Tax Break

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

 * Inquiry into tech giants’ tax strategies nears end. Charles Duhigg and David Koieniewski – The New York Times. Congressional investigators are wrapping up an inquiry into the accounting practices of Apple and other technology companies that allocate revenue and intellectual property offshore to lower the taxes they pay in the United States. Link  

* Step 1: Corporate tax giveaways. Step 2: Outcry. Step 3: Profit. Suzy Khimm – The Washington Post. Pundits on both left and right were outraged when they realized a whole flotilla of corporate tax giveaways were buried in the fiscal cliff deal, ranging from a tax break for race-car track owners to electric-scooter makers. Link  

* IRS quick to issue withholding rules after the tax deal. John McKinnon – The Wall Street Journal. Hours after President Barack Obama signed the bill averting the fiscal cliff, the Internal Revenue Service issued new guidelines for employers on how much to withhold from workers’ paychecks this year. Link  

* Putin makes French film star Depardieu a Russian. Alexei Anishchuk – Reuters. Russian President Vladimir Putin has granted citizenship to Gerard Depardieu, the French movie star whose decision to quit his homeland to avoid a tax hike prompted accusations of national betrayal. Russia has a flat income tax rate of 13 percent, compared to the 75 percent on income over 1 million euros ($1.32 million) that Hollande wants to levy in France. Link  

* And now there is tax reform. Jennifer Rubin – The Washington Post opinion. The Republicans have the opportunity, now that they joined in a deal allowing the top marginal rate on individuals to rise, to reset the argument on tax reform. Republicans need to emphasize the base-broadening and anti-cronyism aspects of tax reform, as well as the benefits of simplification for average taxpayers. Link  

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

* Cliff fix hits small business. Emily Maltby and Angus Loten – The Wall Street Journal. The fiscal-cliff deal didn’t change the corporate tax rate, which is no more than 35 percent. But many small S-Corp businesses will see a tax increase to 39.6 percent. Link

* Small-business tax incentives survive the deal. Robb Mandelbaum – The New York Times. The bill also renews dozens of other income-tax provisions for individuals and businesses through a series of provisions that the legislating class calls “extenders.” And though advocates for small businesses were concerned that legislators might overlook their interests in the high-pressure negotiations, it turns out that their pessimism was unfounded. Link

 * How deal was made, unmade, then saved. Patrick O’Connor and Peter Nicholas – The Wall Street Journal. By early Wednesday, partisans on the left and right had found plenty to grumble about in Congress’s New Year’s deal to avoid going off the fiscal cliff. But it is unlikely there would have been any deal at all to grumble about if not for a Sunday afternoon phone call from one end of Pennsylvania Avenue to the other. Link

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

* Analysis: 77 percent of households to see tax increase. John McKinnon – The Wall Street Journal. The fiscal cliff bill’s impact would be far-reaching for American taxpayers, and particularly painful for very high-income households, according to a new analysis. About 77 percent of American households would see a tax increase compared to their 2012 tax levels, according to the analysis by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. Link 

* Amid pressure, House passes fiscal deal. Jennifer Steinhauer – The New York Times. Ending a climactic fiscal showdown in the final hours of the 112th Congress, the House late Tuesday passed and sent to President Obama legislation to avert big income tax increases on most Americans and prevent large cuts in spending for the Pentagon and other government programs. Link

* Congress’s feeble finish to the ‘fiscal cliff’ fiasco. The Washington Post editorial. The compromise bill passed by Congress to avert the worst effects of the “fiscal cliff” is a small, imperfect package that will do too little to address the nation’s long-term debt problem. But for all its weaknesses, the bill’s enactment is far better than a failure by this Congress to act before it adjourns Thursday. Link

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

* Obama summons congressional leaders for ‘fiscal cliff’ talks. Lori Montgomery and Rosalind Helderman – The Washington Post. President Obama summoned congressional leaders to a Friday summit at the White House in a last-ditch effort to protect taxpayers, unemployed workers and the fragile U.S. recovery from severe austerity measures set to hit in just four days. Also Thursday, House of Representatives Speaker John Boehner announced he would call the House back into session this weekend. And in perhaps the most significant development, Senate Minority Leader Mitch McConnell was engaged directly in talks with the White House. He signaled an interest in cutting a deal. Link 

 * Summoned back to work, senators chafe at inaction. Jennifer Steinhauer – The New York Times. Senators bid hasty goodbyes to families, donned ties and pantsuits in lieu of sweat pants and Christmas sweaters and one by one returned to the Capitol on Thursday to begin the business of doing nothing in particular. But for once, those lawmakers were fully united, if only around their sadness and frustration at being stuck in Washington in a holiday week, peering over the edge of the fiscal abyss. Link

* Cliff talks down to the wire. Janet Hook and Carol Lee – The Wall Street Journal. Congress and the White House took small steps toward breaking the budget impasse Thursday, but Democrats and Republicans grew increasingly fearful they will not be able to avert the tax increases and spending cuts known as the fiscal cliff, a prospect that is unnerving consumers and investors. President Barack Obama invited congressional leaders to the White House on Friday afternoon for a last-ditch effort to broker a deal, as the Senate returned to Washington on Thursday. House Republican leaders said in a Thursday conference call with Republicans, who are growing nervous about their party being blamed for the deadlock, that the House will reconvene Sunday evening. Link

Some important tax and accounting dates in the weeks to come:

Sunday, Dec. 30

* U.S. House of Representatives returns to work on legislation to avoid tax increases and spending cuts associated with the fiscal cliff that begin to kick in on Jan. 1.

