Tax Break

Essential reading: Boehner sticks to no tax-hike pledge, and more

Speaker of the House John Boehner on Capitol Hill in Washington. REUTERS/Larry Downing

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

* Boehner holds firm on no tax-hike pledge. David Lawder – Reuters. U.S. House of Representatives Speaker John Boehner on Thursday dismissed suggestions that Republicans were warming to raising revenue as part of a plan to cut the deficit, adding that tax hikes on millionaires would cost jobs. The top Republican in Congress blasted a proposal from House Democratic leader Nancy Pelosi to raise taxes only on those earning more than $1 million, saying it would hurt too many small business owners, who hire the most U.S. workers. Link

* US House panel backs medical device tax repeal. Patrick Temple-West – Reuters. A Republican-controlled congressional panel voted on Thursday to repeal a tax on medical devices, a key revenue provision in President Barack Obama’s 2010 healthcare reform law, but the measure was not expected to become law. Approval in the House, which is dominated by Republicans, was viewed as probable, possibly as soon as next week. But the measure faced an uphill climb in the Democrat-controlled Senate, where parallel legislation lacks bipartisan sponsors. Link

* On sidelines of tax-writing panel, estate-tax policy is debated. Siobhan Hughes – The Wall Street Journal. A debate over estate-tax policy is being waged on the sidelines of Congress, where policy isn’t developed but where Republican lawmakers are  eager to draw battle lines over the year-end expiration of the Bush tax cuts. On a day when a House tax-writing panel was voting to dismantle portions of the 2010 healthcare law, Rep. Joe Walsh on Thursday used his perch as chairman of a House Small Business Committee subcommittee to shine a spotlight on the estate tax. The freshman Republican stepped into an area in the jurisdiction of the U.S. House Ways and Means Committee in order to call attention to the dilemma of certain small-business executives who face the prospect that their businesses will have to be sold or dismantled if tax policy reverts to 2001 levels in order for heirs to come up with the money to pay the estate tax. Link

* Did light touch tax become soft touch? Vanessa Houlder – The Financial Times. To critics, the UK’s former head tax collector Dave Hartnett is the most wined-and-dined civil servant in Whitehall whose alleged sweetheart deals with big business cost Britain billions of pounds of tax. Hartnett’s role in encouraging “far too cozy a relationship between HMRC and large companies” was cited in a scathing report by parliament in December. Though HMRC, the UK customs and tax department, slammed the report as inaccurate, Margaret Hodge, the MP who led the investigation, hailed it as a “damning indictment”. Link

Calendar

Some important tax and accounting dates in the week ahead:

Monday, June 4
•    Jim Doty, chairman of the Public Company Accounting Oversight Board, gives the opening keynote address at Compliance Week 2012, a three-day conference on new accounting standards, reporting requirements from the Securities & Exchange Commission, and other topics. Washington.

•    The Organization for Economic Co-operation and Development,  its Business and Industry Advisory Committee and the United States Council for International Business co-host a two-day conference on its new international taxation initiatives. Topics include transfer pricing and international tax cooperation, among others. Speakers include officials from the U.S. Treasury, the Internal Revenue Service, and private industry. Washington.

Tuesday, June 5
•    The American Law Institute and American Bar Association webcast on the Supreme Court’s decision in United States v. Home Concrete, the scope of the Treasury Department’s power to issue tax regulations, and how the court must those regulations.

Essential reading: Medical device tax repeal gains ground, and more

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

* Medical device tax repeal gains some ground. N.C. Aizenman – The Washington Post. Makers of medical devices are gaining some momentum in a vigorous campaign to persuade Congress to scrap a tax imposed on their industry by the 2010 healthcare law. A bill to void the tax sponsored by Rep. Erik Paulsen will be marked up in the House Ways and Means Committee on Thursday. Republican House leaders say a floor vote could be scheduled as soon as next week. Link

* Swiss parliament oks German, UK, Austria tax deals. Andrew Thompson and Catherine Bosley – Reuters. Switzerland’s parliament gave the green light for tax pacts with Germany, Britain and Austria aimed at preventing tax cheats from stashing money in secret accounts, a decision that could pour billions of extra euros into strained state coffers. Lawmakers in parliament’s lower house on Wednesday voted 108 to 81 in favor of the agreement with Germany, which will levy a retroactive tax of up to 41 percent. The deal, set to take effect in early 2013, has already been approved by the upper house. Link

* At core of Greek chaos, a reviled tax. Charles Forelle – The Wall Street Journal. When the Greek government surprised homeowners in September by imposing a new national property tax, the mayor of this down-at-the-heels suburb on the western fringe of Athens sprung into action and mobilized against it. For many in the euro zone, Greece’s sluggish tax receipts are a perennial frustration. For many in Greece, however, the new taxes — which fall particularly hard on those lower on the income scale — are only compounding the country’s woes and stifling its economy. Link

Tax Foundation: Kansas tax cut plays favorites

Kansas Governor Sam Brownback REUTERS/Dave Kaup

Kansas Governor Sam Brownback cut his state’s income taxes on May 22, bringing the highest rate down from 6.45 percent to 4.9 percent and doubling the standard deduction to $9,000 for both heads of household and married couples. Overall $800 million of taxes per year are being eliminated beginning in 2014.

The Tax Foundation, a Washington-based research firm that favors lower taxes, highlighted a potentially unintended consequence in its May 29 analysis of the new law: its changes to the way pass-through businesses are taxed, possibly encouraging businesses to adopt this structure.

Owners of pass-throughs declare profits from a business as income under the personal tax code, rather than filing as a corporation. Popular forms include LLCs, S corps, partnerships, farms and sole proprietorships.

