Tax Break

Essential reading: H&R Block cuts back, Supreme Court restrains IRS, and more

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

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

* H&R Block to close stores, cut jobs. Jochelle Mendonca – Reuters. H&R Block said the head of its U.S. retail tax services unit resigned, and the top U.S. tax preparer announced another round of store closures and job cuts, as it realigns its business to focus on the fast-growing digital tax market. Separately, the company said the number of tax filings it prepared through April 18, grew 4.5 percent to 22.2 million. Link

* Supreme Court restrains IRS in tax shelter case. Patrick Temple-West – Reuters. The Supreme Court ruled on Wednesday that the Internal Revenue Service took too much time to try to collect back taxes from a business in a tax shelter case, a decision with wider impact for dozens of related cases. The high court said the agency could not use an extended, six-year statute of limitations period. The IRS had said the extended period, an exception from the normal three-year limit, was justified in the case. But the court disagreed with the tax-collecting agency in a 5-4 decision in United States v. Home Concrete & Supply LLC. Link

* French front-runner says he’d seek to renegotiate fiscal treaty if elected. Steven Erlanger and Nicholas Kulish – The New York Times. The front-runner for the French presidency, the Socialist candidate François Hollande, said on Wednesday that if elected he would ask other European leaders to renegotiate a fiscal treaty in order to promote growth. He said he would also call for a financial transaction tax, as his rival, President Nicolas Sarkozy has done. Link

* Bernanke warns lawmakers on ‘fiscal cliff’ Kristina Peterson – The Wall Street Journal. Federal Reserve Chairman Ben Bernanke delivered his strongest warning yet to lawmakers, who appear likely to put off until after the November elections any decisions on what to do about the year-end expiration of the Bush-era tax cuts and a payroll-tax break as well as $1.2 trillion in automatic spending cuts that are scheduled to kick in at the start of 2013. If lawmakers allow the tax cuts to expire and the spending cuts to take effect, “there is absolutely no chance that the Federal Reserve would be able to have the ability whatsoever to offset that effect on the economy,” Bernanke said at a news conference Wednesday. Link

* Real wages tumble in developed countries as taxes rise. Paul Hannon – The Wall Street Journal. Governments in developed economies raised income taxes last year in an effort to cut their budget deficits, reversing a decade-long decline in the share of labor costs accounted for by the state, the Organization for Economic Cooperation and Development said Wednesday. In its annual Taxing Wages report, the OECD said the tax wedge rose in 26 of its 34 members during 2011, and fell in seven. The tax wedge is the proportion of labor costs accounted for by the state in the form of income taxes and social security contributions from both employers and workers. Link

Tax and accounting calendar

U.S. President Barack Obama greets U.S. Supreme Court Justices Anthony Kennedy (C) and Ruth Bader Ginsburg (R) prior to his State of the Union address, January 24, 2012. REUTERS/Saul Loeb/Pool

Some important upcoming events in the tax and accounting world: Saturday, March 25 – Wednesday, March 28 - Tax Executives International three-day conference in Washington, D.C.
Monday, March 26 – The first of three days of oral argument the  U.S. Supreme Court will hear on the Obama administration’s healthcare reform. Argument today is  focused on the Anti-Injunction Act, which dates to 1867, and whether taxpayers must actually begin paying the penalty for not purchasing insurance before objections to the mandate can be raised in court. Argument starts at 10 a.m.
Tuesday, March 27 –

    The Subcommittee on Energy, Natural Resources and Infrastructure will hold a hearing on renewable tax incentives and whether they have affected the renewable energy industry at 2:45 p.m. The House Appropriations Financial Services and General Government Subcommittee will hold a hearing on President Barack Obama’s proposed 2013 budget for the Treasury Department. Treasury Secretary Timothy F. Geithner will testify. Starts at 10 a.m. Day two of the U.S. Supreme Court review of the Obama healthcare reform. Argument is scheduled for 10 a.m. and will address whether Congress overstepped its powers under the Constitution by adopting the individual mandate. This is the issue at the heart of the legal battle over the law that aims to provide health coverage to more than 30 million uninsured Americans.
Wednesday, March 28 -
    On the third and final day of U.S. Supreme Court oral argument on the Patient Protection and Affordable Care Act, a first session will begin at 10 a.m. focused on whether the entire law must fall if the insurance mandate was found to be unconstitutional, or if the other parts can survive. At 1 p.m. a second session will tackle whether Congress had the authority to require that states expand the number of people eligible for assistance from the Medicaid healthcare program for the poor and disabled. The House Financial Services committee will hold a hearing on accounting and auditing oversight at 10 a.m. The Public Company Accounting Oversight Board’s investor advisory group will meet in Washington to discuss an array of topics including independence, going concern warnings,  and others. 
Thursday, March 29 -
    Government Accounting Standards Board teleconference. The D.C. Bar will sponsor a luncheon program on temporary and proposed Treasury regulations on certain dividend equivalent payments. IRS official Peter Merkel and Treasury official Karl Walli will speak.

Thursday, March 29 – Friday, March 30 - The American Bar Association  and others are sponsoring a two-day conference in Vienna, Austria, on tax planning strategies in the U.S. and Europe, including discussions of cross-border losses in tax planning, tax risk management by multinationals, transfer pricing, and collective investment vehicles.

“Tax” is key issue in Obama healthcare Supreme Court case

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

To be or not to be a tax?

That is the question, wrote Donna Smith of Reuters, in a March 14 piece on the upcoming U.S. Supreme Court case that will test the validity of President Barack Obama’s controversial healthcare system overhaul.

The central issue in the arguments is the money that Americans will have to pay starting in 2014 to the Internal Revenue Service if they fail to obtain medical insurance.

Though the money is going to the IRS, the Obama administration has gone to great lengths to term it a penalty, not a tax.

The tax code ‘ambiguous’? Supreme Court to decide

A $6 million tax bill landed before the Supreme Court on Tuesday, leaving the justices to determine the will of Congress and the high court’s own decisions from more than 50 years ago. (See the Reuters  preview here.)

The case centers on a law from 1954 in which Congress granted the Internal Revenue Service an extended statute of limitations to ferret out tax cheats when the taxpayer “omits from gross income” more than 25 percent of his or her tax liability.

The tax shelter at issue – known as Son of Boss transaction – claimed fake tax losses, or an “overstatement of basis.”