Bramwell’s Lunch Beat: No Agreement – Yet – on Lease Accounting Standard
IRS employee took home data on 20,000 workers at agency
The IRS announced yesterday via a statement that an employee of the agency took home a computer thumb drive containing unencrypted data on 20,000 fellow workers, Richard Rubin of Bloomberg reported yesterday.
However, the IRS noted its systems that hold personal data on hundreds of millions of Americans weren’t breached.
“This incident is a powerful reminder to all of us that we must do everything we can to protect sensitive data – whether it involves our fellow employees or taxpayers,” IRS Commissioner John Koskinen said in a message to employees, according to the article. “This was not a problem with our network or systems, but rather an isolated incident.”
Koskinen added that IRS officials were told of the breach “a few days ago.” The agency is contacting the current and former employees involved, almost all of whom worked in Pennsylvania, Delaware, and New Jersey, according to Rubin. The information dates to 2007, before the IRS started using automatic encryption.
The Social Security numbers, names, and addresses of employees and contract workers were potentially accessible online because the thumb drive was plugged into the employee’s “unsecure home network,” according to Koskinen’s message.
The IRS said it’s working with the Treasury Inspector General for Tax Administration (TIGTA) to investigate the incident.
Rule makers still split on lease accounting
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are currently meeting for the second time in as many days to discuss a joint standard for lease accounting.
The boards aim to issue a final standard later this year that would move about $2 trillion dollars of lease obligations onto corporate balance sheets. But according to Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, they are still split on the fundamental model companies should use to measure those liabilities.
Chasan reported yesterday the FASB and the IASB remained divided during their meeting Tuesday morning on whether to restrict companies to one method to account for leases, or to let them choose between two.
“We have been struggling with this standard for many years,” IASB Chairman Hans Hoogervorst said during Tuesday’s meeting in Norwalk, Connecticut, according to the article. “There is no simple answer.”
Since 2005, the US Securities and Exchange Commission (SEC) has recommended an overhaul of lease accounting because large off-the-books lease obligations can obscure a company’s true finances.
Tax experts: Brace for health-law tumult
Tax experts believe headaches over the Affordable Care Act are likely to grow in the coming year as tens of millions of Americans face the task of establishing that they have insurance coverage to avoid paying penalties, John D. McKinnon of the Wall Street Journal wrote today.
“We believe it's going to create massive confusion,” said Mark Ciaramitaro, vice president of health care enrollment services for H&R Block, according to the article. “There's so much now that confuses people. We think it gets much worse next tax season.”
Perhaps the biggest problem is a lack of public understanding of the complex and frequently changing program, tax experts say. They expect that to be compounded by a misunderstanding of the penalties, as many don't realize they could pay more than the minimum $95 for not having insurance, the article stated.
“But the potential for confusion about the law is feeding speculation among some tax experts that the [Obama] administration might end up waiving the individual mandate penalty for 2014, or minimizing its impact by granting widespread exemptions,” McKinnon wrote.
Report: Dem tax plan would help millions
According to a new study from the Brookings Institute, Democratic proposals to expand the Earned Income Tax Credit (EITC) would help roughly 15 million taxpayers, Bernie Becker of The Hill reported yesterday.
Proposals from the White House and Democratic lawmakers like Senate Majority Whip Dick Durbin (D-IL), Senator Sherrod Brown (D-OH), and Representative Richard Neal (D-MA) would allow certain workers without children to start claiming the credit when they’re 21, instead of the current 25, the article stated.
The proposals would also increase the maximum amount of credit that workers who don’t have children, or don't have custody of their children, can receive.
“According to Brookings, the White House proposal would benefit just over 14 million taxpayers, while the congressional measures would help 15.2 million, with many of those workers coming from fields like retail and food service,” Becker wrote.
“The Brookings study, authored by Elizabeth Kneebone and Jane Williams, adds that the White House proposal could double the number of eligible EITC filers without children in 15 states, and that roughly six in 10 of the taxpayers benefiting from the proposals would come from the country’s top 100 metro areas.”
Autonomy’s founder defends company’s accounting
Mike Lynch, the former chief executive of UK software maker Autonomy Corp., defended his former company's accounting yesterday in an open letter to shareholders of Hewlett-Packard Co. (H-P) ahead of H-P’s annual shareholder meeting, Lisa Fleisher of the Wall Street Journal reported.
In the letter, Lynch accused H-P of smearing Autonomy management. H-P bought Autonomy in October 2011 for $11.1 billion. H-P wrote off $8.8 billion from the deal in 2012, citing accounting irregularities at Autonomy.