Monday, Dec. 31

* U.S. government borrowing hits its debt ceiling, according to Treasury Secretary Tim Geithner.

Thursday, Jan. 3

* The 112th U.S. Congress adjourns. New Congress in session starting at noon ET.

The cost of pensions gets plenty of attention, both from the companies that sponsor them and their investors.  Other retirement benefits, including medical costs, don’t garner the same scrutiny.

That’s because under federal law, pensions must be funded at certain minimal levels, while  “other post-employment benefits” (OPEB)  have no mandatory funding, no matter how under-funded they may be.

OPEB remain a huge obligation sitting on corporate books, however, and as accounting sleuth Jack Ciesielski ferreted out in a recent report, for many companies they are a growing contributor to earnings.

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

* Boehner’s budget ‘Plan B’ collapses. Janet Hook – The Wall Street Journal. House Speaker John Boehner, facing a rebellion in his party’s conservative ranks, abandoned his own plan to avert tax increases for most Americans Thursday night, throwing Washington’s high-stakes budget negotiations into disarray and bringing the prospect of tumbling over the fiscal cliff into sudden focus. Link

* Threat of tax changes rattles muni market. Kelly Nolan and Mike Cherney – The Wall Street Journal. Many muni investors are worried that budget negotiations in Washington could result in new taxes on interest they receive from municipal bonds. Link  

* Struggling homeowners may lose critical tax break in fiscal cliff talks. Amtita Jayakumar – The Washington Post. Among the tax breaks at risk in the negotiations between the White House and Congress to avert the “fiscal cliff” is a measure aimed at helping struggling homeowners. Households could soon receive an extra tax bill if Congress does not extend a five-year tax break. Link  

Democratic-voting blue states could face a greater economic fallout from any fiscal cliff resolution than their Republican red state brethren, according to a Dec. 17 white paper  from municipal bond research firm eBooleant Consulting.

Entitled “The Blue State Tax Crunch,”  the paper predicts a recession for these states even if a broad, country-wide recession is avoided.

Size is one problem. Any changes made to the federal tax code  to try to avoid the cliff will be felt most in the largest states. They already contribute the most to federal taxes and the majority of these big states are blue. Higher tax rates will have an impact.

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

* Tax impact for small business hard to gauge. John McKinnon – The Wall Street Journal. The latest budget offers exchanged between the White House and Republican leaders would raise tax rates on a tiny fraction of small-business owners, but would still affect a sizeable portion of business activity, studies show. Link

* Boehner seeks support for tax increase on the wealthiest. Lisa Mascaro – The Los Angeles Times. As President Obama and House Speaker John A. Boehner took turns blaming each other for the sudden lull in the budget talks, the action continued off-camera Wednesday as the Ohio Republican focused on building support from his conservative majority to increase tax rates on the wealthy. Link 

 * John Boehner’s Plan B would raise taxes on the poor. Dylan Matthews – The Washington Post. While Speaker Boehner’s bill makes permanent the expansion of the Child Tax Credit (CTC) signed into law by George W. Bush as part of the 2001 tax cut deal it does not extend an expansion that was passed as part of the 2009 stimulus package, and has been renewed since then, allowing poor families to refund more of the credit. Link

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

* Boehner’s backup tax plan shakes up ‘fiscal cliff’ negotiations. Paul Kane and Lori Montgomery – The Washington Post. House Speaker John A. Boehner veered off the bipartisan course he had been charting toward a broad tax-and-entitlement deal with President Obama and instead Tuesday pushed a GOP package to extend tax cuts for income up to $1 million. Link  

* Rubio responds to Plan B: Raising taxes not the right way. Natalie Jennings – The Washington Post. Senator Marco Rubio joined other Republicans in offering a tempered response to House Speaker John Boehner’s proposed “Plan B” legislation to avoid the “fiscal cliff.” “I continue to know that raising taxes on anybody is not a good way to generate economic growth,” Rubio said. Link  

* Proposed cap on federal tax deductions would hit California hard. Michael Hilzik – The Los Angeles Times. The plan to cap federal tax deductions at either a set figure or a percentage of income would strike deepest and hardest mostly at residents of California, as well as other populous states with high levels of government services, high state and local taxes, and relatively expensive housing. Link