Unstructured Finance

Essential reading: Companies’ profits abroad save on taxes, and more

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

* More U.S. profits parked abroad, saving on taxes. Scott Thurm and Kate Linebaugh – The Wall Street Journal. A Wall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year. That shielded more than 40 percent of their annual profits from U.S. taxes. Link

* As momentum builds toward tax reform, lobbyists prepare for a fight. Jerry Markon – The Washington Post. Lobbying over the tax code has more than tripled since President Barack Obama took office, disclosure records show. Link 

* Overseas tax savings for U.S. drugmakers under threat. Drew Armstrong – Bloomberg news. The six biggest U.S. drugmakers avoided paying $7.05 billion in U.S. taxes last year by shifting their profits overseas. That’s almost double the amount they saved using the same strategy 10 years earlier, according to data compiled by Bloomberg. Link

* In search of debt deal, Obama walks a narrow path. Richard Stevenson and John Harwood – The New York Times. Some Republican senators and aides, publicly and privately, have expressed an openness to accepting revenue increases as part of a loophole-closing overhaul of the tax code. Link 

* L.A. tax-hike vote patterns tell a tale of two realities. Davide Zahniser – The Los Angeles Times. Los Angeles voters last week rejected a proposed city sales tax increase that the mayor, the police chief and other civic leaders said was vital to shoring up the Los Angeles Police Department. Link 


People relax in one of the Blue Lagoon hot springs near the town of Grindavik, Iceland. February 14, 2013. REUTERS/Stoyan Nenov

Some important tax and accounting dates in the days ahead:

Thursday, March 14

Jefferson VanderWolk, international tax counsel, Senate Finance Committee, speaks on International Tax Institute panel on foreign tax law and its relevance in resolving U.S. tax law issues. 12:15 – 2 p.m. ET, Grand Hyatt. New York.

Friday, March 15

* U.S. Public Company Accounting Oversight Board chairman James Doty speaks at the University of Missouri Orin Ethics Symposium. Columbia, Missouri.

Essential reading: Tax haven hunter Levin to retire, and more

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

* Michigan Sen. Carl Levin will not seek reelection. Rachel Weiner and Aaron Blake – The Washington Post. As chairman of the Senate Permanent Subcommittee on Investigations, Carl Levin has investigated Enron, the credit card industry, the 2008 financial crisis, and offshore tax havens. Link

* IASB loan-loss proposal a test for convergence. Emily Chasan – The Wall Street Journal. International accounting rulemakers have, for now, agreed to disagree with U.S. accounting standard setters on a new model for companies to account for credit losses, adding another delay to the convergence process between the two rulemakers. Link    

* Obama continues Congressional outreach with White House lunch. Jackie Calmes – The New York Times. On Capitol Hill, there was guarded optimism that these meetings would continue to be productive. Though the vast political differences between the two parties on issues like taxes and spending were hardly far from leaders’ minds. Link

The amazing shrinking pile of non-agency mortgage debt

By Matthew Goldstein

Many cash-strapped, unemployed or underemployed people are still struggling with too much consumer and household debt. But there is one kind of debt that is getting smaller and smaller–mortgage bonds issued during the U.S. housing bubble by Wall Street banks and finance firms that isn’t guaranteed by either Fannie Mae of Freddie Mac.

The outstanding dollar value of  so-called private label residential mortgage bonds, or non-agency mortgage debt, is $909 million, according to stats compiled by CoreLogic and mutual fund firm Doubleline Capital. At its peak in July 2007, the total of private label mortgage debt was $2.2 trillion.

In July 2007, the financial crisis began in earnest as ever-so-late-to-game rating agencies began downgrading en massse a whole range of private label mortgage debt, much of which was backed by mortgages taken out by borrowers with either iffy credit histories or who put almost no money down for a home. As we all know the market for private mortgage debt shut-down and only now is beginning to show the first signs of coming to life–or green shoots as some might say.

State defections impact U.S. interstate tax compact

Worried about challenges to their corporate tax base, some U.S. states have started to modify their participation in the Multistate Tax Compact, with a few withdrawing altogether.

The 45-year-old compact was forged to ensure companies operating in multiple states do not pay tax on the same income in more than one state. It also benefited the states by helping them fight off then-pending federal intervention on the topic.

