Bramwell’s Lunch Beat: China Has ‘State Secrets’ It Is Not Willing to Share
Dems: Inspect inspector general
Congressional Democrats have for months said that J. Russell George, Treasury’s inspector general for tax administration, crafted a flawed, misleading report that helped fan the flames of the IRS targeting controversy, Bernie Becker of The Hill wrote on February 9.
Representative Elijah Cummings (D-MD), the top Democrat on the House Oversight and Government Reform Committee, and Representative Gerry Connolly (D-VA) criticized George for agreeing to brief GOP staff at a late January meeting on the Affordable Care Act without Democrats in attendance.
According to Becker, aides say they now know of multiple meetings of George with the staff of Oversight Chairman Darrell Issa (R-CA) from which Democrats were excluded.
Also, Connolly and Representative Matt Cartwright (D-PA) filed a formal ethics complaint on February 5 about George’s original report on the IRS targeting last year, questioning the inspector general’s “independence, ethics, competence, and quality control” with an oversight board for inspectors general, the article stated.
[Click here for AccountingWEB’s coverage of the Tea Party scandal.]
The SEC shouldn’t forget that Beijing always wins
According to an article today in the China Economic Review, the US Securities and Exchange Commission (SEC) ruling in late January to suspend the Chinese affiliates of the Big Four firms from auditing US-listed Chinese firms could be the beginning of the end of a several-year showdown. The article said China's “unflinching attitude” toward the SEC’s decision “shows just how much it is willing to risk to keep secrets firmly on the mainland.”
“The heart of the dispute revolves around the China Securities Regulatory Commission's (CSRC) unwillingness to let US regulators see working papers from Chinese firms, followed by the reluctance of the Public Company Accounting Oversight Board (PCAOB), a body mandated by the US Congress to oversee the audits of public firms, to take real action for this severe breach of US law,” the article stated.
“Insiders have told China Economic Review that working papers from China's state-owned firms could reveal some embarrassing details; for example, the connections that the families of top Chinese leaders have to some of the country's biggest, most powerful enterprises. The literature is so sensitive that China has conveniently labeled them ‘state secrets.’ The Big Four affiliates say their management could face time in a Chinese prison should they hand over the documents. China has come out as the easy winner in the game.”
Unions, trade associations worried about possible IRS rule changes
Holly Yeager of the Washington Post wrote yesterday: “When the IRS announced that it intended to put new limits on the political activities of some tax-exempt groups, it made clear that it was talking about ‘social welfare’ organizations, a category of the tax code that includes several serious spenders in recent elections, such as Crossroads GPS, Americans for Prosperity, and the League of Conservation Voters.
“But – in what came as a surprise to many – the proposed rules noted that regulators are also considering similar changes that would apply to trade associations and labor unions.”
The IRS hasn’t yet explained how it would quantify political work or how much would be too much, but groups that cross that threshold would risk losing their status as tax-exempt organizations, the article stated.
According to Yeager, Brett Kappel, a campaign finance lawyer who advises companies and trade associations, has been telling his clients: “You should pay attention to this. It’s potentially catastrophic.”
Proxy voting change could level playing field for activists
Emily Chasan of the Wall Street Journal reported on February 7 that Broadridge Financial Solutions Inc., which says it processes proxy votes for about 90 percent of North American public companies, will no longer let companies see the interim voting results of all participants in a proxy contest change.
“The change, which took effect on Friday, is significant because companies will no longer know how many votes their activist rivals are gathering on a proxy proposal before the final vote,” she wrote. “That, in turn, may limit their ability to predict proxy voting outcomes.”
Playing accounting games puts red-ink budgets in the black
David Crane, an advisor to former California Governor Arnold Schwarzenegger and president of Govern for California, contributed an article for the San Francisco Chronicle on how some states are gaming government accounting rules.
“For example, unlike a business, governments can avoid recognizing an expense simply by delaying payment. That's because state and local governments get to use ‘cash-based’ accounting, which recognizes expense only when cash changes hands,” Crane wrote. “That's how [New Jersey Governor Chris] Christie ‘balanced’ New Jersey's budget in 2010 simply by pushing a $3 billion pension payment from one year into the next. Pushing the payment cost $240 million in interest, a hefty price for citizens to pay so their governor can look good. But hardly anyone knew.”
Delayed tax refunds, the EITC & how we’re getting it wrong
Forbes contributor Kelly Phillips Erb wrote yesterday about how "Donna," a small business owner, and her eleven-year-old daughter are likely now homeless because her tax refund that she was counting on from the IRS was delayed and she can’t pay her bills.
“Donna is one of millions of taxpayers who rely on a tax refund each year,” the article stated. “This year, for some reason, her refund isn’t available as promised. The IRS ‘Where’s My Refund?’ tool had indicated a deposit on February 6, 2014, a promise that Donna counted on when she asked her landlord for a few more days to make the rent. Now, her grace period with the landlord is up and there’s still no refund. Despite making a number of inquiries, Donna has no explanation for the delay and worse, no updated refund date.”
Michael Jackson estate embroiled in tax fight with IRS
According to a February 7 article in the Los Angeles Times, the IRS has told Michael Jackson's executors that the estate owes $505 million in taxes and an additional $197 million in penalties, for a total of more than $702 million.
According to documents filed with the US Tax Court in Washington, Jackson's executors placed his net worth at the time of his June 2009 death at slightly more than $7 million. The IRS placed it at $1.125 billion.
Jackson's return was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20 percent penalty for underpayment, the article stated.