Tax and Budget Outlook Ken Kies CoManaging Partner, WNTS Chair, Federal Tax Policy Group Financial E - PowerPoint PPT Presentation

Loading...

PPT – Tax and Budget Outlook Ken Kies CoManaging Partner, WNTS Chair, Federal Tax Policy Group Financial E PowerPoint presentation | free to view - id: 27c96-YzlkN



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Tax and Budget Outlook Ken Kies CoManaging Partner, WNTS Chair, Federal Tax Policy Group Financial E

Description:

Chair, Federal Tax Policy Group. Financial Executives International. 2002 Tax Seminar ... Rite Aid v. U.S. (Federal Circuit , 2001) ... – PowerPoint PPT presentation

Number of Views:69
Avg rating:3.0/5.0
Slides: 34
Provided by: pricewate
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Tax and Budget Outlook Ken Kies CoManaging Partner, WNTS Chair, Federal Tax Policy Group Financial E


1
Tax and Budget Outlook Ken Kies Co-Managing
Partner, WNTS Chair, Federal Tax Policy Group
Financial Executives International 2002 Tax
Seminar Las Vegas, Nevada February 14, 2002
2
Overview
  • The Budget Outlook
  • Election-Year Dynamics
  • Economic Stimulus
  • The Extenders
  • Threat of Pay-Fors
  • Other Tax Initiatives

3
Surplus Outlook for FY 2002 ( Billions, CBO
estimates)
4
Surplus Outlook for FY 2003 ( Billions, CBO
estimates)
5
Ten-Year Surplus Estimates ( Billions, CBO
estimates)
6
Control of 107th Congress House of
Representatives
7
Control of 107th Congress Senate
8
Five Key Senate Races
  • Minnesota (Wellstone v. Coleman)
  • South Dakota (Johnson v. Thune)
  • Missouri (Carnahan v. Talent)
  • Arkansas (Hutchinson v. Pryor)
  • New Hampshire (Smith/Sununu v. Shaheen)

9
Tax Bill in an Election Year?
  • 1974 ERISA
  • 1976 Tax Reform Act of 1976
  • 1978 Revenue Act of 1978
  • 1980 OBRA80 et al
  • 1982 TEFRA
  • 1984 DEFRA

10
Tax Bill in an Election Year?
  • 1986 Tax Reform Act of 1986
  • 1988 TAMRA
  • 1990 OBRA 90
  • 1992 Tax Fairness and Economic Growth Act
    (H.R. 4210) VETOED
  • 1996 Small Business/HIPAA et al

11
Tax Bill in an Election Year?
  • 1998 IRS Restructuring and Reform Act/Tax and
    Trade Relief Extension Act
  • 2000 FSC Repeal/Community Renewal

12
Stimulus Outlook
  • House-passed bill (H.R. 3529)
  • Administration FY 2003 budget
  • Senate gridlock
  • Daschle least common denominator bill fails
    to get 60 votes
  • Senate approves stand-alone extension of
    unemployment benefits
  • Next steps?

13
House-Passed Stimulus Bill
  • Approved December 20 (H.R. 3529)
    (90B FY 2002/157B FY 2002-11)
  • Corporate AMT relief
  • Repeal depreciation adjustment
  • Repeal 90 FTC, NOL limitations
  • Five-year NOL carryback (24 mos.)
  • 30 bonus depreciation (36 mos.)
  • Five-year extension of subpart F exception

14
House-Passed Stimulus Bill
  • Two-year extension of other expiring provisions
    (e.g., Work Opportunity Tax Credit)
  • 25 individual tax rate to take effect in 2002
  • Temporary increase in pension funding interest
    rates
  • Revenue raisers (1) Gitlitz, (2) limit use of
    nonaccrual experience method of accounting

15
House-Passed Stimulus Bill
  • Supplemental stimulus payments (300
    single/600 for married couples)
  • 13-week extension of UI benefits
  • 60 refundable tax credit for health insurance
    purchased by unemployed

16
Other Tax-Related Initiatives
  • Energy legislation
  • Tax incentives for charitable giving
  • Pension reforms
  • Patients Bill of Rights
  • Tax simplification
  • Eliminate sunset of 2001 tax cuts

17
Federal Taxes as a Percent of GDP (Actual data
and CBO Projections)
18
Pressure on Revenue Raisers
  • Return to pay-go?
  • Corporate tax shelter legislation?
  • Enron fallout

19
Corporate Tax Shelter Legislation?
  • Rep. Lloyd Doggett
  • H.R. 2520 would codify economic substance
    doctrine.
  • Estimated to raise 7.5B over 10 years.
  • Senate Finance Committee staff
  • 40 penalty for understatements in transactions
    where significant purpose is tax avoidance.

