Tax Break

Tax lawyers are divided over the legal consequences of the bruising defeat in court of a billionaire former client of UBS AG who sued the Swiss bank for allegedly giving him incorrect tax advice.

On April 10, Judge Andrew Guilford of U.S. District Court in Santa Ana, Calif., dismissed a case brought by Igor Olenicoff, a Russia-born property developer. Olenicoff had accused the bank of improperly telling him he didn’t have to disclose certain Swiss-held assets on his U.S. tax returns.

In ruling for UBS, the judge said that because Olenicoff had been convicted in 2007 of tax evasion and of lying on his tax returns about having offshore accounts, he did not have a solid claim of fraud and breach of fiduciary duty against UBS. Judge Guilford wrote that because Olenicoff had admitted to tax evasion, he had placed “nearly every room of his legal house of cards into jeopardy.”

The judge wrote that UBS had run afoul of U.S. authorities over its offshore private bank, but added that “UBS’s admission of guilt does not give Olenicoff the right to sue UBS for fraudulent tax advice.”

In 2009, UBS averted indictment, admitted to criminal wrongdoing with tax-evasion services sold to 19,000 Americans through its private bank and signed a $780 million deferred-prosecution agreement with the U.S. Justice Department.

Tuesday, April 24 - Comment letters due to the Financial Accounting Standards Board on its proposed update on accounting for intangibles

Wednesday, April 25

International Financial Reporting Standards (IFRS) Taxonomy Annual Convention in London. The Senate Finance Committee has scheduled a hearing, “Tax Reform: What It Means for State and Local Tax and Fiscal Policy,” to start at 10 am in the Dirksen Senate Office Building. House Ways and Means Oversight Subcommittee will hold a hearing on the impact of limitations on the use of tax-favored accounts to buy over-the-counter medication at 2:30 pm, the Longworth House Office Building. Karin Gross of the IRS will speak on conservation easements at a luncheon sponsored by the D.C. Bar Taxation Section Exempt Organizations Committee.

Thursday, April 26

The Senate Finance Committee will hold its second tax hearing of the week, this one entitled, “Tax Filing Season: Improving the Taxpayer Experience,” starting at 10 am in the Dirksen Senate Office Building. At the same time, the House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the merits of extending or not extending tax breaks that expired in 2011 or will expire in 2012 in the Longworth House Office Building.

Friday, April 27 - At 10 am an IRS hearing will be held in the IRS Auditorium on proposed guidance to nonresident aliens and foreign corporations regarding financial products derived from dividend payments from sources within the United States.

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

* House passes Republican business tax cut. Kim Dixon – Reuters. The Republican-controlled House of Representatives on Thursday passed a tax break for small businesses, giving voters a stark alternative to President Barack Obama’s politically popular “Buffett Rule” surtax on the wealthy. In an escalating election-year war of words over taxes, the Republican measure, like the Buffett Rule, is not expected to become law. It is opposed by Democrats, who control the Senate, where the bill was expected to die. Link

* Olympus eyes fresh start, ex-CEO mulls legal threat. Tim Kelly and Yoko Kubota – Reuters. Shareholders of Olympus Corp approved a new board on Friday, hoping for a fresh start at the camera and medical device maker that hid $1.7 billion of investment losses in Japan’s biggest corporate scandal in decades. While Olympus will hope the vote draws a line under a scandal that has wiped more than $4 billion off its market value, its former CEO and foreign investors, who own 25-30 percent of the company, have sought a change in a deep-rooted culture of cross-shareholdings and cozy ties between banks and boardrooms. Link

* State tax collections pass peak from recession’s start. Michael Cooper – The New York Times. State tax collections, which during the recession  experienced their steepest and longest drop since at least the Great Depression, have been climbing back for the last two years and finally surpassed their previous peaks as 2011 drew to a close, according to a report issued on Thursday. But huge challenges remain, as their populations and the cost of providing services have continued to rise, and the growth in tax collections has begun to soften. Link

In what our colleague Kim Dixon termed “an escalating election-year war of words over taxes” the Republican-controlled House of Representatives has passed a 20 percent tax break for small businesses, that will likely face the same fate as the Buffet tax Democratic senators voted for earlier in the week: death in the other party’s chamber.

Democrats opposed to the tax blasted it as favoring small businesses that are also tremendously profitable. Steven Dennis wrote in Roll Call that it looked like businesses like the New York Giants football team, which employs 210 people but is worth $1.3 billion, according to Forbes, could qualify for the tax break.

