Senate Finance Committee Chairman Max Baucus (D-Mont.) June 16 introduced a new substitute amendment (S. Amdt. 4369) to the tax extenders bill (H.R. 4213) that would further soften a tax increase on investment fund managers and would ease administrative concerns regarding new rules for S corporations.

Baucus’s new substitute amendment to the extenders bill was offered just hours after his original proposal (S. Amdt. 4301) garnered only 45 of the 60 votes needed to advance in the Senate.

Senators in both parties criticized the bill’s carried interest provisions, which would tax most of the share of profits that investment fund managers receive at ordinary income tax rates, rather than the much lower capital gains tax rate at which they are currently taxed.

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Senate Majority Leader Harry Reid (D-Nev.) filed a motion June 14 to invoke cloture on the tax extenders bill (H.R. 4213) in an effort to complete the Senate’s version of the legislation by the end of the week.

In addition to renewing about $32 billion in expired tax breaks for tax year 2010, the bill would change the tax treatment of carried interest earned by investment fund managers, impose tougher rules on the use of foreign tax credits by multinational companies, and tighten rules on professional service providers who run Subchapter S corporations.

The bill also includes an extension of federal unemployment insurance benefits and would delay a scheduled cut in Medicare reimbursement rates for doctors.

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The activities of companies that send agents into other countries to do business can create a permanent establishment for tax purposes even if the presence of agents does not rise to the level of incorporation or putting in place significant facilities, an Internal Revenue Service official said June 4.

Steven Jensen, a senior international counsel in IRS’s Office of Chief Counsel, said some taxpayers take the position that “there is no agency P.E. It’s a unicorn. It doesn’t exist.”

Speaking to the Federal Bar Association Section of Taxation at an insurance conference, Jensen said, “We really don’t believe that. We believe P.E. is being created by agency activities.”

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The international revenue raisers in legislation (H.R. 4213) to extend expiring tax provisions would constrain the ability of U.S. multinationals to utilize the foreign tax credit and are a major reason for the business community’s opposition to the bill, practitioners told BNA in interviews May 25 and 26.

Unveiled May 20, the American Jobs and Closing Tax Loopholes Act contains a host of pay-fors aimed at addressing perceived cross-border abuses (97 DTR GG-1, 5/21/10). House leaders said they plan to bring the extender legislation to the floor for a vote May 27 (see related report in this issue).

Both Joseph Calianno, Grant Thornton LLP, Washington, D.C., and Phil West, Steptoe & Johnson LLP, Washington, D.C., said in separate interviews that two key provisions, one dealing with covered asset acquisitions under tax code Section 338 and one addressing tax planning that uses a so-called “hopscotch” rule under Section 956, would limit use of the foreign credit and are a significant issue for corporate taxpayers.

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House Ways and Means Committee member Lloyd Doggett (D-Texas) May 18 unveiled legislation (H.R. 5328) to sharply pull back…

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The government continues to wrestle with the question of how a $10 million asset threshold for those required to disclose uncertain tax positions under a new proposal will apply to taxpayers who file “protective” elections using Form 1120F, a senior Treasury Department official said May 18…

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Gene Sperling, counselor to…

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A key issue under that third category will be…

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The sharper focus and more vigorous approach are taking place across…

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Witnesses at a March 15 Internal Revenue Service hearing on payments made to settle payment card and third-party network transactions focused on the foreign reporting requirements of the proposed…

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