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Stay informed on key tax legislative developments with Tax Watch. From time-to-time, articles will also include commentary by distinguished practitioners on various aspects of proposed and potential tax legislation. Get the latest tax news & developments from Thomson Reuters.

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Tax Watch Archive

2/15/12 — Deal reportedly reached to extend payroll tax cut.
It's been reported that a tentative deal has been reached to extend the payroll tax cut through the end of 2012. The deal also would extend unemployment insurance, and implement the "doc-fix" (which prevents Medicare reimbursement rates to doctors from falling). It appears as if the payroll tax cut extension will not have any offsets, but extension of unemployment insurance and the "doc fix" will be paid for in some way.

There are indications the payroll tax cut extension will be cleared by Congress before the end of this week.

2/14/12 — House Republicans introduce "backup plan" for extending payroll tax cut only.
Very little progress has been made by the committee in charge of coming up with a bill to extend the payroll tax cut through the end of 2012, as well as extend unemployment insurance and put in place another Medicare "doc fix." Pointing to the lack of progress, House Republicans on Tuesday, February—14, introduced H.R. 4013, a "backup" bill that would simply extend the payroll tax holiday (due to expire at the end of this month) for the remainder of the year—with no offsets—while the conference negotiations continue regarding offsets, unemployment insurance, and the "doc fix."

House Democrats were quick to criticize the Republicans' attempt to decouple the payroll tax from the other extenders currently under consideration by the conferees. "There is no reason all three of these priorities cannot proceed at the same time as both the House and Senate agreed," said House Minority Leader Nancy Pelosi (D-CA), in a written statement. "House Republicans chose the go-it-alone path in December to nearly disastrous effect and American families cannot afford a repeat performance," said Sander Levin (D-MI), a conferee on the payroll tax bill.

Pelosi didn't rule out support for the backup plan. She said, "We have long proposed bringing this tax cut to the floor without payfors and House Democrats will support it so that taxes are not raised on 160 million working Americans, but this should not be a substitute for the work of the Conference Committee."

2/14/12 — Levin once again introduces carried-interest bill.
On Tuesday, February 14, Ways and Means Committee Ranking Member Sander Levin (D-MI) introduced the "Carried Interest Fairness Act of 2012," which would tax at ordinary income rates income received by partners for performing investment management services for a partnership. It's his third try at such legislation (the first try was in 2007, and the second in 2009).

The bill is aimed at "carried interest," or a share in the fund's profits—an important part of the incentive package of partner-managers of investment funds structured as partnerships. In exchange for providing the service of managing their investors' assets, fund managers often receive a portion (usually 20%) of the fund's profits (carried interest). Under current law, partner-managers treat their carried interest as low-taxed long-term capital gain. The bill would "clarify" that any income received from a partnership, capital or otherwise, in compensation for services is ordinary income for tax purposes. As a result, managers of investment partnerships who receive carried interest as compensation would pay ordinary income tax rates, rather than capital gains rates, on that compensation. However, under the bill, the capital gains rate would continue to apply to the extent that a manager's allocation of capital gain income represents a return on capital that they have invested in the partnership.

In what is billed as a refinement and revision of its previous versions, the current bill would provide that in the case of the sale of manager's interest in an investment management firm, where there is a clearly separable and verifiable element of goodwill—such as where there is a separate management entity—the manager would receive capital gains treatment for that portion of the gain on the sale.

The following material can also be found on Checkpoint:

the legislative text of the "Carried Interest Fairness Act of 2012"; and
a technical explanation of the "Carried Interest Fairness Act of 2012."

2/8/12 — Senate Finance Committee OKs modified Chairman's Mark to Highway Investment, Job Creation and Economic Growth Act of 2012.
On February 7, the Senate Finance Committee, by a vote of 17 to 6 (1 present), approved the Chairman's Mark as modified to the Highway Investment, Job Creation and Economic Growth Act of 2012. The measure will be used as the tax title to S. 1813, "Moving Ahead for Progress in the 21st Century" (MAP 21), the comprehensive transportation bill, and the Senate could begin consideration of this bill as early as February 9.