But former presidential advisor Bruce Bartlett, who worked in the first Bush administration and for Ronald Regan, argues with the deeper premise – the axiom that small businesses are the drivers of job creation.
He lays out the argument in a New York Times Economix post from earlier this week:

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

* Tax evaders face higher penalty. Vanessa Houlder – The Financial Times. British tax evaders with secret accounts in Switzerland will pay more than originally planned to legitimize their holdings under a revised deal signed on Wednesday. Revenue & Customs demanded that Switzerland increase the maximum one-off penalty to cover former unpaid tax from 34 per cent to 41 per cent, after a similar revision to the Swiss-German tax deal earlier this month. The program is expected to bring in billions of pounds. Link

* US pressure over India tax law. James Politi and James Crabtree – The Financial Times. US business groups are putting pressure on Tim Geithner, the treasury secretary, to intervene to try to stop India from enacting a contentious retroactive taxation law that they argue would have “severe consequences” for American investors in the country. They have asked him to “raise concerns” about the tax bill in talks with Indian officials during the spring meetings of the World Bank and International Monetary Fund this week. Link

* What Hong Kong knows about China. Joseph Sternberg – The Wall Street Journal. In a bit of virtuous contagion, a coughing fit of accounting honesty concerning Chinese companies appears to be spreading from the U.S. to Hong Kong. The earnings season just concluded has seen a mini-spate of delayed accounts. Trading in 13 companies’ shares is currently suspended pending incomplete audits. Link

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

* Lawmakers consider changing tax breaks on retirement savings. Lori Montgomery – The Washington Post. The painful trade-offs of tax reform came into sharper focus on Tuesday as lawmakers began considering reducing or otherwise changing specific tax breaks, starting with laws that allow millions of Americans to avoid taxes while saving for retirement through 401(k) plans, employer pensions, IRAs and other programs. Link

* White House says Obama would veto Republican tax cut. Alister Bull – Reuters. The White House said on Tuesday that President Barack Obama would veto a small business tax cut proposal by Republicans in the House of Representatives that his Democrats complain is biased toward helping the rich. Link

* Senate to take up Simpson-Bowles deficit plan. James Politi – The Financial Times. The centrist Democrat who chairs the Senate budget committee will present legislation on Wednesday to implement the recommendations of a 2010 bipartisan debt reduction panel, in a surprise move to force the upper chamber to consider the contentious plan. In a sign that the Simpson-Bowles plan is unlikely to garner much traction in the Senate, Republicans mocked the move. Link

House Ways and Means Committee Chair Dave Camp (R-MI), Washington February 15, 2012. REUTERS/ Gary Cameron

The latest in a series of congressional tax committee meetings ahead of the Next Great Tax Code Reform revealed one thing Tuesday: trying to squeeze revenue out of tax-free retirement accounts will be a tough sell.

“Tax Reform” as it is known, generally refers to a process that includes lowering tax rates for most everybody, but takes away special breaks to pay for that. The result, it is hoped, is efficiency and simplicity.

U.S. Park Police Officer Calvin Covington with his horse Harper mails his family's income tax returns at a mobile post office near the Internal Revenue Service building in downtown Washington. REUTERS/Jonathan

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

* Romney’s remarks on limiting tax deductions draw fire. By Sam Youngman and Donna Smith – Reuters. After Mitt Romney was overheard telling supporters at a private fundraiser in Florida over the weekend that he might seek to limit tax deductions for mortgages and eliminate the Department of Housing and Urban Development (HUD), aides said on Monday that Romney was simply throwing out ideas, not outlining policy to help offset his proposal to slash all U.S. tax rates by 20 percent. Link  

“This is going to be one of the craziest years I’ve seen,” said Mark Steber, chief tax officer for Jackson Hewitt Tax Services. “It’s kind of the perfect tax storm.”

For those of us still smarting from the 2011 tax comeuppance, 2012 is nothing to look forward to.

A host of tax deductions are set to expire by Dec. 31. Together they add up to many billions of dollars in breaks for taxpayers.

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

* Romney specifies deductions he would cut. Sara Murray – The Wall Street Journal. In order to offset the 20 percent income tax cut he has proposed for all taxpayers, Romney would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction. He also said he would look to the Department of Education and the Department of Housing and Urban Development for budget cuts. Link

* Q+A: The ‘Buffett Rule,’ a minimum tax on the rich. Kim Dixon and Patrick Temple-West – Reuters. President Barack Obama and congressional Democrats are laying a political trap for Republicans to be sprung on Monday when the U. S. Senate is slated to vote on the proposed “Buffett Rule,” which would slap a minimum tax on the highest-income Americans. Link

* For Americans abroad, taxes just got more complicated. David Jolly – The New York Times. Americans overseas face a new form that will add to the hassle of tax time for many and, critics say, set up the unwary for penalties. The new requirement comes courtesy of the Foreign Account Tax Compliance Act, or FATCA, an effort to crack down on offshore tax evasion by U.S. citizens. Link