Tax Break

Essential tax and accounting reading: Obama wants Romney tax returns, battling over big oil breaks, Japan’s mega sales tax, and more

U.S. President Barack Obama walks past a pumpjack, New Mexico, March 21, 2012. REUTERS/Jason Reed

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Obama campaign seeks Romney tax returns. Mark Maremont – The Wall Street Journal. President Barack Obama’s re-election campaign called on Republican front-runner Mitt Romney to release his tax returns dating back to the 1980s, to see if they contain information about an uncommon investment arrangement at his former private-equity firm that may have helped swell his individual retirement account. The request follows a page-one article in The Wall Street Journal on Thursday that recounted how employees at the firm, Bain Capital, were allowed to invest their retirement money in companies the firm acquired, including investing through a special share class that could skyrocket in value in successful deals. Romney’s IRA was valued at between $20.7 million and $101.6 million as of August, according to his financial disclosures. Link

* GOP blocks Obama’s effort to end tax breaks for big oil. Zachary Goldfarb and Brad Plumer – The Washington Post. President Obama on Thursday called on Congress to end tax breaks for oil companies in a populist speech that sought to turn the blame for gas prices nearing $4 a gallon back onto his Republican critics. In fiery, campaign-style remarks delivered from the Rose Garden, Obama told lawmakers that they can “stand with big oil companies, or they can stand with the American people.” Senate Democrats followed by forcing a vote to end tax cuts for the five largest oil companies, which Republicans resoundingly defeated. Link

* House vote sets up Republican budget as manifesto, target. David Lawder – Reuters. House Republicans passed congressman Paul Ryan’s deficit-cutting budget plan on Thursday, setting it up as a central theme for their election-year campaign efforts and as a target for Democratic attacks over its proposed healthcare cuts. The Ryan blueprint, which proposes to cut tax rates and slow the growth of federal debt at the expense of social programs, won House approval by a vote of 228-191, with Democrats unanimously opposed. Ten Republicans also voted no, reflecting desires among fiscal conservatives for even deeper spending cuts. Link

* Japan govt submits tax hike plan, heads into political showdown. Rie Ishiguro and Stanley White – Reuters. Japan’s government on Friday submitted laws to double its sales tax by 2015 to fund swelling social security costs in the world’s fastest-ageing nation, setting up a showdown that could split the ruling party, force early elections and deepen policy paralysis. Link

PCAOB’s debate over auditor rotation moves to Congress

An ambitious reform agenda at the main U.S. auditor watchdog — already under fire from the accounting industry — has now drawn the ire of members of Congress.

At a hearing on Wednesday, members of a House Financial Services subcommittee took aim at the Public Company Accounting Oversight Board, saying some of the items on its agenda, including term limits for audit firms and making its disciplinary proceedings public, would amount to regulatory overreach.

Investor advocates had expected for some time that PCAOB chairman James Doty would be called before Congress to defend his activist agenda. The rotation idea, still in its early stages, would upset some of the accounting industry’s longest-standing client relationships, and the business lobby has pressed Congress to intervene.

Essential tax and accounting reading: Bain’s IRAs, E&Y cleared on Olympus, Biden attacks Romney tax plan, and more

* Germany to agree to tougher Swiss tax deal-paper. Emma Thomasson – Reuters. Germany is set to agree a revised deal with Switzerland on secret offshore accounts that involves higher rates of taxes than originally planned to meet objections from the opposition, a Swiss newspaper reported on Thursday. Citing unnamed sources, the Tages-Anzeiger daily said German state premiers meeting in Berlin on Thursday should sign off on the deal after the opposition Social Democrats (SPD) and Greens apparently accepted Swiss concessions to tighten the agreement. Link

* Panel clears Ernst & Young unit in Olympus scandal. Kana Inagaki – The Wall Street Journal. Closing another chapter in probes into the scandal that rocked Olympus Corp. last year, an independent panel of lawyers and professors on Thursday cleared Ernst & Young ShinNihon LLC of legal responsibility in its audit of the company’s accounts. But the panel also called on the accounting industry to take measures that go beyond existing legal obligations to better spot potential fraud. Ernst & Young ShinNihon commissioned the four-member panel in December after a separate panel appointed by Olympus’ board raised questions over the hand-over process when Ernst & Young took over the auditing of the company from KPMG AZSA LLC in 2009. KPMG AZSA audited Olympus’ accounts from 1974 to 2009. Link

* Cameron hits back over claims of elitism. George Parker – The Financial Times. British Prime Minister David Cameron has attempted to dispel Labour claims that he leads an elitist “out of touch” government, when he declared his love of Cornish pasties, one of the hot foods that will be taxed more under budget value-added tax rules. The comments came after George Osborne announced a Budget measure on takeaway food, putting a 20 per cent VAT charge on food “sold above ambient temperatures” – immediately named a “pasty tax”. Labour has revelled in the government’s discomfort. Link

Essential tax and accounting reading: taxing the rich, MF Global accounting under review, Simpson-Bowles cuts get a vote, tax hike helps New York budget, and more

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles April 14, 2011. REUTERS/Kevin Lamarque

Welcome to the top tax and accounting news from Reuters and other sources.

