From the Senate Finance Committee, chaired by Sen. Max Baucus (D-MT), “Baucus Introduces Bill to Create Jobs and Extend Family, Worker, Employer Tax Cuts”:

Washington, DC – Senate Finance Committee Chairman Max Baucus (D?Mont.) today introduced fully paid-for legislation to create jobs and extend critical tax cuts for individuals, families and employers, while closing tax loopholes for wealthy investment fund managers and large corporations. The bill would cut taxes for families paying college tuition, state and local taxes, and property taxes. It would cut taxes for employers to spur research and development and investment, freeing up cash to expand and hire new workers. And the legislation would bolster career training programs and provide wage assistance to help employers hire workers to help our economy grow.

The bill features many one-year extensions of current tax programs, exemptions, incentives and the like. For example, the R&D Tax Credit would be extended for one year,  retroactively from the start of 2010.

News coverage …

• CQPolitics.com, “Senator Takes Another Shot at Moving a ‘Tax Extenders’ Package“
• WebCPA.com, “Baucus Introduces New Tax Cut Extenders Bill“
• Business Insurance, “Newest tax bill retains punitive damages provision“
• Bloomberg, “Build America Bond Extension for 1 Year Offered in Senate Bill“

(continue reading…)

Dianne Searcey of the Wall Street Journal’s Law Blog provides more detail on the possible $1.6 billion tax break for contingency fee litigation. Having failed to move legislation to accomplish this special-interest policy change in Congress, the American Association for Justice has been trying to gain the same benefit from Treasury.

Apparently at the heart of the matter is an April letter Sens. Max Baucus (D., Mont.) and Richard Durbin (D., Ill.) sent to Michael Mundaca, assistant secretary for tax policy seeking clarity on the 9th Circuit ruling in the 1995 case of Boccardo v. Commissioner.

In the Boccardo case, the IRS asserted that out-of-pocket expenses incurred by attorneys on behalf of clients while prosecuting contingency cases are not deductible because the law firm expects reimbursement upon getting a settlement or judgment. The Tax Court agreed.

The 9th Circuit took up the matter. The letter sums up the ruling like this:

The court “held that attorneys who represent clients in contingency fee cases may treat litigation costs that are paid by the attorneys, such as filing fees and witness expenses as deductible ordinary and necessary business expenses . . . when the attorney and client agree to a specific fee arrangement known as a gross fee contract.”

The IRS issued a memo saying that the ruling applied only to attorneys in the 9th Circuit. But the Tax Court has since recognized the validity of the decision in at least one other case, according to the letter.

Here’s an analysis dated June 14 of the underlying and complicated tax law issues from Robert W. Wood of the San Francisco law firm of Wood and Porter, “Lawyers Who Deduct Client Costs: Revisiting Boccardo“. Abstract:

In this article, Wood considers how contingent fee lawyers treat costs and when they can deduct them, explaining the relationship between this issue and the fee agreement. He notes that Sens. Baucus and Durbin have recently entered the fray, but that 15 years after the Ninth Circuit decided Boccardo, considerable confusion remains.

And again, Victor Schwartz and Chris Appel of Shook, Hardy & Bacon explained why such a deduction would amount to a taxpayer subsidy of speculative lawsuits in a paper last year for the Washington Legal Foundation, “Federal Government Bailout for Trial Lawyers.”

Earlier posts here.

UPDATE: Good, newsy report in National Law Journal, in which the American Association for Justice confirms its lobbying: “‘Obviously, we are exploring all avenues to clarify this confusing tax code,’ said Ray De Lorenzi, a spokesman for the American Association for Justice, which advocates for trial lawyers, in a statement. He declined to give details on any meetings or exchanges with Treasury Department officials.”

From Portfolio.com:

The House passed legislation December 3 to make the current estate tax rate of 45 percent permanent and exempt $3.5 million of assets from the tax. Many Republicans in the Senate, however want a lower rate and higher exemption. With health care reform dominating its agenda, the Senate couldn’t hash out this issue.