Senate Finance Chair Max Baucus's (D-MT) modified Chairman's Mark (see Article #2032) would among other changes provide parity for employer provided mass transit and parking benefits under Code Sec. 132(f); revised required beginning date under the required minimum distribution rules for 5% owners; a five-year payout for inherited IRAs; and treatment of distributions of debt securities in a tax-free spin-off transaction in the same way as distributions of cash or other property. In response to Republican members' objection to the change that would require a five-year payout for IRAs (rather than over the remaining life expectancy of the designated beneficiary), Baucus indicated his willingness to instead find other offsets. The Senate Finance Committee also approved two amendments to the Chairman's modified mark by voice vote: an amendment offered by Senator Jeff Bingaman (D-NM) that would modify the tax treatment of long-term highway leases; and an amendment offered by Senator Robert Menendez (D-NJ) that would raise the volume cap on private activity bonds for water and wastewater projects.

The following material can also be found on Checkpoint:

the text of the Joint Committee on Taxation's JCX-11-12: "Description of the Chairman's Modification to the Proposals of the Highway Investment, Job Creation, and Economic Growth Act of 2012"; and
the text of a Senate Finance press release titled "Baucus Announces Modified Chairman's Mark of Highway Funding Legislation."

2/8/12 — No progress in conferees' efforts to extend payroll tax cut.
With the temporary reduction in payroll taxes scheduled to expire on February 29, conferees for H.R. 3630, the "Payroll Tax Cut Continuation Act of 2011," met on Feb. 7 to discuss offsets for a bill extending the payroll tax cut. After four hours of discussions it was clear that Republican and Democratic conferees were no where close to reaching an agreement on offsets. Democrats conferees have rejected Republican conferees' proposal to pay for the cost of the bill with a pay freeze on Federal employees, an increase in high-income individuals' Medicare premiums, and a clawback of health care subsidies overpayments. Republican conferees have rejected Democratic conferees' proposal for a millionaires surtax.

Dave Camp (R-MI), Chair of the conference, reportedly said that conferees may have to consider new options to pay for the bill, telling conferees that if they couldn't agree on how to pay for the legislation they would have three choices—go outside the scope of the conference to find other offsets, reduce the size of the bill, or not offset the bill at all, which he said the President was not in favor of doing.

Meanwhile, Senate Majority Leader Harry Reid (D-NV) is reported to have said that conferees need to reach an agreement by next Monday or Tuesday, "otherwise we'll have to come to the floor with something."

2/7/12 — Congress passes Air Transportation Modernization and Safety Improvement Act.
Late on Monday, February 6, the Senate by a vote of 75 to 20 passed H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act Conference Report. As the measure had already passed the House of Representatives on February 3, it is now cleared for the President's signature.

The FAA Air Transportation Modernization and Safety Improvement Act includes a corporate tax change, relaxed rollover rules for certain airline employees, and many aviation related excise tax changes. For highlights of these tax changes, see Weekly Alert - 02/09/2012.

The following material can also be found on Checkpoint:

the legislative text of H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act; and
the text of the Conference Report to H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act.

2/7/12 — Baucus releases modified Chairman's Mark to Highway Investment, Job Creation and Economic Growth Act of 2012.
On February 7, ahead of the Senate Finance Committee's consideration of Highway Investment, Job Creation and Economic Growth Act of 2012, Senate Finance Chair Max Baucus (D-MT) introduced a modified Chairman's Mark of the measure (for the original Chairman's Mark, see Article #2030). According to a press release, the modified Mark incorporates "amendments and altered revenue proposals from both parties to build broad support" for the bill.

