Treasury Grant Sequestration Update

January 31, 2013

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As a result of Taxpayer Relief Act of 2012 (also known as the fiscal cliff legislation), the sequester percentage for Treasury Grants has been reduced from 7.6 percent to 5 percent of the grant amount.  The Office of Management and Budget is expected to confirm this change in guidance to be released mid-February.

In addition, the sequester will not apply until the later of (i) March 27, 2013 or (ii) when the final budget authorization is completed by Congress. Further, agencies have up to 120 days from the later of those two dates to implement the sequester. It is important to note that it is up to 120 days, so Treasury could elect to act sooner.

On a less optimistic note, Beltway insiders (including for the first time members of the Obama administration) are starting to acknowledge that sequestration may in fact occur.

To avoid sequestration, Sen. Levin (D-MI) has proposed raising the necessary revenue by eliminating 10 international tax planning techniques (or in his parlance "abuses").  Several of these are used by large U.S. multinationals, like Apple and Microsoft. The proposal is unlikely to pass the House. 

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David K. Burton
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New York

Jeffrey D. McMillen
jmcmillen@akingump.com
202.887.4270
Washington, D.C.
Adam S. Umanoff 
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Los Angeles
Edward W. Zaelke
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213.254.1234
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Jacob J. Worenklein
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212.872.1027
New York
Dino E. Barajas
dbarajas@akingump.com
310.552.6613
Los Angeles
Elliot Hinds
ehinds@akingump.com
310.229.1035
Los Angeles
 

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