Tax Break

Officials outline IRS and Justice Department tax focus

Notes from the Tax Underground: What do tax officials and tax lawyers worry about?

At New York University’s Tax Controversy Forum in New York last Friday, Michael Danilack, deputy commissioner (international) of the Internal Revenue Service, told hundreds of tax lawyers that being more strategic was essential to the agency.

Danilack, who oversees the recently revamped Large Business & International division, flashed up a PowerPoint slide entitled, “Key Drivers of the New International Function.” The division was remade in October 2010 to concentrate on the international aspects of taxation for large U.S. multinationals.

The IRS, subsequent slides said, was now “focusing on cases/issues where taxpayers engage in aggressive planning.” Other slides said the agency was “moving into areas not receiving sufficient attention” and “willing to let go of less important issues to move to matters of strategic importance.”

Cue transfer pricing, which dominated the rest of Danilack’s talk. The IRS has watched with unease as a growing number of multinational corporations book increasingly large profits overseas, often in tax-haven countries. Danilack said the agency was staffing up a newly designed “field-focused Transfer Pricing Initiative.”

Essential reading: Analysis finds middle class taxes rise under Republican plan, and more

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

* Middle class would face higher taxes under Republican plan, analysis finds. Lori Montgomery – The Washington Post. The tax reform plan that House Republicans have advanced would sharply cut taxes for the wealthiest Americans and could leave middle-class households facing much larger tax bills, according to a new analysis set to be released Wednesday. The report, prepared by Senate Democrats and reviewed by nonpartisan tax experts, marks the first attempt to quantify the trade-offs inherent in the GOP tax package, which would replace the current tax structure with two brackets — 25 percent and 10 percent — and cut the top rate from 35 percent. Link

* SEC seeks Big 4 audit papers from China: source. Dena Aubin – Reuters. The Chinese arms of all of the Big Four audit firms have been asked by U.S. regulators to turn over documents related to audits of China-based companies listed in the United States, a person familiar with the matter said on Tuesday. The formal requests made by the U.S. Securities and Exchange Commission ratchet up the tension in a standoff between U.S. authorities, the companies and Chinese officials over access to the auditors’ work papers. Link

* Baucus weighs bipartisan tax renewal plan. Kim Dixon – Reuters. The top tax-writing lawmaker in the U.S. Senate expressed interest in a bipartisan proposal to extend all tax cuts expiring at year’s end, coupled with a mandate to force Congress to revamp the tax code within a set time frame. Senator Max Baucus’ receptiveness to the idea reflects one strand of thinking among some Democrats: that despite their preference for letting tax rates rise only for the wealthy, a more likely scenario in an end-of-the-year deal with Republicans may involve extending the low rates for all taxpayers at least for a short period of time. Link

Essential reading: Julius Baer bids for Merrill Lynch wealth-management, and more

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

* Julius Baer seeks Merrill Lynch unit. John Revill – The Wall Street Journal. Julius Baer Holding AG said Tuesday it is in talks to buy Bank of America Corp’s Merrill Lynch international wealth-management business, a move that would help reduce the Swiss private bank’s dependence on its home market where margins have been squeezed by a crackdown on tax havens and banking secrecy. A deal could be worth up to $2 billion, according to recent reports. Link

* On budget, Gov. Christie alters course. Heather Haddon – The Wall Street Journal. Republican Governor Chris Christie has risen to national GOP fame as a fiscal conservative who in his first budget address denounced the use of “one-time gimmicks that have worsened our situation.” But now Christie faces the reality of underperforming tax collections just as he is set on passing a substantial tax cut by the end of the month. Link

* Default concerns grip muni bond market. Nicole Bullock and Matt Garrahan – The Financial Times. Default fears have gripped a $20 billion part of the U.S. municipal bond market as the fallout from state budget cuts in California may threaten upcoming payments. The situation has left investors, mostly wealthy individuals who benefit from tax breaks on munis, with little insight as to how to evaluate these bonds. Link

Essential reading: A tax deduction in lunching with Buffett, and more

Warren Buffett sings with University of Nebraska cheerleaders during the Berkshire Hathaway Annual shareholders meeting in Omaha, May 5, 2012. REUTERS/Lane Hickenbottom