Here's a brief summary of Baucus's key tax modifications, which are bound to please some taxpayers but anger others:

Parity for employer provided mass transit and parking benefits. For 2011, there was parity for exclusion from income for employer-provided mass transit and parking benefits under Code Sec. 132(f). The exclusion was $230 per month for each of these breaks in 2011. However, for 2012, the exclusion under current law is $240 for qualified parking (due to an inflation adjustment) but only $125 for employer-provided transit and vanpooling benefits.

The modified Chairman's Mark would extended the parity for qualified transportation fringe benefits for all of 2012.

RIA observation: That is, the proposal apparently would increase the 2012 exclusion amount for employer-provided transit and vanpooling benefits to $240.

Revised required beginning date (RBD) for 5% owners. Employer-provided defined contribution qualified retirement plans, IRAs and individual retirement annuities are subject to the required minimum distribution (RMD) rules. Generally, RMDs from qualified retirement plans (e.g., 401(k)s) and IRAs must begin by the required beginning date (RBD), which usually is April 1 of the calendar year following the calendar year in which the individual (employee or IRA owner) reaches age 70 ¹/2. But for employer-provided qualified retirement plans, the RBD for non-5% company owners is delayed to April 1 of the year following the year in which the individual retires.

The modified Chairman's Mark would provide that if an employee becomes a 5% owner after age 70 ¹/2 but before retiring and thus before the employee's RBD with respect to tax favored retirement plans of the employee's employer, the RBD for that employee becomes April 1 following the year that the employee becomes a 5% owner. For this proposed change, if an employee became a 5% owner with respect to a plan year ending before Jan. 1, 2012, and has not retired before 2013, he would be treated as having become a 5% owner in 2013. Otherwise, the proposal would apply on the enactment date without regard to whether the employee became a 5% owner before, on, or after the enactment date.

Five-year payout for inherited IRAs. Under current law, minimum distributions after the death of a qualified plan (e.g., 401(k)) participant or IRA owner depend on whether he died before or after his RBD. (1) If he died on or after his RBD, and designated a nonspouse beneficiary for the account, the IRA balance is paid out over the longer of: the remaining life expectancy of the designated beneficiary, or the remaining life expectancy of the IRA owner. (2) If he dies before his RBD, and designated a nonspouse beneficiary for the account, there are two methods for satisfying the after-death RMD rules: (a) Under the five-year method, the individual's entire account must be distributed no later than December 31 of the calendar year containing the fifth anniversary of his death; and (b) Under the life expectancy method, annual RMDs over the beneficiary's life or over a period not extending beyond his life expectancy, must begin no later than December 31 of the calendar year immediately following the calendar year in which the individual died. More liberal rules apply if the sole beneficiary of the account is the taxpayer's spouse. For example, the spouse may roll over the decedent's IRA into his or her own IRA, or elect to treat the IRA as the spouse's own IRA.

Under the modified Chairman's Mark, with enumerated exceptions, an inherited qualified plan account or IRA would have to paid out to beneficiaries within five years, regardless of whether the employee or IRA owner died before, on, or after his RBD.

RIA observation: If enacted, the proposal would result in large tax bills, and eroded inheritances, for many qualified plan and IRA beneficiaries.

The following beneficiaries would be excepted from the 5-year mandatory payout rule: the decedent's surviving spouse; disabled or chronically ill individuals; individuals who are not more than 10 years younger than the employee or IRA owner; and children who have not reached the age of majority.

The proposed accelerated payout of inherited qualified plan or IRA amounts generally would apply for distributions with respect to employees or IRA owners who die after Dec. 31, 2012. For deaths after that date, the proposal would not apply to a qualified annuity which is a binding annuity contract in effect on the enactment date and at all times thereafter.

