Unstructured Finance

Essential reading: Uneven IRS scrutiny, and more

Welcome to the top tax and accounting headlines:   

* Uneven IRS scrutiny seen in political spending by big tax-exempt groups. Nicholas Confessore – The New York Times. For the I.R.S.’s bipartisan legion of critics, the agency’s record has underscored its contradictory and seemingly confused response to the fastest-growing corner in the world of unlimited political spending. Link    

 * Q&A: Details of the IRS controversy. Laura Saunders – The Wall Street Journal. The Internal Revenue Service is embroiled in a controversy over its handling of applications by tea-party and other conservative groups seeking to set up as tax-exempt nonprofits known as 501(c)(4)s. Link 

* IRS officials in Washington were involved in targeting of conservative groups. Juliet Eilperin – The Washington Post. Internal Revenue Service officials in Washington and at least two other offices were involved with investigating conservative groups seeking tax-exempt status, making clear that the effort reached well beyond the branch in Cincinnati that was initially blamed. Link    

* France weighs new tax to fund film, music industries. Sam Schechner – The Wall Street Journal. The French government is considering a new tax on smartphones, and broadening existing taxes to apply to foreign video-streaming companies, as it looks for ways to keep financing its cinema, music and literature in the digital age. Link 

* Cuccinelli’s deja vu tax plan. Juliet Lapidos – The New York Times. Ken Cuccinelli, the Republican candidate for governor of Virginia has a tax plan that starts with closing tax loopholes and putting an end to special interest giveaways. Link    

Essential reading: IRS targeted groups critical of government, and more

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

* Health insurance tax ‘scares the daylights’ out of some small-business owners. J.D. Harrison. Many small-business owners worry that a new tax on insurance providers in the health-care law will mean higher premiums for them, undermining the law’s capacity to lower their health-care costs. Link  

* IRS targeted groups critical of government, documents from agency probe show. Juliet Eilperin – The Washington Post. At various points over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with “tea party” or “patriot” in their name but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution. Link  

* IRS focus on conservatives gives Republicans an issue to seize on. Jonathan Weisman and Matthew Wald – The New York Times. The accusations of IRS abuse are sure to fuel an effort that appears to be uniting dispirited Republicans and their conservative political base: investigating President Barack Obama and his administration. Link  


Some important tax and accounting events in the week ahead.

Monday, May 13 – Thursday, May 16

* Government and private sector attorneys and accountants speak to Practicing Law Institute program, Basics of Accounting for Lawyers. New York.

* Federation of Tax Administrators electronic filing symposium. New Orleans.

Tuesday, May 14

Voters in south Florida’s Miami-Dade County go to polls to decide whether to increase local hotel taxes to help pay for a $350 million upgrade to the Miami Dolphins stadium.

Wednesday, May 15

Financial Accounting Standards Board meeting on not-for-profit financial reporting. 1300ET, Norwalk, Connecticut.

Essential reading: Falling deficit alters budget debate, and more

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

* Falling deficit alters debate. Damian Palleta – The Wall Street Journal. Rising government revenue from tax collections and bailout paybacks are shrinking the federal deficit faster than expected, delaying the point when the government will reach the so-called debt ceiling and altering the budget debate in Washington. Link    

* Who would win or lose on online sales tax. Jayne O’Donnell and Hadley Malcolm – USA Today. Major retailers and local stores will be the big winners if the House follows the Senate and requires Internet retailers to collect sales taxes on online purchases. Link    

* Weigh taxes when picking a state for retirement. Arden Dale – The Wall Street Journal. When it comes to choosing the best state in which to retire, some people look beyond traditional needs like nice weather and recreational opportunities. Link    

Essential reading: Tax collections from wealthy are saving government, and more

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

* Swiss bank tied to indictment ponders U.S. registration -sources. John Letzing – The Wall Street Journal. A Swiss private bank that recently suspended an executive who allegedly helped U.S. taxpayers evade obligations is considering opening a U.S. branch, two people familiar with the matter said Wednesday, a step intended to help it comply with U.S. regulations. Link 

