Tax Break

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

*H&R Block digital tax business grows, profit falls. Reuters. H&R Block Inc posted a lower fourth-quarter profit on charges related to job cuts earlier this year, but the top U.S. tax preparer said it gained market share in the highly competitive tax filing business. The company cut jobs, shut stores and overhauled its management in April, to focus on the fast-growing digital tax preparation segment after several years of losing customers to do-it-yourself tax filing services like Intuit Inc’s TurboTax software. Link

*Hatch, Rangel beat back challenges. Andrew Grossman and Naftali Bendavid – The Wall Street Journal. Two longtime congressional incumbents beat back strong challenges to their careers in primary elections on Tuesday. In New York, Charles Rangel, the 82-year-old Democrat who once led the powerful House Ways and Means Committee, won his primary race and is on track to claim a 22nd two-year term. In Utah, Republican Sen. Orrin Hatch easily defeated a primary challenger who ran aggressively to his right. Link 

* IRS offers reprieve to expat tax filers. Lynnley Browning – Reuters. Many Americans living abroad will get a small reprieve from U.S. Internal Revenue Service rules on reporting foreign assets, the agency announced on Tuesday. The IRS said it would allow some U.S. citizens, including dual citizens, who have not filed income tax returns or not disclosed their foreign bank accounts, to come forward without facing onerous penalties or the threat of prosecution. Link

* Portman tax plan to cut interest, write-offs. Kim Dixon – Reuters. Senator Rob Portman, a potential vice presidential pick by presumptive Republican nominee Mitt Romney, said his plan to revamp corporate taxes includes limits on investment write-offs and interest deductibility. Portman said the Obama administration has failed to lead on overhauling corporate taxes in the United States, which has among the steepest corporate tax rates among its industrialized peers at 35 percent. Link

* Christie laments a tax cut loss. Heather Haddon – The Wall Street Journal. It was billed as the year of the tax cut in the Garden State. Instead, there may be no tax cut at all. Saying lawmakers didn’t provide guaranteed tax relief in their $31.7 billion budget, Republican Gov. Chris Christie on Tuesday ramped up attacks on Democrats, vowing to tour the state and highlight what he said was a broken promise. Mr. Christie proposed slashing income taxes by 10 percent across all brackets. Link 

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

* Treasury resists Northern Ireland corporation tax cuts plan. Jamie Smyth – The Financial Times. A plan to devolve the power to reduce corporation tax to the Northern Ireland assembly is being resisted by the Treasury, denting hopes that lower taxes can be introduced to boost an economy hit by three decades of violence. Ministers from the UK and Northern Ireland government held a third meeting on Monday to discuss the proposal, which would enable Northern Ireland to cut its corporation tax rate to 12.5 per cent to match that of the Irish Republic. Link

* New rules may make public pensions appear weaker. Lisa Lambert and Nanette Byrnes – Reuters. New accounting rules approved on Monday are likely to show public pension funds are in a weaker financial position than previously thought and intensify disputes over how public retirement systems are funded. State and local governments will have to post their net pension liability – the difference between the projected benefit payments and the assets set aside to cover those payments – up front on financial statements, under the changes. Link

* N.J. budget vote sets up showdown with Christie. Heather Haddon – The Wall Street Journal. New Jersey Democrats pushed through a $31.7 billion budget in a party-line vote Monday, setting the stage for a possible veto by Republican Governor Chris Christie later this week. The bill substitutes a property-tax credit for Christie’s proposal to cut income taxes by 10 percent, with a delay until revenue figures can be further studied later this year. Link

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

* State, local fiscal burdens drag on economic recovery. Connor Dougherty – The Wall Street Journal. State and local government tax collections have improved from the recession years, they only recently regained their pre-downturn peak. Meantime, local governments, which unlike states rely on property taxes, continue to suffer from the big drop in real estate prices. Given political pressure to reduce the federal budget deficit, cities and states are likely to get less help from Washington. If that happens they would have to make up the gap with tax hikes of their own or else live more frugally—what they’re doing now. Link

* Public pensions to give ‘clearer picture’ of finances. Lisa Lambert – Reuters. Public retirement systems will have to make major changes in how they disclose their pension assets and liabilities, under new rules that the board in charge of accounting standards for U.S. state and local governments is set to approve on Monday. The Governmental Accounting Standards Board will vote on the changes at an afternoon meeting. The reforms were proposed nearly a year ago to give more detail on how pensions affect governments’ finances. Link