20
Corporate Tax Shelter Legislation?
  • Senate Finance Committee staff (cont.)
  • Penalty avoided if there is (1) substantial
    authority, (2) disclosure, (3) reasonable belief
    that treatment of transaction was more likely
    than not correct.
  • Opinions must be independent.
  • Minimum 100K penalty for failure to disclose
    reportable transactions.
  • Penalty on promoters equal to 50 of fees.

21
Corporate Income Tax Receipts ( billions)
22
The Bush Treasury and Corporate Tax Shelters
  • Opposes new legislation
  • Narrowed Clinton Administration tax shelter
    regulations
  • Deleted different foreign tax treatment as
    indicator of transaction requiring disclosure.
  • Eliminated economic profit test under
    confidential corporate tax shelter registration
    regulations and list maintenance regulations.

23
The Bush Treasury and Corporate Tax Shelters
  • Deputy Assistant Secretary (Tax Policy) Pam Olson
    (10/2/01)
  • The tax shelter problem on the corporate level
    has diminished. Im not saying its gone but it
    has rapidly declined.
  • There is growing empirical evidence that it has
    moved beyond the corporate world and has taken
    hold in the small business area and among
    individuals.

24
IRS Audits of Individual Returns ( Coverage)
25
IRS Audits of Small Businesses (Corporations with
Assets 26
The Bush Treasury and Corporate Tax Shelters
  • Deputy Assistant Secretary (Tax Policy) Pam Olson
    (10/2/01)
  • We need strategies for resolving the issues. …
    We cant spend forever dealing with the issues of
    the 90s.

27
Corporate Tax Shelters IRS Initiatives
  • Shelter disclosure initiative
  • Taxpayers disclose shelter transactions,
    marketing materials
  • IRS waives accuracy-related penalties
  • IRS Office of Tax Shelter Analysis
  • Leasing transactions
  • Corporate-owned life insurance
  • Updates to IRS listed transactions

28
Mounting IRS Court Losses
  • Compaq Computer Corporation v. Commr (Fifth
    Circuit, 2001)
  • United Parcel Service v. Commr (Eleventh
    Circuit, 2001)
  • IES Industries, Inc. v. Commr (Eighth Circuit ,
    2001)
  • Rite Aid v. U.S. (Federal Circuit , 2001)
  • Boca Investerings Partnership
    (U.S. District Court for the District
    of Columbia, 2001)

29
Still, Some IRS Wins …
  • ACM Partnership v. Commr
    (3rd Circuit, 1998)
  • ASA Investerings Partnership
    (DC Circuit, 2000)
  • COLI Cases
  • Winn-Dixie v. Commr (Tax Court, 1999)
  • CM Holdings, Inc (U.S. Dist. Ct. for Dist. of
    Delaware, 2000)
  • American Electric Power (U.S. Dist. Ct. for So.
    Dist. Ohio, 2001)
  • The Limited
    (Tax Court, 1999)

30
The Bush Treasury Tax Team
  • Bush Treasury modifications to loss disallowance
    regulations
  • Bush Treasury withdraws adverse Clinton
    Administration RD credit regulations
  • Bush Treasury limits reach of Clinton
    Administration anti-Morris Trust regulations
  • Bush Treasury revises split-dollar life
    insurance guidance

31
FSC/ETI Saga Continues
  • July 2001 WTO rules that ETI regime does not
    bring U.S. into compliance with 1998 FSC ruling
  • October 2001 U.S. launches appeal
  • November 2001 Oral arguments before WTO panel
  • January 14, 2002 WTO rejects U.S. appeal

32
Possible Outcomes in FSC/ETI Dispute
  • EU sanctions?
  • ETI replacement legislation?
  • International tax reform
  • U.S. compensation?
  • Negotiated settlement?

33
ETI Tax Expenditure (JCT billions)
About PowerShow.com