Unstructured Finance

UF Weekend Reads

The heat is on all across the U.S. as we gear up for the 4th of July. And in Europe, the heat over the euro zone financial crisis seems to have abated for a day at least, judging by Friday’s big stock market reaction.

So is the euro zone financial crisis over? No, and a lot more work needs to be done. It’s also likely that Friday’s rally will give way to more selling pressure by next week. It’s the Madness of Wall Street and it’s simply how things go.

But here’s the thing: this week’s ability of European leaders to move toward getting something done–even if it is just a bigger band-aid–is one more indication that at the end of the day this crisis will be solved in someway. Oh sure, some nations will get hurt–and more importantly a lot of ordinary people that had nothing to do with the financial crisis will get hurt the most. However, maybe it’s time for everyone–especially those in the media, at hedge funds, bloggers and on Twitter–to back away from some of the worst doom-and-gloom hysteria. Yes, things are bad and could get worse, but is the world really coming undone over the euro zone crisis?

Earlier this week, my UF co-leader Jenn Ablan had an exclusive interview with Michael Steinhardt, one of the people who helped make hedge funds famous, and he basically said there was too much hysteria over Europe. And I think he’s onto something.

So on a real hot weekend, maybe it’s time for everyone to chillax–about the euro zone, health care, etc. Sound advice for all of us–even me.

The eminent domain brush fire

By Matthew Goldstein

It didn’t take long for the powerful voices on Wall Street to rise up in protest over an intriguing and controversial idea to condemn distressed mortgages through local government’s power of eminent domain.

Two weeks after Jenn Ablan and I first reported that officials in San Bernardino County, Calif. were giving serious consideration to the novel idea being pushed by financier-backed Mortgage Resolution Partners, 18 financial trade groups are voicing strong objections. The groups, led by the Securities Industry and Financial Markets Association, are concerned that if local governments can seize underwater mortgages it might discourage bank lending. Why? The argument is that if it can happen now, who knows when local governments might move to condemn mortgages again–crisis or not.

The unified opposition may make it difficult for Mortgage Resolution Partners, which says it is talking to public officials in Nevada, Florida and on Capitol Hill, to get much traction for its plan outside of San Bernardino. And if San Bernardino County goes forward with using private money to buy-up underwater mortgages held by banks and in mortgage-backed securities, a U.S. Supreme Court lawsuit challenging the legality of the measure seems more than likely.

Essential reading: Supreme Court ruling casts tax shadow over US healthcare law, and more

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

* Supreme Court ruling casts tax shadow over US healthcare law. Kim Dixon and Kevin Drawbaugh – Reuters. Republicans seized on a momentous U.S. Supreme Court ruling on Thursday to accuse President Barack Obama of hiding a tax increase in his healthcare law, an argument likely to intensify a congressional tax policy war already under way. The court ruled the 2010 law was valid because Congress has the power to impose taxes. The Obama administration played down the tax factor, but Republican opponents pounced on the decision, seeking to elicit political points from a legal issue. Link

* US IRS steps up scrutiny of tax-exempt political groups. Patrick Temple-West and Alina Selyukh – Reuters. The U.S. Internal Revenue Service is signaling that it will increase its scrutiny of tax-exempt political organizations, which are becoming a force in elections by raising tens of millions of dollars from undisclosed donors. The IRS has been corresponding with such groups and is preparing questions to ask them as part of effort to determine whether their fundraising or advertising work runs afoul of tax law. IRS spokesman Terry Lemons said on Thursday the scrutiny will affect a range of tax-exempt groups. Link

* Rotation not enough to improve audits-experts. Dena Aubin – Reuters. Making U.S. companies switch or rotate auditors every few years would not end audit failures, and regulators should consider additional measures to protect investors, former securities regulators and legal experts said on Thursday. The auditing profession has become a comfortable oligopoly and its basic product has become suspect, said Harold Williams, former chairman of the U.S. Securities and Exchange Commission, at a forum in San Francisco. Link


With a national holiday in the middle of the week and both the U.S. Senate and House of Representatives on break, the coming week will be quiet in tax and accounting circles.

Tuesday, July 3
•    The U.S. Taxpayer Advocacy Panel will hold a pair of open teleconference meetings. The first, on return processing delays, will start at 9:30 a.m. EDT. The second, on toll-free filing will be at 11 a.m. EDT.