Reverse Morris Trust transactions. Under current law, taxes are generally imposed on parent corporations that extract value in excess of basis from their subsidiaries before engaging in a tax-free spin-off transaction. Therefore, if a subsidiary corporation distributes cash or other property to its parent in excess of the parent's basis in the subsidiary or if a subsidiary corporation assumes parent debt in excess of the parent's basis in the subsidiary the parent corporation will recognize gain. But taxes are not assessed if a subsidiary corporation distributes its own debt securities to a parent corporation before a spin-off transaction even where the value of these securities would exceed the parent corporation's basis in its subsidiary.

The modified Chairman's Mark would treat distributions of debt securities in a tax-free spin-off transaction in the same way as distributions of cash or other property. Subject to a transition rule, the provision would apply to exchanges after the enactment date.

The following material can also be found on Checkpoint:

the text of the Joint Committee on Taxation's JCX-11-12: "Description of the Chairman's Modification to the Proposals of the Highway Investment, Job Creation, and Economic Growth Act of 2012"; and
the text of a Senate Finance press release titled "Baucus Announces Modified Chairman's Mark of Highway Funding Legislation."

2/6/12 — House passes Air Transportation Modernization and Safety Improvement Act, which includes corporate tax change.
On February 3, the House by a vote of 248 to 169, passed H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act Conference Report. The Senate is scheduled to take up the measure on Monday, February 6.

H.R. 658 includes a corporate tax change that was carried in the President's budget proposals for FY 2011 and 2012. It concerns Code Sec. 249, which bars a deduction to the issuing corporation for any premium paid upon the repurchase of a bond, debenture, note, or other evidence of indebtedness which is convertible into the stock of (1) the issuing corporation, (2) or a corporation in control of, or controlled by, the issuing corporation. The bar applies to the extent that the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. Currently, for Code Sec. 249 purchases, the term control is defined with reference to the control definition in Code Sec. 368(c).

Effective for repurchases after the enactment date, the bill would modify the definition of "control" by incorporating indirect control relationships described in Code Sec. 1563(a)(1).

For other changes in H.R. 658, see Article #2029.

The following material can also be found on Checkpoint:

the legislative text of H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act; and
the text of the Conference Report to H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act.

2/6/12 — Senate Finance to mark up Highway Investment, Job Creation and Economic Growth Act of 2012.
On February 7, the Senate Finance Committee is scheduled to mark up the "Highway Investment, Job Creation and Economic Growth Act of 2012." According to a press release issued by Senate Finance Chair Max Baucus (D-MT), if favorably reported by the Committee, this measure will be folded into a larger transportation bill for Senate debate.

The changes that would be made by this legislation include:

Extension of the motor fuel taxes, all three non-fuel excise taxes, and the Leaking Underground Storage Tank (LUST) Trust Fund tax through Sept. 30, 2015.
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) black liquor (a byproduct of the paper milling process in kraft mills) is excluded from alternative fuel tax credit eligibility, effective for fuel sold or used after Dec. 31, 2009. (Code Sec. 6426(d)(2) The bill would prohibit taxpayers from claiming the alternative mixture credit (or the cellulosic biofuels credit) on any new or amended returns made on or after Feb. 3, 2012.
Authorize the federal government to deny the application for a new passport or renewal of an existing passport to an individual with $50,000 or more (indexed for inflation) of unpaid federal taxes that IRS is collecting through enforcement action. It would also permit the federal government to revoke a passport upon reentry into the U.S. by such individuals.
Permit IRS to impose a levy of up to 100% (up from current law's 15%) on tax delinquent Medicare service providers.

The following material can also be found on Checkpoint:

the text of the Joint Committee on Taxation's JCX-9-12: "Description of the Chairman's Mark of S.__, the Highway Investment, Job Creation and Economic Growth Act of 2012"; and
the text of a press release titled "Baucus Unveils Chairman's Mark to Fund Highway Bill, Create Infrastructure Jobs."

2/3/12 — Air Transportation Modernization and Safety Improvement Act includes corporate tax change.
On February 3, the House was scheduled to consider H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act Conference Report. The Senate is scheduled to take up the measure on Monday, February 6.