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

* Lunch with Warren Buffett: One giant tax deduction. Laura Saunders – The Wall Street Journal. An anonymous donor on June 8 paid $3.46 million to Glide, an antipoverty group in San Francisco, for the privilege of having lunch with Warren Buffett. Is the donation tax-deductible? Experts say most of it probably is, meaning taxpayers in effect will pick up about $1.2 million of the tab. Link

* Israeli tax preparers snared. Laura Saunders – The Wall Street Journal. In a sign the U.S. government is moving beyond Switzerland in its pursuit of secret offshore accounts, the Justice Department and Internal Revenue Service announced the indictment of three Israeli-American tax preparers, who are charged with helping U.S. taxpayers hide millions of dollars in two Israeli banks. The U.S. since 2009 has been cracking down on U.S. taxpayers hiding assets abroad. Swiss banking giant UBS turned over the names of more than 4,000 customers and paid a $780 million fine. Now the U.S. government is casting a wider net. Link

Calendar

Cochiti, a six-year-old Whippet, competes in the diving dog competition during the Purina Pro Plan Incredible Dog Challenge in Del Mar, California June 9, 2012

Some important tax and accounting dates in the week ahead:

Tuesday, June 19
•    U.S. Public Company Accounting Oversight Board member Lew Ferguson delivers the keynote speech at a Securities and Exchange Commission conference for U.S.-listed companies in China. Shanghai.
•    Senate Finance Committee hearing on “Confronting the Looming Fiscal Crisis.” 10 a.m. at the Dirksen Senate Office Building. Washington.
•    Michael Danilack, deputy commissioner (international), Internal Revenue Service Large Business and International Division, gives the opening luncheon speech to the Institute of International Bankers two-day program on tax issues affecting international banking and financial institutions operating in the United States. New York.

Tuesday, June 19 – Thursday, June 21
•    IRS executives and others discuss tax topics at an IRS forum. Orlando, Florida.

Essential reading: States refused to abolish taxes, but remain eager to roll them back, and more

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

* States refused to abolish taxes, but they’re still eager to roll them back. Suzy Khimm – The Washington Post. Conservatives in a handful of red states have been pushing to abolish some state taxes entirely. But they’ve been hitting a lot of roadblocks. On Tuesday, the overwhelming majority of voters rejected a ballot measure that would have made North Dakota the first state to eliminate property taxes. Earlier this spring, Republican-controlled legislatures in Kansas and Oklahoma also defeated measures that would have abolished the state-income tax, fearing the loss of revenue. But anti-tax momentum has still been growing on the state level. Link

* Obama challenges on vague Romney tax, budget plan. Kevin Drawbaugh and Kim Dixon – Reuters. U.S. President Barack Obama challenged reporters on Thursday to check out his analysis of the Republicans’ plan for taxes, the budget and the deficit – a plan sketched so far only in vague terms. The president said his rival Mitt Romney and other Republicans want to keep the tax cuts approved under President George W. Bush, “add another $5 trillion in tax cuts on top of that,” cut $1 trillion from the budget, and reduce the deficit. Link

* Obama says election will determine course of economy. Laura MacInnis – Reuters. President Barack Obama cast his re-election battle with Mitt Romney as a clash between starkly different economic visions on Thursday and warned that his Republican rival would hollow out the middle class in a speech that could set the tone for months of intense campaigning. Seeking to gain some footing after a string of bad economic news and a political stumble, Obama said the November 6 election would put the United States on one of two paths: an economy built on education and scientific research that delivers a broadly shared prosperity, or a Republican approach that cuts taxes for the wealthy and undermines opportunity for many others. Link

Essential reading: BDO to pay $50 million in tax shelter case, and more

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

* BDO to pay $50 million in tax shelter case. Dena Aubin – Reuters. Accounting firm BDO USA has agreed to pay $50 million to settle charges of selling tax shelters that generated $6.5 billion in phony tax losses for wealthy clients, U.S. prosecutors said on Wednesday. The penalty is part of a wide-ranging, nearly decade-old government case against illegal tax shelters. Big Four accounting firm KPMG narrowly avoided an indictment in 2005 over its sale of tax shelters and was fined $456 million. Link

* Republicans see advantages in go-slow approach to bills. Janet Hook – The Wall Street Journal. Republicans in Congress, buoyed by optimism about Mitt Romney’s chance of winning the White House, are finding new incentives to put off striking deals on major legislative issues. Legislative progress on tax cuts, deficit reduction and even less controversial matters, such as highway funding, has ground to a near-halt on Capitol Hill. But conservatives are beginning to see a silver lining in gridlock. Some Democrats say they would rather let taxes go up and spending cuts kick in than accept a lame-duck budget deal that lacks what they would view as sufficient concessions by Republicans. Link