Now that some states are pulling out, the question arises: What impact will this have on the compact and its administrator, the Multistate Tax Commission?

Essential reading US fights offshore tax evasion, and more

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

* Offshore tax probe picks up. Laura Saunders – The Wall Street Journal. After getting a guilty plea from Switzerland’s oldest private bank, which was ordered Monday to pay a total of $74 million for violating U.S. tax laws, federal investigators have fresh momentum thanks to leads gathered from interviews with confessed tax cheats. Link 

 * House GOP plans a budget that retains tax increases and Medicare cuts. Jonathan Weisman – The New York Times. House Republicans will preserve Medicare cuts and accept tax increases they sternly opposed just months ago in a new tax-and-spending blueprint, senior Republicans said Wednesday. Link

 * IRS amnesty for employers of household help. Arden Dale – The Wall Street Journal. Employing a nanny or other household workers can open a can of worms with the Internal Revenue Service, but the agency wants to make it easier for someone who mishandles taxes for their hired help to put things right. Link

Essential reading: Cadbury gets tax bill in India, and more

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

* India says Cadbury evaded taxes. Joe Palazzolo and Julie Jargon – The Wall Street Journal. India has accused Cadbury PLC of dodging about $46 million in taxes by pretending to produce candy at a factory that didn’t exist. Link

* Obama recruits Republicans for budget talks with personal calls. Jonathan Weisman – The New York Times. President Barack Obama spoke around noon Tuesday with Senator Lindsey Graham for about 10 minutes and both agreed that a major deal could be reached that raises revenues by closing tax loopholes. Link

* Ex-Kirkland partner pleads guilty to underreporting taxes. Chard Bray – The Wall Street Journal. A former Kirkland & Eillis LLP bankruptcy and restructuring partner pleaded guilty to underreporting his taxes by more than $2 million on Tuesday. Link

Essential reading: Tax-exempt bonds get scrutiny, and more

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

* A stealth tax subsidy for business faces new scrutiny. Mary Williams Walsh and Louise Story – The New York Times. This valuable tax break — the ability to finance a variety of business projects cheaply with bonds that are tax exempt — has not only endured, it has grown, in what amounts to a stealth subsidy for private enterprise. Link  

* Some bonus cash for business-tax overhaul. John McKinnon – The Wall Street Journal. This year, the Joint Committee on Taxation enormously increased its estimate of how much revenue would be generated by tightening the tax rules for U.S. multinationals’ overseas earnings. Link  

Ray Dalio went into this year even more bullish than we thought

By Matthew Goldstein

Hedge fund titan Ray Dalio is really bullish on stocks and all things risky–at least he was in early January.

A few weeks ago, our competitors at Bloomberg and The Wall Street Journal did a good job reporting on Dalio’s macro market thesis for 2013 when they got a transcript of an investor call (Bloomberg) and a sneak peak at Bridgewater Associates’ year-end report to investors (WSJ). But after taking my own recent look at Bridgewater’s year-end investor note–book is probably a better description for the 300-page plus bound treatise–you realize that bullish just doesn’t describe Bridgewater’s stance going in 2013.

Here’s a sampler of some of Bridgewater’s comments to investors:

“Cash in the developed world is a terrible asset.” “We would be short cash of all the major developed currencies” And this: “Bonds will be a lousy investment but cash will be worse.”

Essential reading: Wegelin withers under U.S. tax scrutiny, and more

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

 * Wegelin’s fall to tax-haven poster child. Reed Alberotti – The Wall Street Journal. In the span of just one year, Wegelin & Co. went from being one of the most prestigious banks in Switzerland to the verge of being sentenced on U.S. criminal charges and becoming essentially defunct. Link    

* Republicans cling to one thing they agree on: Spending cuts. Richard Stevenson – The New York Times. Aware that conservatives could never accept a second round of tax increases this year, Republicans judged that the better course was to take on the economic and political risks associated with the automatic spending cuts. Link     

* Wealthier households carry the spending load. Brenda Cronin – The Wall Street Journal. The consumer sector is increasingly split in two: Wealthier households are spending more. Poorer ones, hammered by higher taxes and rising gas prices, are holding back. Link