The House then planned to attach a two-month extension of the estate tax on today’s defense bill, but dropped the idea when it became clear that could jeopardize that bill’s passage.

So next year, Congress will try to reinstate the estate tax. They’ll probably try to make it retroactive so there is no tax-free window for death, but lots of experts say that would be unconstitutional.

• ABC News, “Democrats: Estate Tax Repeal to Be Short-Lived”
• Wall Street Journal, “Baucus to Try Next Year to Extend Estate Tax Retroactively”
• Bloomberg, “Estate Tax to Expire Temporarily as Extension Dropped”

Congress might not find it not so easy to quickly reinstate the elapsed tax in 2010. Every vote to impose the death tax will be one that can be described as a “vote to raise taxes on family-owned businesses by 45 percent.” Or 35 percent, or whatever the rate may be.

A statement from Jay Timmons, executive vice president of the National Association of Manufacturers, reacting to the 14-9 vote in the Senate Finance Committee to pass out health care reform legislation this afternoon.

While acknowledging the improvements the Finance Committee version has made — no public option, for example — the NAM objects to major provisions. Excerpt:

[The] NAM remains deeply concerned that the Senate Finance Committee’s bill overall will add costs to the health care system and, by extension, the manufacturing community, on top of the already spiraling costs manufacturers and their employees face today.

Specifically, we believe the excise tax imposed on insurance plans will have a negative economic impact on many manufacturers. And, the Finance Committee’s imposition of industry-specific fees singles out businesses solely to raise revenues – costs that ultimately will be passed onto consumers.

The NAM is also concerned about the proposed tax on employer-provided prescription benefits, limits on Flexible Spending Accounts (FSAs) and new requirements on corporate information reporting.

Lastly, we are disappointed that the bill does not address the costly issue of “defensive medicine” through medical malpractice reform in any meaningful way.

The Finance Committee’s news release is here, and Sen. Max Baucus’ opening statement is here.

UPDATE (5:15 p.m.): Here’s the vote tally.

UPDATE (5:20 p.m.): A tally of the $507 billion in new taxes and fees.

The Chairman’s mark, America’s Healthy Future Act.

Hat tip to Campaign for an American Solution.

UPDATE (10:24 a.m.): Wall Street Journal reports, “Baucus Unveils $856 Billion Health-Care Legislation“:

The sweeping measure is designed to steer a more moderate course on health policy than other major bills moving through Capitol Hill, and doesn’t propose to create a new government insurance plan to compete with private insurers, as proposed in rival House legislation and favored by many liberals. Instead, the Montana Democrat is proposing to expand coverage by creating a network of nonprofit health insurance cooperatives. 

UPDATE (10:32 a.m.): Washington Post:

Under the Baucus plan, new Web-based insurance exchanges would be established to allow consumers to shop for and compare insurance plans. The package would also expand Medicaid and place caps on patients’ annual health-care costs. It would be paid for with $349 billion in new taxes and fees and $507 billion in cuts to government health programs.

Good satire from Scott Ott of Scrappleface, writing for The Examiner, “Obama plan creates ‘Public Option’ malpractice law firm“:

With multimillion-dollar jury awards in medical malpractice suits driving up the cost of liability insurance for physicians — and thus the cost of health care to consumers — President Barack Obama today backed a health care malpractice reform plan that would create a “public option” law firm to sue doctors for “reasonable” damages.

“We need to keep these ambulance-chasers honest,” Obama said. “These sharks are becoming obscenely wealthy by tugging the heartstrings of compassionate jurors, who then grant ridiculous damage awards for pain and suffering, which makes malpractice insurance rates skyrocket and jacks the price of health care for everyone.”

Satire with the element of truth. Last month, Linda Lipsen, a top lobbyist for the American Association for Justice, told attendees at the trial lawyers’ annual convention that health care legislation represented a threat because some moderate Democratic Senators could support tort reform. Lipsen specifically mentioned Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee. Senate Budget Committee Chairman Kent Conrad says he would also be in favor of a tort reform component in a health care reform bill.