* IRS whistleblower tax take plunges, senator frets. Patrick Temple-West – Reuters. A report from the U.S. Internal Revenue Service’s troubled whistleblower program said tax collections from tipsters fell sharply last year, prompting a U.S. lawmaker on Friday to say he may delay two Treasury Department nominees until the program improves. In fiscal 2011, the IRS collected only $48 million through the program, down from $464 million in fiscal 2010, the agency reported to Congress on June 15. Link

Long-tailed mayflies fly over the surface of the Tisza river southeast of Budapest, June 20, 2012. REUTERS/Laszlo BaloghSome important tax and accounting events in the week ahead:

Monday, June 25
• Deloitte Tax LLP webcast on the effects new tax legislation, standard-setting developments and regulatory matters could have on financial accounting and income tax reporting.

Wednesday, June 27
• Financial Accounting Standards Board (FASB) meeting on repurchase agreements and defining a nonpublic entity. Norwalk, Connecticut.

Wednesday, June 27 – Saturday, June 30
• Internal Revenue Service Chief Counsel William Wilkins speaks at the Tax Executive Institute regional meeting. Hilton Head, South Carolina.

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

* California reaches a budget deal. Jennifer Medina – The New York Times. Gov. Jerry Brown and the Democratic-controlled legislature reached a budget deal on Thursday to close a nearly $16 billion budget gap. The agreement came after days of negotiations, with legislative leaders reluctant to make the cuts that Governor Brown said were urgently needed. Link

* U.S. no-tax pledge creator entreats Republicans. Kim Dixon and David Lawder. The creator and enforcer of a no-tax-hike pledge Grover Norquist huddled with a small group of Republican lawmakers on Thursday in Washington to help strengthen their resolve ahead of tax battles expected to intensify in coming months. South Carolina Republican Senator Lindsey Graham and former Republican Florida Governor Jeb Bush are among prominent Republicans suggesting recently of the need for more flexibility on tax issues. Link

* As churches get political, IRS stays quiet. Nanette Byrnes – Reuters. Pastor Jim Garlow not only intends to break the rules, he also plans to spend the next four months recruiting other pastors to do the same as part of Pulpit Freedom Sunday. On that day each year since 2008, ministers intentionally try to provoke the Internal Revenue Service. The situation is fraught with peril for the IRS, which needs to be seen as apolitical. When it cracks down on political activities proscribed by the 501(c)(3) regulations, it is inevitably branded as partisan. Link

* Christie allies vote against key spending bill. Heather Haddon – The Wall Street Journal. Members of New Jersey Gov. Chris Christie’s own party voted against a bill to help plug a budgetary hole to help pay for the administration’s tax cut—an unexpected wrinkle in an already fraught budgetary session. Two Republicans voted against the bill, which included reallocating $261 million from the Transportation Trust Fund to the general budget. Link

* IRS to review whistleblower program for speed, quality. Jessica Dye – Reuters. The Internal Revenue Service is planning a “comprehensive review” of its embattled whistleblower program to improve the speed and quality of its decisions, an agency official said in a June 20 memorandum. Link

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

* Japan premier wins sales tax deal. George Nishiyama, Toko Sekiguchi and Alexander Martin – The Wall Street Journal. Japanese Prime Minister Yoshihiko Noda won the backing of the main opposition parties for a contentious bill to double the sales tax Thursday. But their support, which ensures the bill’s enactment, came at a high price—a possible ruling-party split led by the prime minister’s biggest rival. Noda’s ruling Democratic Party of Japan and the two main opposition parties agreed to enact the bill to raise the tax to 10 percent by 2015 in the current parliament session, which was extended to early September. The bill is seen as a long overdue first step in curbing the country’s massive debt, now more than twice the size of the economy. Link

* Soda taxes should be used to fight obesity: doctors. Julie Steenhuysen – Reuters. America’s largest physician organization recommended on Wednesday that taxes levied on sugar-sweetened sodas be used to fight the country’s growing obesity crisis. But the policy statement adopted by the American Medical Association’s House of Delegates meeting in Chicago fell short of outright support for taxing sugar-sweetened beverages to control use of these products. Link  

In this video Reuters tax columnist David Cay Johnston interprets some of what we know — and don’t know – about the wealthiest Americans and their taxes.

Tax fairness has been a hot topic this year.

An IRS analysis shows that of the 3,975,288 tax returns reporting income of $200,000 or more for 2009, 35,061 had no U.S. income tax liability at all.

Another IRS report looks at the 400 very highest incomes and finds that a handful of this group also hit the tax-free list.

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.

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

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