“Mr. Lynch has repeatedly defended the company's accounting, saying it adhered to international standards,” Fleisher wrote. “He and H-P have traded a series of accusations and counter-accusations since H-P's write-down.”
US should seek Swiss banker extradition, senators say
David Voreacos of Bloomberg reported today that senators Carl Levin (D-MI) and John McCain (R-AZ) urged the Justice Department to seek extradition of about 30 Swiss bankers and others who are charged with enabling offshore tax evasion and haven’t appeared in federal courts.
The department should “at least attempt to use” powers under an extradition treaty with the Swiss, Levin and McCain wrote yesterday to Deputy Attorney General James Cole, according to the article. Levin and McCain lead the Senate Permanent Subcommittee on Investigations, which issued a report last month criticizing the Justice Department’s enforcement efforts involving Swiss banks, including Credit Suisse Group AG.
“Since 2009, more than 70 taxpayers and about three dozen bankers, lawyers, and advisers have been charged in a crackdown on offshore tax evasion,” Voreacos wrote. “In testimony to the subcommittee on February 26, Cole said the department hasn’t sought extradition from Switzerland of those indicted by US grand juries. Switzerland doesn’t consider tax evasion a crime.”
Emily Pierce, a Justice Department spokeswoman, said in response to the letter: “We have limited resources, and we are focused on using our most effective tools,” according to the article.
A terrible response to the Internet tax mess
Howard Gleckman, Resident Fellow at the Urban Institute and editor of TaxVox, the Tax Policy Center blog, wrote yesterday on why an idea from House GOP leaders to set national rules for sales tax collection based on the location of the seller, not the buyer, is a terrible idea.
“It may, in fact, be worse than that,” Gleckman said. “It may really be a classic legislative poison pill: A cynical effort to exempt Internet sales from any tax under the guise of ‘fairness’ and ‘state sovereignty’ that could not possibly pass Congress. If it somehow became law, it could well be a recipe for the ultimate demise of sales taxes as a source of state revenues. At a House Judiciary Committee hearing last week, Stephen Kranz, a tax partner in the law firm of McDermott, Will & Emery, called the idea ‘the nuclear bomb version of tax competition.’”
Given the nature of online sellers, changing locations to a no-sales-tax state would be fairly easy, the blog stated.
“It would almost certainly set off the sort of tax competition that worries Kranz,” Gleckman wrote. “And at least some states would end up increasing property and income taxes – not an outcome that most House Republicans would likely favor.
“But that’s only part of the problem,” he continued. “Such an origin-based tax would create immense complexity for sellers and consumers. It would still leave unanswered the vexing question of when a firm had physical presence (and would collect taxes owed to the buyer’s state) or did not (and would collect taxes levied by the seller’s state).”
Would a Republican Senate improve the chances for tax reform?
Forbes contributor Jeremy Scott wrote yesterday that a Republican-led Senate would be almost guaranteed to take up a House-passed tax bill, like the one released last month by House Ways and Means Committee Chairman Dave Camp (R-MI). That would mean committee markups, amendments, and votes on the Senate side that won’t happen if Democrats retain the chamber in November.
“Would a Republican-controlled Congress emphasize tax reform? That’s an open question,” Scott noted. “Camp probably won’t be Ways and Means chair next year because of GOP term limits. House Budget Committee Chair Paul Ryan [R-WI] is expected to take over, and he has different priorities. [Senator Orrin] Hatch [R-UT] has never been known as a tax guru. So in terms of committee leadership, it’s tough to argue that 2015 will be better than 2011-2014. Republicans, however, are more committed to tax reform than Democrats. In fact, congressional Democrats are probably the least interested in tax reform of any major bloc in the capital. [Senator Harry] Reid [D-NV] isn’t interested in pushing for it, or even providing support for a Democratic senator who is. There’s no political gain in it for him or his caucus. Democrats want more revenue, aren’t united about how to fix the corporate tax system (few of them have even publicly supported Obama’s corporate tax reform), and have no interest in supporting major cuts or changes to popular individual tax expenditures like the home mortgage interest deduction or state and local tax deductions (which primarily benefit blue states). That’s not really a legislative program they can emphasize to voters.”
Randolph W. Thrower dies at 100; ran IRS under Nixon
Randolph W. Thrower, a Republican lawyer and federal tax law expert who headed the IRS under President Nixon from 1969 to 1971 before losing his job for resisting White House efforts to punish its enemies through tax audits, died on March 8 at his home in Atlanta. He was 100. Click here to read the New York Times obituary.
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