introduced legislation that would amend 162(m) to repeal the exemption for performance based pay and bonuses for all companies, not just TARP recipients.

IRS May Postpone Collection for Distressed Taxpayers

By George L. Yaksick Jr., CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Jan. 7, 2009.

IRS Commissioner Douglas H. Shulman said on January 6 that he has expanded the authority of agency personnel to suspend collection activities for individuals struggling during the current economic slowdown. Shulman, who spoke at news conference in Washington, D.C., unveiled the Service's latest tools to help economically distressed individuals.

IRS Expedites Process to Subordinate or Remove Tax Liens to Help Homeowners

Reprinted from the CCH Federal Banking Law Reporter, Dec. 17, 2008. By George Jones, CCH Washington News Bureau.

Citing “difficult times for the U.S. economy,” IRS Commissioner Douglas Shulman has announced his commitment of Internal Revenue Service resources to an expedited process under which distressed homeowners can have federal tax liens subordinated or discharged. Although procedures already have been in place for lien subordination (in case of a refinancing) and discharge (in case of a sale) well before the current economic turmoil, the Commissioner’s message to the media at IRS headquarters in Washington, D.C., on December 16 covered three apparent changes:

IRS Reacts to Economic Crisis

By George Jones, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Dec. 9, 2008.

The IRS anticipates issuing further guidance that will elaborate on the relatively liberal Notices released recently on application of the loss carryforward rules under Code Section 382 in reaction to the current economic crisis. In announcing these plans, however, Mark Jennings, IRS Branch Chief, Associate Chief Counsel (Corporate), stated that the IRS hopes to define its “more liberal view” precisely with objective safe harbors and other standards, rather than relying on a more open-ended business operations test.

Speaking at a program on Section 382 sponsored by the Federal Bar Association’s Section on Taxation and held at the firm of Pepper Hamilton LLP, in Washington, D.C., on December 8, Jennings also indicated that regulations under Section 382(l), which were authorized by Congress in 1986 but have not yet been issued will be released sometime in 2009. “They will be comprehensive regs, covering Section 382 matters beyond those raised in the current Notices,” Jennings added.