Unstructured Finance

Essential reading: Medical device tax repeal gains ground, and more

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

* Medical device tax repeal gains some ground. N.C. Aizenman – The Washington Post. Makers of medical devices are gaining some momentum in a vigorous campaign to persuade Congress to scrap a tax imposed on their industry by the 2010 healthcare law. A bill to void the tax sponsored by Rep. Erik Paulsen will be marked up in the House Ways and Means Committee on Thursday. Republican House leaders say a floor vote could be scheduled as soon as next week. Link

* Swiss parliament oks German, UK, Austria tax deals. Andrew Thompson and Catherine Bosley – Reuters. Switzerland’s parliament gave the green light for tax pacts with Germany, Britain and Austria aimed at preventing tax cheats from stashing money in secret accounts, a decision that could pour billions of extra euros into strained state coffers. Lawmakers in parliament’s lower house on Wednesday voted 108 to 81 in favor of the agreement with Germany, which will levy a retroactive tax of up to 41 percent. The deal, set to take effect in early 2013, has already been approved by the upper house. Link

* At core of Greek chaos, a reviled tax. Charles Forelle – The Wall Street Journal. When the Greek government surprised homeowners in September by imposing a new national property tax, the mayor of this down-at-the-heels suburb on the western fringe of Athens sprung into action and mobilized against it. For many in the euro zone, Greece’s sluggish tax receipts are a perennial frustration. For many in Greece, however, the new taxes — which fall particularly hard on those lower on the income scale — are only compounding the country’s woes and stifling its economy. Link

* India to seek $7 billion in taxes for past deals. Prasanta Sahu and Dhanya Ann Thoppil – The Wall Street Journal. India is likely to demand up to 400 billion rupees, or about $7 billion, in taxes related to 18 or 19 mergers in which foreign companies transferred Indian assets, a senior government official said. Enactment of legislation that would allow authorities retroactively to tax such deals is expected with a few days, the official told reporters on Wednesday. The proposed legislation follows months of criticism from the business community saying that the retroactive-tax proposal would tarnish India’s allure as an investment destination. Link

* Amazon’s tale of incentives with two California cities. John Letzing – The Wall Street Journal. Amazon.com Inc. is now bringing jobs to a growing number of states. But two California cities are pondering whether they might wind up handing some of the resulting tax windfall right back to the Internet retail giant. The pressures facing San Bernardino and Patterson – which each expect to gain around 1,000 jobs by hosting new Amazon shipping centers – could be shared by other local governments angling to court big companies to help bolster their economies. Amazon representatives asked a number of months ago whether San Bernardino would be open to discussions about sharing sales tax revenue with the company. Link to The Wall Street Journal, http://r.reuters.com/wuj58s

And the winner is….

By Matthew Goldstein

Four months ago, the regulator for Fannie Mae announced with much fanfare that it would accept bids for 2,500 single-family homes owned by Fannie Mae. The process has drawn a lot of interest from hedge funds, private equity firms and other big money players, but it’s been a slow one.

However, it appears the Federal Housing Finance Agency has finally come up with a date for qualified bidders to submit bids for the deal. And that date is, (drum roll) June 7, say people familiar with the situation.

There’s been a lot of speculation about which firms will bid for these Fannie-owned homes. My incredibly well-sourced colleague Jenn Ablan and I have been on this from the start and will endeavor to find out as quickly as possible the names of some of the biggest players entering the market for foreclosed homes. Stay tuned.

Tax Foundation: Kansas tax cut plays favorites

Kansas Governor Sam Brownback REUTERS/Dave Kaup

Kansas Governor Sam Brownback cut his state’s income taxes on May 22, bringing the highest rate down from 6.45 percent to 4.9 percent and doubling the standard deduction to $9,000 for both heads of household and married couples. Overall $800 million of taxes per year are being eliminated beginning in 2014.

The Tax Foundation, a Washington-based research firm that favors lower taxes, highlighted a potentially unintended consequence in its May 29 analysis of the new law: its changes to the way pass-through businesses are taxed, possibly encouraging businesses to adopt this structure.

Owners of pass-throughs declare profits from a business as income under the personal tax code, rather than filing as a corporation. Popular forms include LLCs, S corps, partnerships, farms and sole proprietorships.

Essential reading: As governor, Romney picked winners and losers, no taxes for Lagarde, and more

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

* As governor, Romney picked winners and losers of his own. Andy Sullivan – Reuters. Massachusetts Gov. Mitt Romney’s June 2006 announcement that drugmaker Bristol-Myers Squibb was moving into his state served as a signature accomplishment. The new facility came with a price tag: Romney and other state officials agreed to $67 million in tax breaks and other inducements to ensure the New York-based company picked Massachusetts over rival states like North Carolina. Romney backed tax breaks for film makers and biotech and medical-device manufacturers. His administration promoted venture capital-style funds that extended loans to start-up companies, some of which subsequently went out of business. Link

* Christine Lagarde, scourge of tax evaders, pays no tax. Kim Willsher – The Guardian. Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged. As she is an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes. Link

* Anti-tax crusader assails report on Republican shift. Patrick Temple-West – Reuters. Anti-tax crusader Grover Norquist, scourge of any and all tax increases, said on Tuesday that a news report questioning the vitality of his “no new taxes” pledge – a vow taken by many Republican politicians – is overblown. Republicans who have not signed the pledge may be in congressional races they are unlikely to win anyway, while other candidates have rules against signing pledges, he said. Link 

