Tax Break

Essential reading: Microsoft’s Nevada tax break, debating Apple’s tax rate, and more

A rainbow appears over hotels on the Las Vegas Strip in Las Vegas, Nevada, REUTERS/Ethan Miller

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

* Microsoft heads to Nevada again for tax perks. Maxwell Murphy – The Wall Street Journal. Microsoft’s $300 million investment in Barnes & Noble’s digital reading and college bookstore operations, announced on Monday, offers another peek into the way companies use Nevada as a way to shelter income from taxes. Microsoft formed Morrison Investment Holdings as a Nevada corporation on April 5, adding to the list of dozens of Microsoft investment subsidiaries incorporated in Nevada, rather than in its home state of Washington, over at least the past two decades. Nevada doesn’t tax corporate income or capital gains. Link

* Apple’s tax rate: 9.8 percent? Hayley Tsukayama – The Washington Post. A weekend story from the New York Times shared a surprising statistic: Apple paid just $3.3 billion on $34.2 billion of profits last year — giving it a tax rate of just 9.8 percent. The 9.8 percent figure, reported earlier by the Greenlining Institute, may be based on the wrong calculations for Apple’s tax share. In its own tax filings, Apple reported these tax rate figures paid in the last three years: “approximately 24.2 percent, 24.4 percent and 31.8 percent for 2011, 2010 and 2009, respectively.” Link

* Mobius says India’s proposed tax rules a ‘big mistake.’ Choonsik Yoo – Reuters. India is faltering as an investment destination because of significant policy mistakes, and stock prices there will slide if the nation’s credit rating is cut, according to Mark Mobius, one of the world’s best-known emerging market investors. “The Indian government has been making many many big policy mistakes. The most important of all is the idea of having retroactive taxation,” Mobius, executive chairman of Templeton Emerging Markets Group, told Reuters in a phone interview from the Bahamas. Link

* IRS looking at Chesapeake’s CEO well program-filing. Anna Driver – Reuters. Chesapeake Energy Corp (CHK.N) said on Monday the Internal Revenue Service was reviewing issues related to the company’s perk that grants its chief executive officer a stake in thousands of wells the company drills, according to a regulatory filing. In a filing with the U.S. Securities and Exchange Commission, Chesapeake disclosed “the IRS is reviewing certain issues” related to its Founders Well Participation Program (FWPP) granting CEO Aubrey McClendon the right to take a 2.5 percent interest in every well the company drills. Link

Essential reading: Amazon will collect Nevada sales tax, debating tax cuts, more

A rainbow appears over hotels on the Las Vegas Strip in Las Vegas, Nevada, REUTERS/Ethan Miller

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

* Amazon agrees to begin collecting sales taxes in Nevada.  The Wall Street Journal. Amazon.com Inc. has agreed to collect a sales tax on items sold in Nevada beginning in 2014, or earlier should proposed federal legislation mandate that online retailers collect sales taxes. The online retailing giant said it will collect taxes in the same manner as traditional brick-and-mortar retailers, an agreement that is expected to raise at least $16 million a year for the state, according to the Las Vegas Sun, which initially reported the news. Link

* German cabinet approves Swiss tax deal. Madeline Chambers – Reuters. German Chancellor Angela Merkel’s cabinet passed a revised deal to tax secret deposits in Swiss bank accounts on Wednesday, betting that the opposition Social Democrats (SPD) will drop their objections and back the accord in parliament. Switzerland and Germany hammered out the new deal earlier this month after a diplomatic spat that lasted years. Link

Essential reading: Looking for tax money to fund a student loan break, WIN America shuts down, more

A student studies on the campus of San Francisco State University in San Francisco, California REUTERS/Robert Galbraith

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

* ‘Loophole’ closing eyed to fund student loan policy. Carol Lee and John McKinnon – The Wall Street Journal. The White House and Senate Democrats are looking at ending a tax provision benefiting some small business owners to pay for a year-long extension of a freeze in student loan interest rates, which are scheduled to double from 3.4 percent to 6.8 percent this summer, people familiar with the discussions said. The measure would change a feature of tax law that critics say has allowed many owners of small businesses—particularly those known as Subchapter S corporations—to escape employment taxes on much of their earnings. Link

* SEC charges SinoTech, execs with lying to investors. Sarah Lynch – Reuters. U.S. securities regulators charged China-based SinoTech Energy Ltd and its senior executives with misleading investors on Monday, part of an effort to crack down on accounting problems at Chinese companies listed in the United States. The Securities and Exchange Commission’s civil suit, filed in a U.S. district court in Louisiana, alleges that the oil field services company and its executives “continuously and intentionally misled investors” about the value of its assets and how it used the $120 million in proceeds from its November 2010 initial public offering. Link

Essential reading: Seeking common ground in Washington, shorting India on tax fears, more

A tea vendor holds an umbrella at a roadside in Mumbai. REUTERS/Sima Dubey

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

* In presidential race’s give-and-take, hope for a fiscal compromise. John Harwood – The New York Times. Some elected officials and policy experts see improving odds for 2012 to end up yielding much more, including progress toward a deal on tax and budget issues that have confounded Washington’s divided government. Some say the campaign dialogue could even bring a deal closer. Senator Charles Grassley of Iowa, a member of the Finance Committee, recently urged fellow Republicans to accept Democrats’ demand for some tax increases, as long as Democrats accepted the longstanding argument by conservatives that revenue calculations account for at least some positive effect on economic growth from changes in the tax code. Link 

* Macquarie hedge fund exits short bets in India on tax fears. Nishant Kumar – Reuters. Macquarie’s Asia hedge fund has exited its short positions in Indian single stock futures in response to a controversial set of proposed tax rules that could lower investment returns. Foreign investors have raised concerns on two recent Indian provisions to tax indirect investments and combat tax evasion. Link

* Filmmaker wins case against IRS. Michael Cieply – The New York Times. Documentary filmmakers can breathe a sigh of relief, knowing that the producer and director Lee Storey won her case last week against the commissioner of Internal Revenue in United States Tax Court. The IRS tried to disallow Storey’s deduction of expenses incurred while making and marketing the film “Smile ’Til It Hurts: The Up With People Story.” Link 

Congressional report: small business tax break impact “so small as to be incalculable”

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:

Essential reading: UK tax evaders face higher penalty, challenges of fixing U.S. taxes, more

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

Essential reading: Cuts debated on tax breaks for retirement savings, Simpson-Bowles vote, more

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

Tax-free retirement accounts will be hard to touch in tax reform

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.

Essential reading: Americans overseas balk at taxes, trickle-down taxation, more

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  

If you think 2011 taxes were bad, wait until this year’s tally

“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.