Tax Strategies

The 2006 elections saw the Democrats taking control of both the House and the Senate for the first time in 12 years. The shift in the House is probably the most significant.In the House, the majority party controls the agenda: what hearings are held, what legislation gets taken up by committees. The Democratic majority is a narrow one, just as the Republican majority had been a narrow one. Many of the newly elected Democrats were chosen to appeal to moderate voters, so it is far from clear that there has been a major shift in the view of House members on tax issues. Still, control of the agenda will tend to mean that Democratic proposals, rather than Republican proposals, will emerge from the House Ways and Means Committee.

Politicking is still causing a number of popular tax breaks to be held up in Congress.With the 109th Congress scheduled to wrap up its business at the end of next week, a number of expiring tax measures still have yet to be renewed.

State revenues remain stable for the most part, but in a few places, collections in individual tax categories are not living up to expectations, according to the latest survey of state fiscal offices by the National Conference of State Legislatures.

A partner in the Washington office of law firm Venable LLP since 2003, Sam Olchyk provides general tax advice for businesses and individuals, as well as tackling federal tax issues that require representation before Congress, the Treasury Department and the Internal Revenue Service.Prior to joining the firm, Olchyk spent eight years as a tax attorney for Congress -- first as tax counsel with the Senate Finance Committee, and then as legislation counsel with the Joint Committee on Taxation, where his main responsibility was helping with the development of tax legislation affecting domestic business activity. During his time on Capitol Hill, Olchyk, who is also a CPA, worked on numerous proposals that were enacted into law, including pieces of the Job Creation and Worker Assistance Act of 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Community Renewal Tax Relief Act of 2000. In 2001, he worked on a joint committee study regarding the simplification of the federal tax laws.

Responding to criticism from Congress and taxpayer advocates, the Internal Revenue Service announced that for the upcoming tax-filing season, private sector partners in its Free File program will remove ancillary offerings -- such as refund anticipation loans -- made to taxpayers in the course of participating in the program.“We heard many legitimate concerns about the marketing of ancillary products during the last filing season,” said IRS Commissioner Mark Everson, in a statement. “This is a constructive step.”

The California Franchise Tax Board has voted unanimously to permanently offer a program allowing some low-income residents to file government-prepared tax returns, despite opposition from tax preparation software companies.

San Diego’s City Council has approved paying another $2.2 million to KPMG for the Big Four firm’s long overdue 2003 audit. The additional spending approval brings the city’s total KPMG tab to $6.6. million.

The Internal Revenue Service has allocated nearly $1 billion of tax credits to nine planned clean coal projects.The Energy Policy Act of 2005 authorized the tax credits, and, working within a number of set parameters, the IRS consulted with the Department of Energy to allocate the credit to specific projects.

The Internal Revenue Service announced new guidelines for taxpayers to follow in order to substantiate donations to charities that were made via payroll deduction.

The Internal Revenue Service modified a $103 million contract for the management of paper tax returns in November, according to a published report.According to the Washington Post, the original plan to turn over the filing, storage and retrieval activities at seven IRS centers to a contractor Dec. 1 was altered so that, for now, the outsourcing will occur at just two centers. In a statement, the IRS said the conversion was scaled back "to ensure that a sufficient number of employees with the required training and security clearances are in place to manage the files during the upcoming filing season."