House proposes $10.5B, eight-month highway bill
The House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31, 2015, Keith Laing of The Hillreported.
The GOP measure would reauthorize the collection of the gas tax for eight months and transfer $10.5 billion from elsewhere in the federal budget to close the shortfall in the Highway Trust Fund. The Ways and Means Committee is expected to hold a markup of the proposal on Thursday morning.
The House Joint Committee on Taxation said on Tuesday the proposal would be paid for by using $7.7 billion marked for highways and $2 billion for public transportation systems from the federal government's general fund, Laing wrote. The proposal would also take $1 billion from the Leaking Underground Storage Tank Trust Fund, a funding mechanism also used in the last transportation funding bill that was approved by lawmakers in 2012.
Under the GOP’s proposal, the transportation funding would be offset by revenue from federal pension changes and a fee that is paid by travelers who use US customs facilities.
Ways and Means Committee Chairman Dave Camp (R-MI) said the proposal would take $6.4 billion from the “pension smoothing” and $3.5 billion from the customs fees to balance out the Highway Trust Fund infusion, according to the article.
“While it doesn’t provide as much funding as I would like – enough to get through the end of next year – it does give Congress and the tax-writing committees ample time to consider a more long-term solution to the Highway Trust Fund,” Camp said in a statement yesterday.
Salix to merge with Cosmo in latest tax inversion deal
Raleigh, North Carolina-based Salix Pharmaceuticals Ltd. agreed to buy the patents to some drugs for gastrointestinal diseases from Cosmo Pharmaceuticals SpA for about $2.7 billion in stock in a deal that will allow the US company to move to Ireland and lower its tax bill, Simeon Bennett and Alex Wayne of Bloombergreported on Wednesday.
Salix will merge with an Irish unit of Lainate, Italy-based Cosmo, the companies said in a statement on Tuesday. Salix shareholders will own just less than 80 percent of the combined company, which will be renamed Salix Pharmaceuticals PLC, and Cosmo will own the rest.
Bennett and Wayne noted that the transaction adds to the wave of US companies gaining an overseas address as a way to lower their tax rates. AbbVie Inc. is bidding for Shire PLC to execute a similar tax inversion. With the deal, Cosmo is reversing its decision to try to market some products on its own in the United States.
“The new corporate structure greatly enhances our ability to compete for licensing deals and acquisitions, and improves the economics of future business development opportunities,” Salix CEO Carolyn Logan said in the statement, according to the article.
For the combined company to be based in Ireland, the deal is structured as if Cosmo’s Irish subsidiary, Cosmo Technologies Ltd., is buying Salix. Stockholders in Salix will receive one share of the combined company for each Salix share.
AbbVie raises offer for Shire
And speaking of AbbVie, the drug maker on Tuesday raised its offer for Shire to more than $51 billion, its fourth attempt to bring the Dublin-based pharmaceutical company's board to the negotiating table, Hester Plumridge and Peter Loftus of the Wall Street Journalreported.
AbbVie said its cash-and-stock offer amounts to £51.15 ($87.62) a share, an 11 percent rise from its previous bid and a 48 percent premium to Shire’s share price the day before its first offer in early May. The mix of cash and stock is roughly the same, and would leave Shire shareholders holding around 24 percent of the enlarged company. If they accept the offer, Shire shareholders would get £22.44 in cash and 0.8568 of an ordinary AbbVie share for each Shire share they own, according to the article.
Shire said its board was meeting to consider the proposal and would make an announcement in due course. It added that AbbVie didn’t make its revised proposal to Shire before announcing it publicly.
US companies, particularly in pharmaceuticals, are scrambling to lock in overseas partners to benefit from lower corporate taxes offshore, Plumridge and Loftus wrote. AbbVie has said it wants to reincorporate in the United Kingdom after buying Shire, a so-called inversion deal that could lower its tax rate. Last month, Medtronic Inc. agreed to buy Covidien PLC for $42.9 billion in one of the latest successful inversion deals.
In deal to cut corporate taxes, shareholders pay the price
And speaking of Medtronic, its deal to buy Covidien of Ireland may result in the Minneapolis-based company’s shareholders being left with a hefty tax bill, Steven Davidoff Solomon of DealBookwrote on Tuesday.
“The IRS will treat the acquisition as if Medtronic shareholders had sold their shares,” he noted. “Under IRS rules, when a company moves abroad in a tax inversion, the buyer’s shareholders must pay capital gains if they will hold 50 percent or more of the shares. That is the case for Medtronic, and so its shareholders will be stuck with that big tax bill – up to 33 percent in California after you include the state tax. (In Minnesota, where the top capital gains tax is 7.9 percent, shareholders may pay up to 29.7 percent of their holdings in tax.)”
House plans to vote on bonus depreciation this week
Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, wrote that the House of Representatives is scheduled to vote Wednesday on a plan to permanently extend a lucrative business tax break aimed at spurring investment.
The tax break, known as bonus depreciation, lets companies deduct half the cost of some capital equipment purchases immediately, instead of slowly deducting the depreciation over many years.
Chasan noted that the House Ways and Means Committee sent bill HR 4718 to the floor in May. A yes-vote is expected from the Republican-controlled House, but it’s unclear when or how the bill might move toward a vote in the Senate.
