Tax Break

Essential reading: Ernst & Young no longer lobbying for companies it had audited, and more

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

* Ernst, audit clients cut lobbying ties-records. David Ingram and Dena Aubin – Reuters. Ernst & Young’s lobbying unit is no longer listed as a lobbyist for three major U.S. companies, all of whom were 2011 audit clients of the accounting giant. The deregistration follows questions raised by two U.S. senators in March about whether the dual relationships crossed auditor independence boundaries. Documents filed last month with Congress showed that Washington Council Ernst & Young, the E&Y unit, was no longer registered as doing lobbying work for Amgen Inc, CVS Caremark Corp and Verizon Communications Inc. Link

* House Democrats plan to pounce again on GOP budget. Ed O’Keefe – The Washington Post. House Democrats plan to attack the spending plan next week as the GOP-controlled House votes on a budget reconciliation package that includes cuts to replace automatic, across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized another $1.2 trillion in cuts over the next decade, with roughly half of the money coming from defense spending. Link

* U.S. auditor watchdog in China talks: spokeswoman. Dena Aubin – Reuters. The head of the main watchdog group for U.S. auditors is in Beijing participating in annual talks between the United States and China, a spokeswoman said on Thursday. Public Company Accounting Oversight Board Chairman Jim Doty, whose group oversees U.S. auditors, is participating in U.S. Treasury meetings, PCAOB spokeswoman Colleen Brennan said. Link

* GSA: Tax troubles, too? John McKinnon – The Wall Street Journal. On Thursday, congressional investigators said they’ve learned that the much-maligned General Services Administration last year demanded a share of the federal energy-efficiency tax breaks it was offering to contractors, in order to spend the money on other projects. Representative Charles Boustany Jr., chairman of a Ways and Means oversight subcommittee, said in a statement on Thursday that “requiring a cash payment in exchange for a tax deduction is a kickback, pure and simple.”  He fired off a letter to a number of Obama administration officials, demanding more information. Link

Wal-Mart auditor unlikely to suffer in bribery case

Shoppers cart their purchases from a Wal-Mart store in Mexico City, April 24, 2012. REUTERS/Edgard Garrido

The bribery scandal at Wal-Mart Stores Inc’s  Mexican unit is unlikely to land the giant retailer’s auditor, Ernst & Young, in hot water if the government’s record on prosecuting such cases is any indicator, academics and other experts said.

Bribery cases brought under the Foreign Corrupt Practices Act are on the rise, but a review of past U.S. government FCPA settlements shows that external advisers, including audit firms, almost never become legal targets.

Essential reading: Corporate tax reform on back burner, states face more volatile revenue, and more

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

* US corporate tax reform stays on back-burner. James Politi – The Financial Times. The push for reform of the U.S. corporate tax code has emerged as a casualty of election-year political paralysis. But concern is growing that it may not even be top of the policy docket at the beginning of next year, placing it on Washington’s permanent back-burner of languishing policies. To lower the statutory rate from its current level of 35 percent without adding to U.S. deficits, Congress would have to cut out $12 billion per year in business tax breaks. The Hamilton Project, a Washington think tank, will on Thursday release a report highlighting these trade-offs. Link

* U.S. states see rising volatility in tax revenues. Lisa Lambert – Reuters. The Federal Reserve Bank of Chicago, in a report released on Wednesday, said that while state tax revenues have historically risen when times are good and fallen when they are bad, “this response since 2000 has been much larger than in the 1980s and 1990s.” Most of the trend of higher peaks and deeper troughs comes from a reliance on income taxes. Investment income experienced “dramatic swings throughout the 2000s,” and states have grown more reluctant to change tax rates “in the face of economic fluctuations,” the report said. Link

* Honeywell chairman: Foreign firms scared of India now. The chairman of Honeywell International Inc warned that India’s labyrinthine bureaucracy and aggressive regulation and tax policies are spooking foreign investors and will divert investment to China and elsewhere. Chairman David Cote is the latest, and most prominent, foreign-company executive to publicly complain that India, once a darling of U.S. and other foreign investors, risks losing much-needed outside investment because of government policies perceived as anti-business. Link

Essential reading: Mall landlords battle tax, Groupon shifts board amid accounting issues, and more

A padlock on a closed shop in a Colorado mall REUTERS/Rick Wilking

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

* Mall landlords engage in taxing battle. Kris Hudson and Stu Woo – The Wall Street Journal. U.S. shopping-center owners, smarting from high vacancies partly due to the rise in Internet shopping, are throwing their weight behind federal bills aimed at requiring online retailers to collect sales tax. At the same time, some of the biggest mall owners also are gaining traction in their efforts in individual states to squeeze sales tax out of the world’s largest online retailer— Inc. Seven states have reached pacts with Amazon to collect sales tax, with Nevada and Texas joining the list last week. Five more are in talks on similar deals. Link

* Groupon replaces Schultz, Efrusy on board. Alistair Barr – Reuters. Groupon Inc (GRPN.O) appointed two new directors on Monday and said Starbucks Corp (SBUX.O) Chief Executive Howard Schultz and venture capitalist Kevin Efrusy were leaving the board as the company tries to address criticism of its accounting practices. The world’s largest daily deals company came under renewed fire in March after revising its fourth-quarter financial results and admitting to a “material weakness” in its financial statements, months after its high-profile IPO. Groupon’s audit committee was criticized because some members are busy executives who may not have enough time to devote to fixing the company’s accounting problems. Link

That’s not fair! may push U.S. tax revamp

It may seem too simple to be true, but the urge among humans for basic fairness may be among the biggest drivers for a revamp of the U.S. tax code, at least competing with the influence of lobbyists, general greed and politics.

That was one message of tax war veterans gathering at the Urban Institute in Washington on Tuesday where Nietzsche, Marx and other philosophers were mulled along with the hard-nosed lessons of the last revamp in 1986 under Republican President Ronald Reagan.

“Fairness is still the queen of principles that brings us back,” to trying to fix the tax code, said Eugene Steuerle, who was a key economic aide in Reagan’s Treasury Department under that historic overhaul.
Democrats and Republicans say they want a rewrite of the code and cite the mind-numbing complexity combined with the unfairness of breaks favoring select groups. The issue could gain steam after the Nov. 6 elections.

Essential reading: Microsoft’s Nevada tax break, debating Apple’s tax rate, and more

A rainbow appears over hotels on the Las Vegas Strip in Las Vegas, Nevada, REUTERS/Ethan Miller

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

* Microsoft heads to Nevada again for tax perks. Maxwell Murphy – The Wall Street Journal. Microsoft’s $300 million investment in Barnes & Noble’s digital reading and college bookstore operations, announced on Monday, offers another peek into the way companies use Nevada as a way to shelter income from taxes. Microsoft formed Morrison Investment Holdings as a Nevada corporation on April 5, adding to the list of dozens of Microsoft investment subsidiaries incorporated in Nevada, rather than in its home state of Washington, over at least the past two decades. Nevada doesn’t tax corporate income or capital gains. Link

* Apple’s tax rate: 9.8 percent? Hayley Tsukayama – The Washington Post. A weekend story from the New York Times shared a surprising statistic: Apple paid just $3.3 billion on $34.2 billion of profits last year — giving it a tax rate of just 9.8 percent. The 9.8 percent figure, reported earlier by the Greenlining Institute, may be based on the wrong calculations for Apple’s tax share. In its own tax filings, Apple reported these tax rate figures paid in the last three years: “approximately 24.2 percent, 24.4 percent and 31.8 percent for 2011, 2010 and 2009, respectively.” Link