Bramwell’s Lunch Beat: Orrin Hatch is Outraged Over IRS Employee Bonuses
SEC plans to consider whether global standards are achievable
Ken Tysiac, senior editor of the Journal of Accountancy, reported on February 3 that the US Securities and Exchange Commission (SEC) plans to consider whether a single set of high-quality global accounting standards is achievable.
The initiative was one of several described in a draft of the SEC’s strategic plan for 2014 to 2018 that was released on Monday.
The SEC said it “will continue to promote the establishment of high-quality accounting standards by independent standard-setters,” according to the article. “In its oversight of FASB [Financial Accounting Standards Board], the SEC plans to strengthen the board’s independence and maintain its focus on the needs of investors in financial reporting.”
Tysiac wrote the agency also plans to promote higher-quality financial reporting worldwide and will consider whether a single set of global standards is achievable, according to the document. The strategic plan does not specifically mention International Financial Reporting Standards (IFRS).
IRS, employee union strike deal on bonuses
The IRS has approved approximately $43 million in employee bonuses after reaching an agreement on February 3 with the National Treasury Employees Union (NTEU), which represents some agency employees, Bernie Becker of The Hill reported.
The amount of bonuses was well short of the $75 million that the employees were owed under their labor agreement. But Becker wrote the decision by new IRS Commissioner John Koskinen to sign off on the bonuses is a shift from previous agency leadership.
Daniel Werfel, the interim IRS chief installed by President Obama shortly after the agency apologized for singling out Tea Party groups applying for tax-exempt status, had moved to cut off bonuses last year.
Senate Finance Committee Ranking Member Orrin Hatch (R-UT) sharply criticized the decision.
“It’s hard to think of a group of people less deserving of bonuses than IRS employees. Frankly, this is outrageous,” he said in a written statement. “I understand that not every IRS worker was responsible, but this is the wrong signal to send the American people who were rightly outraged by how this agency treated people for their political views.”
IBM uses Dutch tax haven to boost profits as sales slide
Alex Barinka and Jesse Drucker of Bloomberg reported on February 3 that IBM Corp. has reduced its tax rate to a two-decade low with help from a tax strategy that sends profits through a Dutch subsidiary.
“The approach, which involves routing almost all sales in Europe, the Middle East, Africa, Asia, and some of the Americas through the Netherlands unit, helped IBM as it gradually reduced its tax rate over twenty years at the same time pretax income quadrupled,” the article stated. “Then last year, the rate slid to the lowest level since at least 1994, lifting earnings above analysts’ estimates.”
IBM is aiming for $20 a share in adjusted earnings by 2015, up from $11.67 in 2010 – a goal made more difficult as the company posted seven straight quarters of declining revenue, according to the article.
“To stay on target, IBM has bought back shares, sold assets, and fired and furloughed workers,” Barinka and Drucker wrote. “A less prominent though vital role is played by its subsidiary in the Netherlands, one of the most important havens for multinational companies looking for ways to legally reduce their tax rates.”
HP revises Autonomy financial reports, citing accounting errors
Hewlett-Packard (HP) disclosed to British authorities on January 31 that it found what it said were serious accounting errors at Autonomy, a UK software maker it acquired in 2011, leading to a number of major revisions in the acquired company’s financial report for 2010, the New York Times reported yesterday.
Among the changes in the restatements were an 81 percent cut in the operating profit of a major Autonomy subsidiary, to £19.6 million, and a 54 percent drop in revenue, according to an audit conducted on HP’s behalf by EY.
“Late in 2012, HP took an $8.8 billion accounting charge tied to its takeover of the British company, adding that ‘serious accounting improprieties’ represented about $5 billion of that write-down,” the article stated.
“The American technology company has contended that Autonomy improperly booked hardware sales as higher-margin software sales in some instances and booked licensing revenue upfront before receiving money, inflating gross profit margins.”
Pot buyers add more than $1 million to Colorado tax coffers
According to an NBC News article, during the first month of legal recreational marijuana sales in Colorado, retailers said they have collected $1.24 million in tax revenue.
“In a back-of-the-napkin calculation, those who shared the data say they figure February’s tax collections in Colorado likely will exceed a quarter of a million dollars a day, putting it on pace to near $100 million annually,” Kerry Sanders wrote. “When Colorado first considered legalizing recreational marijuana, it was estimated the first year’s tax take would be $67 million.”
Taxes paid for pot transactions in Colorado vary depending on the municipality where it’s sold, the article stated. All sales are assessed the standard state sales tax of 2.9 percent, in addition to a special state sales and excise tax. There’s also an extra local sales and excise tax in many cities. In Denver, those taxes add up to nearly 29 percent.
Is the wrong company structure hurting you at tax time?
Forbes contributor Nellie Akalp wrote on February 3: “When it comes to choosing the right business entity, taxes are usually front and center on a new business owner’s mind. What structure will give you the best chance to lower your taxes? How can you lower your self-employment taxes? What are the downsides, if any, of incorporating?”
In this article, she provided a starting guide to understand how each of the common business structures impacts your taxes.