Tax Break

Essential reading: Ernst & Young no longer lobbying for companies it had audited, and more

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

* Ernst, audit clients cut lobbying ties-records. David Ingram and Dena Aubin – Reuters. Ernst & Young’s lobbying unit is no longer listed as a lobbyist for three major U.S. companies, all of whom were 2011 audit clients of the accounting giant. The deregistration follows questions raised by two U.S. senators in March about whether the dual relationships crossed auditor independence boundaries. Documents filed last month with Congress showed that Washington Council Ernst & Young, the E&Y unit, was no longer registered as doing lobbying work for Amgen Inc, CVS Caremark Corp and Verizon Communications Inc. Link

* House Democrats plan to pounce again on GOP budget. Ed O’Keefe – The Washington Post. House Democrats plan to attack the spending plan next week as the GOP-controlled House votes on a budget reconciliation package that includes cuts to replace automatic, across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized another $1.2 trillion in cuts over the next decade, with roughly half of the money coming from defense spending. Link

* U.S. auditor watchdog in China talks: spokeswoman. Dena Aubin – Reuters. The head of the main watchdog group for U.S. auditors is in Beijing participating in annual talks between the United States and China, a spokeswoman said on Thursday. Public Company Accounting Oversight Board Chairman Jim Doty, whose group oversees U.S. auditors, is participating in U.S. Treasury meetings, PCAOB spokeswoman Colleen Brennan said. Link

* GSA: Tax troubles, too? John McKinnon – The Wall Street Journal. On Thursday, congressional investigators said they’ve learned that the much-maligned General Services Administration last year demanded a share of the federal energy-efficiency tax breaks it was offering to contractors, in order to spend the money on other projects. Representative Charles Boustany Jr., chairman of a Ways and Means oversight subcommittee, said in a statement on Thursday that “requiring a cash payment in exchange for a tax deduction is a kickback, pure and simple.”  He fired off a letter to a number of Obama administration officials, demanding more information. Link

Essential reading: Mall landlords battle tax, Groupon shifts board amid accounting issues, and more


A padlock on a closed shop in a Colorado mall REUTERS/Rick Wilking

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

* Mall landlords engage in taxing battle. Kris Hudson and Stu Woo – The Wall Street Journal. U.S. shopping-center owners, smarting from high vacancies partly due to the rise in Internet shopping, are throwing their weight behind federal bills aimed at requiring online retailers to collect sales tax. At the same time, some of the biggest mall owners also are gaining traction in their efforts in individual states to squeeze sales tax out of the world’s largest online retailer—Amazon.com Inc. Seven states have reached pacts with Amazon to collect sales tax, with Nevada and Texas joining the list last week. Five more are in talks on similar deals. Link

* Groupon replaces Schultz, Efrusy on board. Alistair Barr – Reuters. Groupon Inc (GRPN.O) appointed two new directors on Monday and said Starbucks Corp (SBUX.O) Chief Executive Howard Schultz and venture capitalist Kevin Efrusy were leaving the board as the company tries to address criticism of its accounting practices. The world’s largest daily deals company came under renewed fire in March after revising its fourth-quarter financial results and admitting to a “material weakness” in its financial statements, months after its high-profile IPO. Groupon’s audit committee was criticized because some members are busy executives who may not have enough time to devote to fixing the company’s accounting problems. Link

That’s not fair! may push U.S. tax revamp

It may seem too simple to be true, but the urge among humans for basic fairness may be among the biggest drivers for a revamp of the U.S. tax code, at least competing with the influence of lobbyists, general greed and politics.

That was one message of tax war veterans gathering at the Urban Institute in Washington on Tuesday where Nietzsche, Marx and other philosophers were mulled along with the hard-nosed lessons of the last revamp in 1986 under Republican President Ronald Reagan.

“Fairness is still the queen of principles that brings us back,” to trying to fix the tax code, said Eugene Steuerle, who was a key economic aide in Reagan’s Treasury Department under that historic overhaul.
Democrats and Republicans say they want a rewrite of the code and cite the mind-numbing complexity combined with the unfairness of breaks favoring select groups. The issue could gain steam after the Nov. 6 elections.

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

Essential reading: How Apple keeps its tax bill low, KPMG inquiry in UK, and more

   

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

* How Apple sidesteps billions in taxes. Charles Duhigg and David Kocieniewski – The New York Times. As it stands, Apple Inc paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies. Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year. Link  

* KPMG faces inquiry over rescue of HBOS. Helia Ebrahimi – The Sunday Telegraph. Accountancy giant KPMG could face a formal investigation by the UK’s accountancy watchdog for its conduct leading up to the rescue of HBOS by Lloyds TSB. HBOS whistleblower and former head of risk, Paul Moore, has referred KPMG to the regulator in a formal complaint. Moore also has written to Treasury select committee chairman Andrew Tyrie, seeking his support. Moore’s complaint comes a week after it emerged that the former head of HBOS’s corporate bank, Peter Cummings, is to fight a seven-figure fine handed out by the Financial Services Authority for his part in the collapse of the bank. Link  

* Amazon seals sales tax deal with Texas. Barney Jopson – The Financial Times. Amazon has struck an unexpected deal with Texas to start collecting sales tax from consumers at the start of July, in a further sign of its readiness to accept a levy that it had long opposed at state level. Under the deal Amazon will invest at least $200 million to build distribution centers in Texas and create at least 2,500 jobs over the next four years while beginning to collect sales tax on July 1. Link  

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

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

Closing the $450 billion tax gap

Fundamental tax reform, more funding for the IRS, and increased third-party disclosure were among the many solutions to the $450 billion tax gap offered at a Congressional hearing Thursday.

Closing the gap between taxes owed and taxes paid will require a multi-faceted approach, testified James R. White, the director of strategic issues at the Government Accountability Office (GAO) before the IRS oversight subcommittee of the House of Representatives. (His testimony and report is available here.)

Growth in the tax gap, which added $105 billion between 2001 and 2006 (their most recent figures), has made it more urgent, though closing the entire gap may not be possible given public resistance to excessive government intrusion and limits on IRS resources, White noted.

Fate of ex-UBS client cases uncertain, lawyers say

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.”

Essential reading: U.S. House passes small business tax cut, New York sues Sprint, more

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