Capital-intensive businesses, ranging from telecommunications firms to tractor makers, have said the missing tax break is already a drag on revenues, capital spending, and effective tax rates this year.
“For now, we’re expecting to see about $70 million to $80 million headwind as a result of no bonus depreciation,” said David Steiner, Waste Management Inc.’s chief executive, in April, according to the article. The waste collection company had used the deduction to offset more than $1 billion in capital expenditures.
[For some additional reading, the Center on Budget and Policy Priorities believes lawmakers should reject making bonus depreciation a permanent tax break.]
SEC says Utah firm was deficient in its audits of Chinese company
According to the US Securities and Exchange Commission (SEC), Salt Lake City-based accounting firm Child Van Wagoner & Bradshaw PLLC and two of its partners botched the audits of a chicken company based in China that faces allegations of defrauding investors, Michael Rapoport of the Wall Street Journalreported on Tuesday.
In an administrative proceeding, the SEC said the Utah firm, along with partners Russell E. Anderson and Marty Van Wagoner, was deficient in its 2009 and 2010 audits of Yuhe International Inc., a Chinese provider of broiler chickens.
The firm effectively did no work of its own in the 2009 audit, instead relying on the incomplete work of the company's previous auditor, the SEC said, according to the article. In the 2010 audit, the firm knew Yuhe was at risk of not being able to produce accurate financial statements but didn't properly address those risks, the SEC said.
Child Van Wagoner & Bradshaw stopped auditing public companies in 2012. The case will be heard by an SEC administrative law judge, who must render a decision by next May, Rapoport wrote.
Accountant’s plea signals more possible scrutiny of Madoff son
Joseph Ax of Reutersreported on Tuesday that US prosecutors may still be building a case against imprisoned swindler Bernard Madoff's only surviving son, who according to sources was one of the “co-conspirators” mentioned in a plea deal by a Madoff associate last month.
Ax wrote that two sources familiar with the Madoff case confirmed to Reuters that people identified only as “co-conspirators” in statements and court documents at accountant Paul Konigsberg's June 24 plea hearing are Madoff's sons, Mark and Andrew, who were employees of the Madoff investment firm.
Mark Madoff committed suicide in December 2010 at the age of 46 on the second anniversary of Bernard Madoff's arrest. Andrew Madoff, 48, spoke publicly last year about his battle with stage-four blood cancer, though his current health is unclear.
Ax noted that speculation about whether the sons knew of their father's decades-long, worldwide fraud has persisted since its collapse. They have denied any involvement in the Ponzi scheme, which is estimated to have cost investors $17 billion in principal.
Konigsberg signed a deal to cooperate with prosecutors as part of his plea. With no charges pending against anyone else, the deal coupled with the references to the Madoff sons as co-conspirators, suggests prosecutors hope Konigsberg may be able to provide evidence against Andrew Madoff, a legal expert said.
“It certainly does indicate that the government thinks they committed crimes,” said Robert Anello, a white-collar defense lawyer not involved in the case, according to the article. “If they haven’t already been charged, it would certainly make you sit up and take notice if you’re their lawyers.”
IMA names Joseph A. Vincent chair of Global Board of Directors
The Institute of Management Accountants (IMA) has announced Joseph A. Vincent, CMA, of Stratford, Connecticut, as chair of its Global Board of Directors for fiscal year 2014-15.
As IMA’s senior volunteer leader through June 30, 2015, Vincent will work with IMA’s strategic partners, expand IMA’s thought leadership in the profession, and elevate awareness of the Certified Management Accountant (CMA) program.
“Joe has rightly earned his position as chair through his decades of commitment and service to the management accounting profession and to IMA,” IMA President and CEO Jeff Thomson, CMA, CAE, said in a written statement. “His thought leadership and contributions to IMA’s strategic initiatives in the coming year are sure to make a difference in the profession and result in the further growth and strengthening of our organization.”
Vincent has 40 years of manufacturing and distribution experience with both public and private companies. Most recently, he worked as executive vice president, general manager, and CFO for Dixtal Medical Inc., a multimillion-dollar manufacturer and distributor of medical monitoring equipment.
For the past 40 years, Vincent has held several volunteer leadership positions within IMA at the local, regional, and global levels. After joining IMA in 1974, he served as New Haven chapter president in 1985-86, president of the Northeast Regional Council in 1992-93, and national vice president in 1994-95.
In recent years, Vincent has served as a member and chair of the Board of Regents of ICMA, board liaison to IMA’s Committee on Ethics, and for the past three years, was a member of IMA’s Global Board of Directors. He served as IMA chair-elect from 2013-14.
Vincent was preceded as chair by William F. Knese, CMA, CFM, CPA, of Scottsdale, Arizona, who now serves as IMA’s chair-emeritus.
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- Grant Thornton appoints Greg Westfall to assistant managing principal role (Grant Thornton)
- Chile reaches accord with opposition over tax changes (Bloomberg)
- The US corporate tax dodge (Bloomberg View)
- Ireland: US tax inversions aren’t helping us much either (MoneyBeat)
- Tax inversions: A look at five cross-border deals with big price tags (MoneyBeat)
- How corporate tax cheats still get billions in government business (ThinkProgress)
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- IRS funding controversy overlooks real solutions (The Hill)
- What Dave Camp’s tax reform plan would really mean (TaxVox)
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