* UK taxman criticized for Goldman tax deal. Tom Bergin – Reuters. The UK’s public spending watchdog has criticized the tax authorities for a series of settlements that may have allowed companies including investment bank Goldman Sachs and mobile phone operator Vodafone to avoid paying millions of pounds in taxes. A National Audit Office (NAO) report released on Thursday highlighted procedural errors in five large tax settlements, echoing earlier criticism of the deal from a parliamentary committee which accused tax authority HMRC of being “too cozy” with large companies. Link

Essential reading: Another tycoon moves to low-tax Singapore, and more

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

* Another tycoon moves to Singapore. Sam Holmes – The Wall Street Journal. Australian coal magnate Nathan Tinkler, the resource-rich country’s wealthiest person under the age of 40, will relocate to Singapore, joining a notable list of other foreign tycoons moving to the affluent city-state. Tinkler’s spokesman would not comment on whether his client was attracted to Singapore’s more-favorable tax environment. The city-state, which boasts the highest percentage of millionaire households in the world, has a marginal individual tax rate of 20 percent for the highest income bracket, which compares with 45 percent for the top income bracket in Australia. Link

* US Senate tax chief warns of dangerous fiscal path. Kim Dixon and Kevin Drawbaugh – Reuters. The United States is on a “dangerous path” that could lead to a European-style fiscal crisis, the Senate’s top tax legislator warned on Monday, while calling for more tax revenue and ending corporate incentives to shift profits and jobs overseas. Democrat Max Baucus urged fellow lawmakers to resolve by the end of 2012 a host of “crucial spending and tax decisions” that will arise immediately after the Nov. 6 presidential and congressional elections. Link

* Revenues recover but states still tight-fisted. Lisa Lambert – Reuters. U.S. states are remaining tight-fisted over spending even as their revenues are expected to top the levels seen before the height of the recession, unnerved by the clouds over the U.S. and global economies. For the upcoming 2013 fiscal year, total U.S. state revenues will increase by $27.4 billion, or 4.1 percent, to reach $690.3 billion. General fund spending, however, will rise by only $14.6 billion, or 2.2 percent, according to a survey of governors’ budgets released on Tuesday. Link

Essential reading: Push for a fiscal pact picks up speed on Capitol Hill, and more

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

* Push for a fiscal pact picks up speed, and power. Jonathan Weisman – The New York Times. The hunt for a way to avert a crisis appears to be quickening — and, significantly. It now includes the people who might be able to make it happen. This includes Senate Finance chairman Max Baucus. On Monday, Baucus delivers a speech to the Bipartisan Policy Center in Washington on the path toward a simpler tax code that could generate more revenue. Later in the week, the Senate Finance Committee will meet on a host of tax issues. Link

* Flush state ponders a tax cut’s cost. Mark Peters – The Wall Street Journal. An energy boom has flooded North Dakota’s coffers at a time when almost every other state is struggling to make ends meet. But when its fiscally conservative residents get the chance Tuesday to vote themselves a big tax cut, they are expected to say “no.” At issue is a referendum for a proposed constitutional amendment to eliminate local property taxes, requiring the newly flush state government to make up the difference. Link

* Vodafone paid zero UK corporation tax last year. Katherine Rushton – The Telegraph. The company saw its global corporation tax bill go up by 300 million pounds ($462.53 million) to 2.3 billion pounds, but none of that money went to the exchequer in the UK, where Vodafone takes several hundred millions of pounds from more than 19 million customers each year. Although Vodafone has acted within the law, its minimal bill in Britain is likely to reignite anger over the group’s dealings with the taxman. Link 

Calendar

Some important tax and accounting dates in the week ahead:

Monday, June 11

•    Senate Finance Committee Chair Max Baucus gives the keynote speech at the Bipartisan Policy Center seminar on tax reform. 10 a.m. at the Bipartisan Policy Center. Washington.

•    The American Institute of Certified Public Accountants two-day conference on international tax developments, transfer pricing for lending and leasing, doing business in India and the European Union, and other international business topics. Washington.

Tuesday, June 12

•    Senate Finance Committee hearing on energy and tax reform. 10 a.m. at the Dirksen Senate Office Building. Washington.