Essential reading: Camp vows Republicans will resist tax revenue increases, and more

House Ways and Means Committee chairman Dave Camp (R-MI) REUTERS/ Gary Cameron

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

* Camp: Republicans will resist tax revenue increases. James Willhite – The Wall Street Journal. House Ways & Means Chairman Dave Camp said Republicans won’t increase tax revenues to cope with deficits even though “revenue percentage of GDP is at a historic low.” When pressed on whether the Republicans in the House would tolerate offsetting a fourth of spending cuts with revenue increases, Camp said that such a proposal would likely not pass. A simpler tax code with a lower rate and fewer deductions is the goal, Camp said. Link

* Congress inaction risks 2013 tax delay: IRS watchdog. Patrick Temple-West – Reuters. Tax refunds in 2013 could be delayed if the U.S. Congress fails to address major fiscal policy questions soon, said the IRS in-house champion for taxpayers’ rights on Wednesday. National Taxpayer Advocate Nina Olson said in a report that “the 2013 filing season is already at risk” due to inaction by Congress on tax laws that have expired or will soon expire. Link

* U.S. anti-tax pledge creator says oath is strong. Kim Dixon – Reuters. Grover Norquist, the man dubbed by many the most powerful Republican in Washington, said on Wednesday that his anti-tax oath is alive and well despite opposition from senior figures in the party. Norquist, whose 1986 “taxpayer protection pledge” has been signed by the vast majority of elected Republicans, said the numbers prove his case that the oath is still in vogue. More Republicans today have signed the pledge than during the last election cycle, he said. Link

Essential reading: H&R Block digital tax business grows, profit falls, and more

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

*H&R Block digital tax business grows, profit falls. Reuters. H&R Block Inc posted a lower fourth-quarter profit on charges related to job cuts earlier this year, but the top U.S. tax preparer said it gained market share in the highly competitive tax filing business. The company cut jobs, shut stores and overhauled its management in April, to focus on the fast-growing digital tax preparation segment after several years of losing customers to do-it-yourself tax filing services like Intuit Inc’s TurboTax software. Link

*Hatch, Rangel beat back challenges. Andrew Grossman and Naftali Bendavid – The Wall Street Journal. Two longtime congressional incumbents beat back strong challenges to their careers in primary elections on Tuesday. In New York, Charles Rangel, the 82-year-old Democrat who once led the powerful House Ways and Means Committee, won his primary race and is on track to claim a 22nd two-year term. In Utah, Republican Sen. Orrin Hatch easily defeated a primary challenger who ran aggressively to his right. Link 

* IRS offers reprieve to expat tax filers. Lynnley Browning – Reuters. Many Americans living abroad will get a small reprieve from U.S. Internal Revenue Service rules on reporting foreign assets, the agency announced on Tuesday. The IRS said it would allow some U.S. citizens, including dual citizens, who have not filed income tax returns or not disclosed their foreign bank accounts, to come forward without facing onerous penalties or the threat of prosecution. Link

Essential reading: Treasury resists Northern Ireland corportion tax cuts plan, and more

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

* Treasury resists Northern Ireland corporation tax cuts plan. Jamie Smyth – The Financial Times. A plan to devolve the power to reduce corporation tax to the Northern Ireland assembly is being resisted by the Treasury, denting hopes that lower taxes can be introduced to boost an economy hit by three decades of violence. Ministers from the UK and Northern Ireland government held a third meeting on Monday to discuss the proposal, which would enable Northern Ireland to cut its corporation tax rate to 12.5 per cent to match that of the Irish Republic. Link

* New rules may make public pensions appear weaker. Lisa Lambert and Nanette Byrnes – Reuters. New accounting rules approved on Monday are likely to show public pension funds are in a weaker financial position than previously thought and intensify disputes over how public retirement systems are funded. State and local governments will have to post their net pension liability – the difference between the projected benefit payments and the assets set aside to cover those payments – up front on financial statements, under the changes. Link

* N.J. budget vote sets up showdown with Christie. Heather Haddon – The Wall Street Journal. New Jersey Democrats pushed through a $31.7 billion budget in a party-line vote Monday, setting the stage for a possible veto by Republican Governor Chris Christie later this week. The bill substitutes a property-tax credit for Christie’s proposal to cut income taxes by 10 percent, with a delay until revenue figures can be further studied later this year. Link