From the White House blog, “A Significant Breakthrough to Assist Our Seniors“:

Today, the President announced a landmark agreement with pharmaceutical companies, who pledged $80 billion in prescription drug discounts over the next 10 years. …[snip]

The President was joined by Senators Max Baucus and Chris Dodd, and introduced by AARP President Barry Rand, who called the plan a “new opportunity” for those who have been burdened by the costs of prescription drugs.

The agreement, which was reached between Sen. Baucus, Administration officials, and the nation’s pharmaceutical companies, will ultimately reduce the price of prescription drugs by half for millions of America’s seniors. As part of the upcoming health care reform legislation, drug manufacturers that participate in Medicare Part D will either pay a rebate to Medicare or offer a substantial discount of at least 50 percent on prescription drugs to seniors who fall within the infamous “doughnut hole”— payments between $2700 and $6153.75 not covered by Medicare. The deal will help close this unfair gap in coverage, providing relief for millions of seniors who have been burdened by these out-of-pocket expenses, making it easier for them to get the prescriptions that they need.

In addition to providing half-price discounts, the pharmaceutical companies will offer other discounts and savings to total an $80 billion reduction in costs.

The blog posts a photo of the President making the announcement flanked by Rand, Dodd and Baucus.

Hope the pharmaceutical industry leaders got their photo op, too. The agreement wouldn’t have been possible without their involvement, negotiation and agreement.

Here’s a statement from Billy Tauzin, President and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), on the announcement. Excerpt:

With the strong support of AARP, we believe this agreement will be looked back in time as a momentum changer in the legislative efforts to reform our troubled health care system. Our $80 billion pledge toward that goal represents a huge financial commitment by America’s pharmaceutical research and biotechnology companies. But we have a shared vision: every single person in America, regardless of their income, should have access to affordable, high-quality health care coverage and services.

More…

• PhRMA Statement on the Health Care Reform Agreement
• PhRMA Statement on Medicare Part D Coverage Gap

UPDATE: Here’s a transcript of the President’s statement. And his thanks to the pharmaceutical industry: “And I’m grateful to all those who helped make this day possible.”

A statement from Senator Max Baucus (D-MT), chairman of the Senate Finance Committee:

“The President’s proposals highlight an important point – our corporate international tax system needs reforming. There are a number of Finance Committee ideas reflected here, such as the proposal to address offshore tax evasion and making the R&D credit permanent for businesses, but further study is needed to assess the impact of this plan on U.S. businesses,” said Baucus. “I want to make certain that our tax policies are fair and support the global competitiveness of U.S. businesses. These policies must be designed to encourage economic growth and create good‐paying jobs Americans need right now. The proposals announced by the President today set the table for tax reform, and I look forward to sitting down with the Administration soon to take up these issues.” 

From the latest Congressional Record:

 S. 608

   At the request of Mr. TESTER, the name of the Senator from Montana (Mr. BAUCUS) was added as a cosponsor of S. 608, a bill to amend the Consumer Product Safety Improvement Act of 2008 to exclude secondary sales, repair services, and certain vehicles from the ban on lead in children’s products, and for other purposes.

S. 608 is the bill that Sen. Jon Tester (D-MT) has dubbed the “Dirt Bike Bill” that would allow the sale of ATVs designed for children’s use and provide some liability protection for thrift stores and other resellers from legal harassment for selling products with a minute level, safe level of lead. (See earlier Shopfoor.org post.)

Now maybe Senator Baucus signed on in response to especially vigorous lobbying by Montana outdoor enthusiasts and ranchers who use ATVs, but still. He’s an influential senior Democratic Senator, chairman of the Senate Finance Committee, who has publicly acknowledged that the CPSIA is not working and needs to be changed by Congress.

That’s an important and very welcome statement.