Tax Break

Corporate state taxes vary widely, depend on industry, location and longevity, study finds

On Wednesday, the Tax Foundation came out with a study on the tax rates different types of businesses face in different states.

Broadly speaking, the foundation found that corporate taxation practices vary widely not only from state to state, but even from one business to another within any one state, and even between businesses in the same line of work in the same state depending on the age of their facilities, with newer locations getting sizable tax breaks and incentives.

“Until you see the data in black and white, these are just perceptions” of differences, Scott Hodge, president of the Tax Foundation, a think-tank that generally  favors lower tax rates for corporations, told me.

By putting numbers on the variations in tax rates that  businesses face, the foundation hopes to ignite debate and perhaps prompt greater fairness among taxpayers, Hodge said.

Michael LaFaive, director of fiscal policy for the Mackinac Center for Public Policy, a pro-free market  Michigan-based think-tank, said the report may get a serious hearing in state capitals.

Senator Levin unhappy with Facebook’s pending $3 billion tax break

Even before it’s become a public company, web giant Facebook’s has caught plenty of government attention, much of it around the company’s taxes and the impact its billions in stock options are likely to have on the tax coffers.

Today Senator Carl Levin, long active on tax issues, took to the Senate floor to point out the many things he dislikes about the company’s expected tax picture, hoping to tap into broader discussions about the need for greater fairness in the tax code.

On the heels of a California estimate that it could haul in $2.5 billion in income taxes over the next five years as Facebook workers cash in stock options, Levin is highlighting the corporate tax implications of all those stock options.

Tax and Accounting Calendar

A worker arranges a saree drying after dyeing in a village south of Kolkata REUTERS/Rupak De Chowdhuri

Some events in the week ahead:

Monday, February 27 – Tuesday, February 28
The Practicing Law Institute will sponsor a two-day program in New York featuring speakers from Treasury and the IRS on a number of topics including investment adjustments, accounting issues, Treasury Department developments, inter-company transactions, and tax attributes and consolidation.

Tuesday, February 28

* The Public Company Accounting Oversight Board will hold an open board meeting at its offices at 1666 K Street NW in Washington DC and via web conference to consider proposed standards on related parties, significant unusual transactions and other matters. Starting at 9:30 AM.

Essential Reading: Ernst & Young’s fine, Swiss bank fallout and the Buffett rule

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

* Watchdog fines Ernst & Young $2 million over audits. Dena Aubin – Reuters. The watchdog board for corporate auditors on Wednesday said it has imposed a $2 million penalty, its largest fine ever, on accounting and consulting firm Ernst & Young LLP in a settlement involving past audits of Medicis Pharmaceutical Corp. The Public Company Accounting Oversight Board said it also sanctioned four current and former Ernst & Young partners for violating PCAOB rules in the audits of Medicis, which sells prescription drugs for asthma and skin conditions. Ernst & Young settled without admitting or denying the PCAOB’s findings. The audits in question involved Medicis’ 2005, 2006 and 2007 financial statements, the PCAOB said. Link.

* Payroll-tax cut extension talks bog down as time runs short. Siobhan Hughes and Corey Boles – The Wall Street Journal. U.S. Senate Majority Leader Harry Reid said on Tuesday lawmakers working on an extension of a popular payroll-tax cut had only until early next week to reach a deal, as the two sides negotiating the package showed few signs of compromise and spent a morning meeting digging in to their positions. House Ways and Means Committee Chairman Dave Camp said that if negotiators can’t agree on current proposals to offset the cost of the package, they may have to “begin looking at scaling back some of these core policies” or else rely on deficit spending or simply kick the issue “outside the scope of the conference.” House Republicans started the latest round of talks with a proposal to cover the cost partly with a freeze to cost-of-living pay increases for federal workers. That outraged Maryland Democrats, whose constituents include many government workers. Democrats were no happier with a proposal to gradually force more senior citizens to pay higher premiums for Medicare. Link.

* Wegelin boss gives up NZZ role after US tax probe. Emma Thomasson – Reuters. The head of Wegelin – Switzerland’s oldest private bank and which the United States has indicted for helping clients dodge taxes – is standing back from his role as chairman of the country’s influential Neue Zuercher Zeitung daily. Konrad Hummler, one of Switzerland’s most high-profile bankers, said on Thursday he needed to focus on the U.S. case against Wegelin on charges it enabled Americans to evade taxes on at least $1.2 billion in offshore bank accounts. Hummler had come under pressure to step down as NZZ chairman for fear the Wegelin case could damage the reputation of Switzerland’s oldest newspaper – the voice of the country’s business establishment. Link.

Essential Reading: Capitol Hill, Liechtenstein, Mark Zuckerberg and Mitt Romney

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

* US payroll tax talk mired in election-year politics. Richard Cowan and Donna Smith – Reuters.

Republican and Democratic leaders accused each other of bad faith negotiations on Tuesday as both parties played hardball in talks to extend a tax cut for 160 million U.S. workers. Both sides agree the payroll tax cut should be renewed for a full year before it expires on Feb. 29, and its extension has been seen as a foregone conclusion. But the parties are far apart over how to pay for it and the rancor of election-year politics complicates lawmakers’ work. They argued over whether to continue a pay freeze on federal workers for another year, saving around $26 billion, and whether to squeeze $31 billion out of the Medicare healthcare program for the elderly. Link.

* Romney’s returns revive scrutiny of lawful offshore tax shelters. Jonathan Weisman – The New York Times.