Essential reading: State, local fiscal burdens drag on economic recovery, and more

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

* State, local fiscal burdens drag on economic recovery. Connor Dougherty – The Wall Street Journal. State and local government tax collections have improved from the recession years, they only recently regained their pre-downturn peak. Meantime, local governments, which unlike states rely on property taxes, continue to suffer from the big drop in real estate prices. Given political pressure to reduce the federal budget deficit, cities and states are likely to get less help from Washington. If that happens they would have to make up the gap with tax hikes of their own or else live more frugally—what they’re doing now. Link

* Public pensions to give ‘clearer picture’ of finances. Lisa Lambert – Reuters. Public retirement systems will have to make major changes in how they disclose their pension assets and liabilities, under new rules that the board in charge of accounting standards for U.S. state and local governments is set to approve on Monday. The Governmental Accounting Standards Board will vote on the changes at an afternoon meeting. The reforms were proposed nearly a year ago to give more detail on how pensions affect governments’ finances. Link

* IRS whistleblower tax take plunges, senator frets. Patrick Temple-West – Reuters. A report from the U.S. Internal Revenue Service’s troubled whistleblower program said tax collections from tipsters fell sharply last year, prompting a U.S. lawmaker on Friday to say he may delay two Treasury Department nominees until the program improves. In fiscal 2011, the IRS collected only $48 million through the program, down from $464 million in fiscal 2010, the agency reported to Congress on June 15. Link


Long-tailed mayflies fly over the surface of the Tisza river southeast of Budapest, June 20, 2012. REUTERS/Laszlo BaloghSome important tax and accounting events in the week ahead:

Monday, June 25
• Deloitte Tax LLP webcast on the effects new tax legislation, standard-setting developments and regulatory matters could have on financial accounting and income tax reporting.

Wednesday, June 27
• Financial Accounting Standards Board (FASB) meeting on repurchase agreements and defining a nonpublic entity. Norwalk, Connecticut.

Wednesday, June 27 – Saturday, June 30

• Internal Revenue Service Chief Counsel William Wilkins speaks at the Tax Executive Institute regional meeting. Hilton Head, South Carolina.

Essential reading: California reaches a budget deal, and more

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

* California reaches a budget deal. Jennifer Medina – The New York Times.
Gov. Jerry Brown and the Democratic-controlled legislature reached a budget deal on Thursday to close a nearly $16 billion budget gap. The agreement came after days of negotiations, with legislative leaders reluctant to make the cuts that Governor Brown said were urgently needed. Link

* U.S. no-tax pledge creator entreats Republicans. Kim Dixon and David Lawder.
The creator and enforcer of a no-tax-hike pledge Grover Norquist huddled with a small group of Republican lawmakers on Thursday in Washington to help strengthen their resolve ahead of tax battles expected to intensify in coming months. South Carolina Republican Senator Lindsey Graham and former Republican Florida Governor Jeb Bush are among prominent Republicans suggesting recently of the need for more flexibility on tax issues. Link

* As churches get political, IRS stays quiet. Nanette Byrnes – Reuters. Pastor Jim Garlow not only intends to break the rules, he also plans to spend the next four months recruiting other pastors to do the same as part of Pulpit Freedom Sunday. On that day each year since 2008, ministers intentionally try to provoke the Internal Revenue Service. The situation is fraught with peril for the IRS, which needs to be seen as apolitical. When it cracks down on political activities proscribed by the 501(c)(3) regulations, it is inevitably branded as partisan. Link

* Christie allies vote against key spending bill. Heather Haddon – The Wall Street Journal.
Members of New Jersey Gov. Chris Christie’s own party voted against a bill to help plug a budgetary hole to help pay for the administration’s tax cut—an unexpected wrinkle in an already fraught budgetary session. Two Republicans voted against the bill, which included reallocating $261 million from the Transportation Trust Fund to the general budget. Link

* IRS to review whistleblower program for speed, quality. Jessica Dye – Reuters. The Internal Revenue Service is planning a “comprehensive review” of its embattled whistleblower program to improve the speed and quality of its decisions, an agency official said in a June 20 memorandum. Link