Effective for repurchases after the enactment date, the bill would modify the definition of "control" by incorporating indirect control relationships described in Code Sec. 1563(a)(1).

H.R. 658 would make numerous other changes, including the following:

Extend current law's Airport and Airway Highway Trust Fund excise taxes through Sept. 30, 2015 (the last extension extended these taxes through Feb. 18, 2012; see Article #2025).
Exempt from commercial aviation taxes through Sept. 30, 2015, certain flights made as part of a fractional ownership program. Instead, through Sept. 30, 2015, these flights would be treated as noncommercial aviation, subject to the fuel surtax and the base fuel tax for fuel used in noncommercial aviation. This change would apply for taxable transportation provided after, uses of aircraft after, and fuel used after, Mar. 31, 2012.
Allow qualified commercial airline employees who had participated in a commercial airline's tax-exempt defined benefit pension plan that was terminated or otherwise restricted to transfer to a traditional individual retirement account (IRA) any "airline payment amount" received from the airline (including a qualified rollover to a Roth IRA) resulting from a bankruptcy proceeding filed between Sept. 11, 2001, and Jan. 1, 2007. The amount rolled over would be excluded. Those qualified commercial airline employees who contributed an airline payment amount to a Roth IRA could recharacterize the contribution as a rollover to a regular IRA (the trustee-to-trustee transfer from Roth to regular IRA would have to be made within 180 days of the bill's enactment). No more than 90% of airline payments could be rolled over or recharacterized. Those making a recharacterization would have to file a claim for refund by the later of the limitations period of Code Sec. 6511(a), or Apr. 15, 2013. Covered employees as defined under Code Sec. 162(m)(3), would be excluded from the above rollovers or recharacterizations.

The following material can also be found on Checkpoint:

the legislative text of H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act; and
the text of the Conference Report to H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act.

2/3/12 — House-passed Fiscal Responsibility and Retirement Act would repeal health care reform legislation's CLASS Program.
On February 1, the House of Representatives by a vote of 267 to 159, passed H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011. H.R. 1173 would repeal the provisions of the President's signature health care reform legislation dealing with the CLASS insurance program. Several other provisions of that reform legislation have already been repealed (rules dealing with "free choice vouchers," and expanded Form 1099 information reporting requirements).

Background. Sec. 8002 of the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), created a new, voluntary, self-funded public long-term care (LTC) insurance program, known as the CLASS Independence Benefit Plan. It was established for the purchase of community living assistance services and supports ("CLASS") by individuals with functional limitations. Sec. 3210 of PPACA provides that the CLASS program is treated for Code purposes in the same manner as a qualified long-term care insurance contract for qualified long-term care services. Under Code Sec. 7702B, premiums paid for a qualified long-term care insurance contract generally are deductible as medical expenses on Schedule A, Form 1040, subject to a dollar limit on the deductible amount of the premium per year based on the insured person's age at the end of the tax year.

The Joint Committee on Taxation's explanation of H.R. 1173 quotes a letter, written by U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius to Congress, to the effect that HHS has suspended work on establishment of the CLASS program because of its inability to develop a program meeting the applicable criteria.

CLASS program would be repealed. H.R. 1173 would repeal the statutory provisions relating to the CLASS program, including the provision treating the CLASS Program for Code purposes in the same way as a qualified long-term care insurance contract for qualified long-term care services.

The following material can also be found on Checkpoint:

the legislative text of H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011; and
JCX-4-12, the Joint Committee on Taxation Staff explanation of H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011.

2/3/12 — Ways & Means Committee OKs American Energy and Infrastructure Jobs Financing Act of 2012.
On February 3, the House Ways and Means Committee favorably reported out of committee H.R. 3864, the American Energy and Infrastructure Jobs Financing Act of 2012.