* The case for raising top tax rates. Eduardo Porter – The New York Times. The wealthy are feeling defensive about their taxes. Most Americans may think the rich pay too little but, not surprisingly, only 30 percent of the rich agree. More than two-thirds of families earning a quarter of a million dollars a year or more tell Gallup’s pollsters that their taxes are too high. It is true that high-income Americans carry the biggest tax burden. While fewer than 1 in 20 families make more than $200,000, they pay almost half of all federal taxes. However they feel about the tax man, there is a case to be made that they can pay much more. The reason has nothing to do with fairness, justice or ideology. It is about economics and math. Link

* US FASB weighs reform to accounting used by MF Global. Sarah Lynch – Reuters. The U.S. accounting standard-setting board could this year revamp the accounting treatment that MF Global used to mask risky European sovereign debt exposure, an official at the board will tell lawmakers on Wednesday. “Moving forward with this project will involve a series of public education and decision-making meetings and the exposure of a proposed standard for public comment,” said Financial Accounting Standards Board Technical Director Susan Cosper in prepared testimony. Cosper noted that while historically most repo-to-maturity transactions have involved U.S. Treasury securities, the range of instruments involved has broadened over the years to include other debt instruments such as those seen in the MF Global case. Link

Tax clips from the Web: The tax code as literature, canceled debt and TV pitchmen

Then-U.S. Senator Sam Brownback (R-Kansas) gestures as he talks about the U.S. tax code in 2007 REUTERS/Frank Polich

How big is the tax code?

Wait…how many pages do they think War and Peace is? Kay Bell writes in her Don’t Mess With Taxes blog that the floor of Congress has logged several attempts to quantify the length of the U.S. tax code. “At 1.3 million pages it is twice the length of Leo Tolstoy’s War and Peace,” said one House Representative, speaking of the United States tax code. Another popular reference for the code’s impressive verbosity – The Bible.

The quotes in the linked blog have yet to be fact-checked, but one assured fact is that the tax code in its entirety is a long, murky mess. The impulse to reform is strong, but before that happens, Bell writes, “make Congress leave the tax code alone for a while.”

Tax tips for the unemployed and self-employed

In this video Reuters personal business editor Lauren Young offers the skinny on deductions you may be eligible for — but be sure to keep receipts!

Essential tax and accounting reading:oil tax breaks challenged, Dow pushes R&D credit, Buffett’s company in tax dispute, and more

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Bill ending oil company tax cuts clears Senate hurdle. Ayesha Rascoe and Richard Cowan – Reuters. Legislation repealing tax breaks for major oil companies passed its first hurdle in the Senate on Monday, but is unlikely to become law, as Republicans and Democrats seek to score political points over rising gasoline prices. The Senate voted 92 to 4 to proceed with consideration on the bill that would eliminate billions of dollars in tax breaks for the “big five” oil companies: Exxon Mobil Corp, BP Plc, ConocoPhillips, Chevron Corp and Royal Dutch Shell Plc. The lopsided vote in favor of moving ahead with consideration of the oil tax cuts bill reflected political maneuvering in the chamber, not actual support for the measure. Link

* Dow court cases pushes limit of R&D tax credit. Patrick Temple-West and Ernest Scheyder – Reuters. Dow Chemical Co is challenging the U.S. Internal Revenue Service in a rare court case over expanding the research and development tax credit to cover the costs of supplies used to improve the ways existing products are made. Oral arguments are set for Thursday at the 2nd U.S. Circuit Court of Appeals in New York in a case that pits Union Carbide, a wholly owned subsidiary of Dow, against the IRS. A win for Dow would widen the scope of the R&D credit – a mainstay of the corporate tax code that costs U.S. taxpayers roughly $7 billion a year – at a time when corporate tax breaks, in general, are under scrutiny in Washington. Link

* New CEO at accounting firm BDO USA aims for growth. Nanette Byrnes – Reuters. The 270 partners of accounting firm BDO USA selected Wayne Berson, 50, as their leader for the next four years, it was announced on Monday. BDO USA, with $572 million in U.S. fee income last year, is the seventh-largest accounting firm in the country, according to International Accounting Bulletin. Link

Tax aides on tax reform: come lobby now, time may be short after the election

Dome of the U.S. Capitol REUTERS/Jonathan Ernst

Message to U.S.-based multinational companies: it is not too soon to lobby lawmakers on U.S. tax reform.

The messengers: former and current congressional tax staffers speaking at a meeting of tax executives in Washington, D.C., on Monday.