* Tax collections from wealthy are saving government. Robert Frank – CNBC. Call it proof that the system is working—or proof that the system is broken—but taxes paid by the nation’s top earners are putting government back in the black. Link 

* Economists see deficit emphasis as impeding recovery. Jackie Calmes – The New York Times. The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists. Link

Essential reading: Airline industry’s tax troubles, and more

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

* Tax proposals open a debate on airline industry’s troubles. Susan Stellin – The New York Times. A $300 domestic airline ticket now includes about $60 in taxes — or 20 percent of the total fare — which pays for things like air traffic controllers, airport improvements, customs and immigration inspections and checkpoint screening. Link     

* Indefinitely reinvested foreign earnings on the rise. Maxwell Murphy – The Wall Street Journal. Foreign profits at U.S.-based multinational companies will soon top $2 trillion. But much of that sum is unlikely to return to the U.S., regardless of the status of U.S. tax rules, as it already has been spent abroad. Link   

* A strategy for business owners to avoid investment tax. Arden Dale – The Wall Street Journal. Before the tax strategy can be employed, advisers need to examine their business-owning clients’ Forms K-1 to determine if they are actively involved or whether they only have a passive role like an investor. Link    

Essential reading: Tax rewrite favored by Republicans, and more

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

* Tax rewrite in play on Capitol. John McKinnon – The Wall Street Journal. Talk about overhauling the tax code is picking up across Capitol Hill this spring, with lawmakers of both parties agreeing on the need to simplify the system but remaining far apart on the details of how to do it. Link    

* In Commerce pick’s ’08 answers on finances, possible hints at road ahead. Charles Savage – The New York Times. Republican senators are likely to be interested in the Pritzker family’s reputation as innovators in the use of offshore trusts and foreign bank secrecy laws to shelter their wealth from income, capital gains and inheritance taxes. Link    

* Leniency for offshore cheats. Laura Saunders – The Wall Street Journal. Despite a high-profile government crackdown on secret offshore financial accounts since 2009, the average sentence in those cases has been about half as long as in some other types of tax cases. Link    

Spinning single-family home investments into mortgage-backed securities

It’s generally been thought the main exit strategy for Wall Street-backed firms that are buying distressed homes to rent them out, is to convert to a REIT and file for an IPO. That attempt to cash-out on the single-family home trade has obvious benefits for the big institutional buyers but risks for retail investors as the math behind the buy-to-rent model becomes increasingly suspect.

But there’s another potential exit strategy for the institutional buyers beyond converting to a REIT or flipping homes earlier than anticipated and that’s becoming a home lender.

In Las Vegas, where the institutional buyers have been quite active the past six months, there’s talk about firms like Blackstone Group eventually providing financing to prospective buyers looking to acquire one of their single family homes. Buyers like Blackstone won’t comment on speculation about their single-family home management subsidiaries becoming defacto mortgage lenders. But it makes sense, especially in the case of Blackstone, which now owns more than 25,000 homes nationwide and says it intends to hold onto the homes and rent them out for several years.


Some important events in the week ahead:

Sunday, May 5 – Tuesday, May 7

Offshore investigators, service providers and clients attend the Offshore Alert Conference. The Ritz-Carlton South Beach. Miami.

Tuesday, May 7

* Financial Accounting Standards Board’s Private Company Council meeting. 8:30 a.m. – 3 p.m. ET. Norwalk, Connecticut.

* Public Company Accounting Oversight Board open board meeting covering auditing standards and other proposals. 9:30 a.m. – 11:30 a.m. ET, PCAOB offices. Washington.

Wall Street’s trading businesses turn to survival of the least dead

Darwin theorized that peacocks’ colorful plumage was a sign of        their evolutionary strength.

Wall Street has always been known as a cutthroat kind of place, but lately it seems big investment banks are just mulling around, hoping their competitors die first.

A report on Friday by Goldman Sachs bank analysts said that the industry has entered what they called a state of “reverse Darwinism,” in which banks are betting their long-suffering trading operations can increase revenue not by stealing business from rivals on a competitive basis, but by waiting for rivals to call it quits – leaving their clients with no choice but to move business elsewhere.