Essential reading: Lawmakers work with Simpson-Bowles for tax deal, and more

 

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles speak to reporters in Washington April 14, 2011. REUTERS/Kevin Lamarque

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

 

* Lawmakers work with Simpson-Bowles for tax deal. Kim Dixon – Reuters. Former Democratic White House chief of staff Erskine Bowles said he and former Republican senator Alan Simpson, are working with a bipartisan group of 47 senators and as many House members to frame a compromise on $7 trillion in looming fiscal decisions, Bowles said on CNN’s news program, “Fareed Zakaria GPS.” Without a deal, the end of the year brings higher taxes for most Americans with the expiration of historically low income tax rates enjoyed by nearly every American and expiry of a payroll tax break, along with broad automatic spending cuts that most lawmakers in both parties want to avoid. Link

* With personal data in hand, thieves file early and often. Liaette Alvarez – The New York Times. Besieged by identity theft, Florida now faces a fast-spreading form of fraud so simple and lucrative that some violent criminals have traded their guns for laptops. And the target is the United States Treasury. The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card. Link  

FASB under political heat from Congress over lease accounting

U.S. and international accounting rule-makers have been struggling for years to come up with a common standard for lease accounting. Now they have a new hurdle: U.S. lawmakers.

Sixty members of Congress, led by representatives Brad Sherman, a Democrat, and Republican John Campbell, have written to the U.S. Financial Accounting Standards Board warning of dire economic fallout from a plan to have companies put leases on their balance sheets.

The business lobby’s handiwork was evident in the congressional letter on leases. The letter relied heavily on a report commissioned by the U.S. Chamber of Commerce and other trade groups earlier this year. That study said the leasing changes could destroy up to 3.3 million U.S. jobs, or at least 190,000 in the best case. U.S. gross domestic product would fall by $27.5 billion to $478.6 billion a year.

Wall Street gold rush in foreclosed homes heads north

By Matthew Goldstein and Jennifer Ablan

The state of Alaska is looking to cash in on the growing demand for renting out foreclosed single-family homes.

A spokeswoman for the $40 billion Alaska Permanent Fund recently approved a $400 million investment with a California-based company that specializes in buying foreclosed homes and renting them out. Laura Achee said the fund is still negotiating the terms of the deal with American Homes 4 Rent LLC.

The Alaska fund, which is managed by a state-owned corporation, is believed to be one of the first public investment arms to sink money into the market for foreclosed homes.

Companies anticipated dividend tax hikes in 2010- lessons for 2012?

Dividend tax rates, currently 15 percent, are due to expire at the end of this year, one of a host of tax breaks going away unless Congress takes action.

If Congress fails to act, the rate will snap to about 40 percent.

A nearly identical scenario played out in 2010, and there may be some lessons to learn from the way businesses behaved the last time around.

An academic paper released this week dug into the events of 2010 and found that dividend-paying companies – especially those owned by insiders – took anticipatory steps to boost regular and special dividends when the fate of U.S. dividend taxes was uncertain in 2010.

Tax and accounting calendar

Some important tax and accounting dates in the week ahead:

Wednesday, May 30
•    Financial Accounting Standards Board meeting will cover feedback on a proposal regarding real estate investment properties, impairment of indefinite-lived intangible assets and the definition of a nonpublic entity. Norwalk, Connecticut.

Wednesday, May 30 – Friday, June 1
•    Government Accounting Standards Board meeting. Norwalk, Connecticut.

Thursday, May 31
•    International Conference on Global Capital Markets and Corporate Governance, focused on global standards. Public Company Accounting Oversight Board member Steven B. Harris will speak. Moscow.
•    USC Leventhal School of Accounting SEC and Financial Reporting Institute Conference. Speakers include PCAOB Chairman Jim Doty, Chief Auditor Marty Baumann, and Claudius Modesti, Director of the Division of Enforcement and Investigations. Pasadena, California.

Essential reading: Union, liberal coalition pushes Obama tax plan, and more

Union supporters in Las Vegas, September, 2008. REUTERS/David Allio

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

* Union, liberal coalition pushes Obama tax plan. John McKinnon – The Wall Street Journal. A coalition of big unions and left-leaning activist groups has formed to support President Barack Obama’s proposal to raise tax rates on families earning more than $250,000, amid growing signs that Democratic lawmakers want to limit tax increases to people making $1 million or more. Link

* An often procrastinating Congress is raring at the gate on tax cuts. Jennifer Steinhauer – The New York Times. The Bush-era tax cuts, which are set to lapse on Jan 1, have both parties in the House and the Senate eager, perhaps even giddy, to vote for their respective versions of an extension of the cuts this summer, well before the due date. Without any extensions, the expiration would raise taxes next year by $221 billion. Link

* Heard in more states: See you in tax court! Nanette Byrnes – Reuters. Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals. Georgia and Illinois approved laws last year to create a tax court. In Alabama, Governor Robert Bentley announced Thursday that he will pocket veto legislation that would create a new state tax tribunal, due to flaws in the bill, but will support its reintroduction in the next legislative session. Link

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