“Don’t wait until we’ve decided what we are going to do (to come see us),” Senate Finance Committee tax counsel Jeff VanderWolk, who works for Democrat Max Baucus, chairman of that panel, told hundreds of tax officials from Fortune 500 companies at a Tax Executive Institute gathering in Washington today.

Essential tax and accounting reading: Californians support tax hikes, dividend taxes, $1 trillion of tax breaks, inheritance tax, and more

California coast REUTERS/Mike Blake

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Strong majority back Jerry Brown’s tax-hike initiative-poll. Anthony York – The Los Angeles Times. California voters strongly support Gov. Jerry Brown’s new proposal to increase the sales tax and raise levies on upper incomes to help raise money for schools and balance the state’s budget, according to a new USC Dornsife/Los Angeles Times poll. Sixty-four percent of those surveyed said they supported the governor’s measure, which he hopes to place on the November ballot. It would hike the state sales tax by a quarter-cent per dollar for the next four years and create a graduated surcharge on incomes of more than $250,000 that would last seven years. Link

* Will a dividend-tax hike spoil the party. Jack Hough – The Wall Street Journal. Apple’s dividend announcement this past week is good news for income investors, but bad news might be lurking around the corner. Unless Congress takes action, the top tax rate for the highest earners on most dividends, currently 15 percent, is set to jump to a whopping 43.4 percent next year. That is a maximum income-tax rate of 39.6 percent —since dividends will once again be taxed as regular income — plus a 3.8 percent tax on investment income as part of the health-care overhaul passed in 2009. Link

* Tax breaks exceed $1 trillion: Report. John McKinnon – The Wall Street Journal. A congressional report detailing the value of major tax breaks shows they amount to more than $1 trillion a year — roughly the size of the annual federal budget deficit — and benefit wide swaths of the population. The new report, by the nonpartisan Congressional Research Service, underscores how far-reaching many of the tax breaks are. They include the exclusion from taxable income for employer-provided health insurance, the biggest break, at $164.2 billion a year in 2014; the exclusion for employer-provided pensions, the second-biggest, at $162.7 billion; and the exclusions for Medicare and Social Security benefits. Link

Tax and accounting calendar

U.S. President Barack Obama greets U.S. Supreme Court Justices Anthony Kennedy (C) and Ruth Bader Ginsburg (R) prior to his State of the Union address, January 24, 2012. REUTERS/Saul Loeb/Pool

Some important upcoming events in the tax and accounting world: Saturday, March 25 – Wednesday, March 28 - Tax Executives International three-day conference in Washington, D.C.
Monday, March 26 – The first of three days of oral argument the  U.S. Supreme Court will hear on the Obama administration’s healthcare reform. Argument today is  focused on the Anti-Injunction Act, which dates to 1867, and whether taxpayers must actually begin paying the penalty for not purchasing insurance before objections to the mandate can be raised in court. Argument starts at 10 a.m.
Tuesday, March 27 –

    The Subcommittee on Energy, Natural Resources and Infrastructure will hold a hearing on renewable tax incentives and whether they have affected the renewable energy industry at 2:45 p.m. The House Appropriations Financial Services and General Government Subcommittee will hold a hearing on President Barack Obama’s proposed 2013 budget for the Treasury Department. Treasury Secretary Timothy F. Geithner will testify. Starts at 10 a.m. Day two of the U.S. Supreme Court review of the Obama healthcare reform. Argument is scheduled for 10 a.m. and will address whether Congress overstepped its powers under the Constitution by adopting the individual mandate. This is the issue at the heart of the legal battle over the law that aims to provide health coverage to more than 30 million uninsured Americans.
Wednesday, March 28 -
    On the third and final day of U.S. Supreme Court oral argument on the Patient Protection and Affordable Care Act, a first session will begin at 10 a.m. focused on whether the entire law must fall if the insurance mandate was found to be unconstitutional, or if the other parts can survive. At 1 p.m. a second session will tackle whether Congress had the authority to require that states expand the number of people eligible for assistance from the Medicaid healthcare program for the poor and disabled. The House Financial Services committee will hold a hearing on accounting and auditing oversight at 10 a.m. The Public Company Accounting Oversight Board’s investor advisory group will meet in Washington to discuss an array of topics including independence, going concern warnings,  and others. 
Thursday, March 29 -
    Government Accounting Standards Board teleconference. The D.C. Bar will sponsor a luncheon program on temporary and proposed Treasury regulations on certain dividend equivalent payments. IRS official Peter Merkel and Treasury official Karl Walli will speak.

Thursday, March 29 – Friday, March 30 - The American Bar Association  and others are sponsoring a two-day conference in Vienna, Austria, on tax planning strategies in the U.S. and Europe, including discussions of cross-border losses in tax planning, tax risk management by multinationals, transfer pricing, and collective investment vehicles.