H.R. 3864 would among other changes extend through Sept. 30, 2016, the expenditure authority for the Highway Trust Fund. It also would extend the motor fuel taxes, and all three non-fuel excise taxes at their current rates through Sept. 30, 2018.

2/3/12 — Conferees continue to grapple with extension of payroll tax cut; bonus depreciation may be extended.
On February 2, conferees on a bill to extend the payroll tax cut through the end of 2012 continued their negotiations. There was agreement among conferees that 100% percent bonus first-year depreciation should be extended through 2012. Under current law, bonus first year depreciation is equal to: 100% of the cost of qualified property placed in service after Sept. 8, 2010 and before Jan. 1, 2012 (before Jan. 1, 2013 for certain longer-lived and transportation property); and 50% of the cost of qualified property placed in service after Dec. 31, 2011 and before Jan. 1, 2013 (after Dec. 31, 2012 and before Jan. 1, 2014 for certain longer-lived and transportation property. (The President also has called for this provision to be extended; see Article #2024).

Conferees didn't agree on how bonus depreciation extension provision should be paid for.

Additionally, Senator Max Baucus (D-MT) Vice Chair of the conference and Senator Ben Cardin (D-MD), urged negotiators to consider extending tax breaks that expired at the end of 2011. Baucus said consideration should be given to extending the R&D credit and the education expense provisions. Dave Camp (R-MI), Chair of the conference, said that the provisions would be outside of the scope of the conference, but that he would be willing to discuss them, and that it was possible that the provisions Baucus mentioned might be added to the bill. Again, the major issue will be how to pay for any extenders.

2/1/12 — President signs Airport and Airway Extension Act into law.
On January 31, President Obama signed into law H.R. 3800, the "Airport and Airway Extension Act of 2012" (P.L. 112-91). Among other things, the Act amends the Code to extend through Feb. 17, 2012, increased excise taxes on aviation fuels, the excise tax on air transportation of persons and property, and the expenditure authority for the Airport and Airway Trust Fund. It also authorizes appropriations for the period beginning on Oct. 1, 2011 and ending on Feb. 17, 2012, for airport planning and development.

RIA observation: The House and Senate are slated to take up for H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act, which would extend current law's airport and airway trust fund excuse taxes through Sept. 30, 2015.

The text of H.R. 3800, the "Airport and Airway Extension Act of 2012" can be found on Checkpoint.

2/1/12 — President sends "Startup America Legislative Agenda" to Congress.
On January 31, the President sent to Congress his "Startup America Legislative Agenda," a plan to "expand tax relief and unlock capital for startups and small businesses that are creating jobs." The agenda includes the following tax proposals:

Expand and make permanent zero capital gains on small business investments.

RIA observation: This is apparently a reference to the exclusion for qualified small business stock (QSBS) under Code Sec. 1202. Under current law, noncorporate taxpayers may exclude from gross income 100% of any gain realized on the sale or exchange of QSBS held for more than five years if the QSBS is acquired after Sept.. 27, 2010 and before Jan.. 1, 2012.

Create a new tax credit that would provide a 10% income tax credit on new payroll for small businesses—through either hiring or increased wages—added in 2012.

RIA observation: The President first proposed a tax credit for adding new workers in 2010.

Permanently double the amount of start-up expenses entrepreneurs can deduct from their taxes under Code Sec. 195 from $5,000 to $10,000.

RIA observation: For tax years beginning in 2010, taxpayers were allowed to currently deduct up to $10,000 of start-up expenses.

Extend 100% first-year depreciation under Code Sec. 168(k) for one year, effective for qualified property acquired and placed in service before Jan. 1, 2013.

RIA observation: Under current law, additional first year depreciation is equal to: 100% of the cost of qualified property placed in service after Sept. 8, 2010 and before Jan. 1, 2012 (before Jan. 1, 2013 for certain longer-lived and transportation property); and 50% of the cost of qualified property placed in service after Dec. 31, 2011 and before Jan. 1, 2013 (after Dec. 31, 2012 and before Jan. 1, 2014 for certain longer-lived and transportation property).

