Tax Break

Essential reading: California reaches a budget deal, and more

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

* PM’s ‘political tin ear’ on tax attacked. Helen Warrell, Jim Pickard and Kiran Stacey – The Financial Times. David Cameron’s decision to criticizes tax avoidance by Jimmy Carr, the comedian, has prompted unease in Westminster from officials, Conservative MPs and peers who fear he showed a “political tin-ear” in singling out one person over their financial affairs. Link

* German finance min: Want to push transactions tax today with “all emphasis.” The Wall Street Journal. Germany and Austria will push for the creation of a financial transactions tax covering at least nine European countries Friday, their finance ministers said Friday. German Finance Minister Wolfgang Schaeuble told journalists he will push with “all emphasis” for a deal with at least nine states of the European Union. Link

Essential reading: Japan premier wins sales tax deal, and more

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  

David Cay Johnston on how the well-to-do can pay no taxes

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.

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.

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