Essential reading: As governor, Romney picked winners and losers, no taxes for Lagarde, and more

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

* As governor, Romney picked winners and losers of his own. Andy Sullivan – Reuters. Massachusetts Gov. Mitt Romney’s June 2006 announcement that drugmaker Bristol-Myers Squibb was moving into his state served as a signature accomplishment. The new facility came with a price tag: Romney and other state officials agreed to $67 million in tax breaks and other inducements to ensure the New York-based company picked Massachusetts over rival states like North Carolina. Romney backed tax breaks for film makers and biotech and medical-device manufacturers. His administration promoted venture capital-style funds that extended loans to start-up companies, some of which subsequently went out of business. Link

* Christine Lagarde, scourge of tax evaders, pays no tax. Kim Willsher – The Guardian. Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged. As she is an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes. Link

* Anti-tax crusader assails report on Republican shift. Patrick Temple-West – Reuters. Anti-tax crusader Grover Norquist, scourge of any and all tax increases, said on Tuesday that a news report questioning the vitality of his “no new taxes” pledge – a vow taken by many Republican politicians – is overblown. Republicans who have not signed the pledge may be in congressional races they are unlikely to win anyway, while other candidates have rules against signing pledges, he said. Link 

Essential reading: Lawmakers work with Simpson-Bowles for tax deal, and more

 

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles speak to reporters in Washington April 14, 2011. REUTERS/Kevin Lamarque

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

 

* Lawmakers work with Simpson-Bowles for tax deal. Kim Dixon – Reuters. Former Democratic White House chief of staff Erskine Bowles said he and former Republican senator Alan Simpson, are working with a bipartisan group of 47 senators and as many House members to frame a compromise on $7 trillion in looming fiscal decisions, Bowles said on CNN’s news program, “Fareed Zakaria GPS.” Without a deal, the end of the year brings higher taxes for most Americans with the expiration of historically low income tax rates enjoyed by nearly every American and expiry of a payroll tax break, along with broad automatic spending cuts that most lawmakers in both parties want to avoid. Link

* With personal data in hand, thieves file early and often. Liaette Alvarez – The New York Times. Besieged by identity theft, Florida now faces a fast-spreading form of fraud so simple and lucrative that some violent criminals have traded their guns for laptops. And the target is the United States Treasury. The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card. Link  

FASB under political heat from Congress over lease accounting

U.S. and international accounting rule-makers have been struggling for years to come up with a common standard for lease accounting. Now they have a new hurdle: U.S. lawmakers.

Sixty members of Congress, led by representatives Brad Sherman, a Democrat, and Republican John Campbell, have written to the U.S. Financial Accounting Standards Board warning of dire economic fallout from a plan to have companies put leases on their balance sheets.

The business lobby’s handiwork was evident in the congressional letter on leases. The letter relied heavily on a report commissioned by the U.S. Chamber of Commerce and other trade groups earlier this year. That study said the leasing changes could destroy up to 3.3 million U.S. jobs, or at least 190,000 in the best case. U.S. gross domestic product would fall by $27.5 billion to $478.6 billion a year.

Companies anticipated dividend tax hikes in 2010- lessons for 2012?

Dividend tax rates, currently 15 percent, are due to expire at the end of this year, one of a host of tax breaks going away unless Congress takes action.

If Congress fails to act, the rate will snap to about 40 percent.

A nearly identical scenario played out in 2010, and there may be some lessons to learn from the way businesses behaved the last time around.

An academic paper released this week dug into the events of 2010 and found that dividend-paying companies – especially those owned by insiders – took anticipatory steps to boost regular and special dividends when the fate of U.S. dividend taxes was uncertain in 2010.

Tax and accounting calendar

Some important tax and accounting dates in the week ahead:

Wednesday, May 30
•    Financial Accounting Standards Board meeting will cover feedback on a proposal regarding real estate investment properties, impairment of indefinite-lived intangible assets and the definition of a nonpublic entity. Norwalk, Connecticut.

Wednesday, May 30 – Friday, June 1
•    Government Accounting Standards Board meeting. Norwalk, Connecticut.

Thursday, May 31
•    International Conference on Global Capital Markets and Corporate Governance, focused on global standards. Public Company Accounting Oversight Board member Steven B. Harris will speak. Moscow.
•    USC Leventhal School of Accounting SEC and Financial Reporting Institute Conference. Speakers include PCAOB Chairman Jim Doty, Chief Auditor Marty Baumann, and Claudius Modesti, Director of the Division of Enforcement and Investigations. Pasadena, California.

Essential reading: Union, liberal coalition pushes Obama tax plan, and more

Union supporters in Las Vegas, September, 2008. REUTERS/David Allio

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

* Union, liberal coalition pushes Obama tax plan. John McKinnon – The Wall Street Journal. A coalition of big unions and left-leaning activist groups has formed to support President Barack Obama’s proposal to raise tax rates on families earning more than $250,000, amid growing signs that Democratic lawmakers want to limit tax increases to people making $1 million or more. Link

* An often procrastinating Congress is raring at the gate on tax cuts. Jennifer Steinhauer – The New York Times. The Bush-era tax cuts, which are set to lapse on Jan 1, have both parties in the House and the Senate eager, perhaps even giddy, to vote for their respective versions of an extension of the cuts this summer, well before the due date. Without any extensions, the expiration would raise taxes next year by $221 billion. Link

* Heard in more states: See you in tax court! Nanette Byrnes – Reuters. Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals. Georgia and Illinois approved laws last year to create a tax court. In Alabama, Governor Robert Bentley announced Thursday that he will pocket veto legislation that would create a new state tax tribunal, due to flaws in the bill, but will support its reintroduction in the next legislative session. Link