A press release on the President's Startup America Legislative Agenda can be found on Checkpoint.

1/27/12 — Congress passes Airport and Airway Extension Act.
On January 26, the Senate by voice vote approved H.R. 3800, the "Airport and Airway Extension Act of 2012." The bill was approved by the House on Jan. 24, also by voice vote. It is now cleared for the President's signature. Among other things, the bill would amend the Code to extend through Feb. 17, 2012, increased excise taxes on aviation fuels, the excise tax on air transportation of persons and property, and the expenditure authority for the Airport and Airway Trust Fund. It would also increase the authorization of appropriations for the period beginning on Oct. 1, 2011 and ending on Feb. 17, 2012, for airport planning and development and noise compatibility planning projects.

1/25/12 — White House details President Obama's proposals for U.S. manufacturing and corporate tax reform.
The White House has released a Fact Sheet on President Obama's "Blueprint for an America Built to Last" proposals to encourage companies to create U.S. manufacturing jobs rather than shipping those jobs overseas, as laid out in his State of the Union address. The Fact Sheet also provides a framework for corporate tax reform.

The following six proposals, which it is hoped Congress will act on immediately, form a revenue-neutral reform package to support manufacturing, discourage outsourcing, and encourage insourcing:

Deny moving expense deductions to companies moving operations overseas and allow a new 20% credit for the expenses of moving operations back to the U.S. (Revenue neutral)
Target the Code Sec. 199 domestic production activity deduction on manufacturers who create jobs in the U.S. and doubling the deduction for advanced manufacturing technologies from 9% to 18%. (Revenue neutral)
Create a new Manufacturing Communities Tax Credit ($2 billion per year in incentives for three years) for qualified investments that help finance projects in communities that have suffered a "major job loss event"—i.e., where a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in permanent mass layoffs. (Cost $6 billion)
Extend the Code Sec. 48C(d) Advanced Energy Manufacturing Tax Credit for investments in clean energy manufacturing in the U.S. (Cost $5 billion)
Provide 100% expensing of investment in plants and equipment. (Cost $4 billion)
Close a loophole that allows companies to shift profits overseas from intangible property created in the U.S. (Raises $23 billion)

Corporate tax reform. President Obama also proposed a framework for corporate tax reform to encourage greater U.S. investment and eliminate tax advantages for outsourcing by:

making companies pay a minimum tax for overseas profits;
making permanent an expanded Code Sec. 41 research and experimentation tax credit; and
simplifying the Code and closing loopholes.

The following material can also be found on Checkpoint:

"Fact Sheet: President Obama's Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing."
"Blueprint for an America Built to Last."

1/24/12 — House passes Airport and Airway Extension Act.
On January 25, the House by voice vote approved H.R. 3800, the "Airport and Airway Extension Act of 2012." Among other things, the bill would amend the Code to extend through Feb. 29, 2012, increased excise taxes on aviation fuels, the excise tax on air transportation of persons and property, and the expenditure authority for the Airport and Airway Trust Fund. It would also increase the authorization of appropriations for the period beginning on Oct. 1, 2011 and ending on Feb. 29, 2012, for airport planning and development and noise compatibility planning projects.

1/18/12 — Another part of the President's health care reform legislation may be repealed.
On January 18, the House Ways and Means Committee by a vote of 23 to 13, favorably reported out of Committee, H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011. H.R. 1173 would repeal the provisions of the President's signature health care reform legislation dealing with the CLASS insurance program. Several other provisions of that reform legislation have already been repealed (rules dealing with "free choice vouchers," and expanded Form 1099 information reporting requirements).

The following material can also be found on Checkpoint:

the legislative text of H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011; and
JCX-4-12, the Joint Committee on Taxation Staff explanation of H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011.

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