In it, but not of it. TPM DC
The second half of this Journal article explains the COI tax break well. Essentially, any company buying up its own outstanding debt at a discount price -- which usually means a private equity firm that has taken over a struggling corporation -- the purchaser of debt has to pay taxes on the amount of debt it forgives. If I buy up your $100 debt at a discount of $40, leaving you on the hook to me for $60, the cancelled $40 of debt is still taxable.
The Chamber of Commerce, and 35 other trade associations in the home building and retail sectors, are seeking a COI waiver that would allow cancelled debt to be tax-free. As the Journal notes, the casino company Harrah's has taken up the matter with Nevada's two senators, John Ensign (R) -- a member of the powerful Finance Committee who already backs the COI waiver -- and Majority Leader Harry Reid (D).
Five bucks says the COI waiver makes it into the Senate's version of the stimulus bill when that emerges this week ...