Bramwell’s Lunch Beat: Veto Threat Looms Over Section 179 Vote
Tax breaks for companies like Apple investigated by EU
The European Union (EU) on Wednesday opened an investigation into the way countries, including Ireland, provide tax arrangements that enable big multinational corporations like Apple to reduce their tax bills worldwide, James Kanter of the New York Times reported.
The inquiry by Joaquín Almunia, the EU’s competition commissioner, also covers Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg. EU officials said the inquiry would examine “transfer pricing arrangements validated” in the three countries involved.
Ireland has become a preferred place for giant tech companies to place their international headquarters, largely because of concessions from the government allowing businesses to obtain even further breaks on corporate tax rates that, at 12.5 percent, are already low, Kanter wrote.
“The company in question did not receive selective treatment and there was no ‘special tax rate deal,'” the Irish government said in a statement on Wednesday, apparently referring to Apple, according to the article. “We are very confident that we will successfully defend our position as Ireland does not have a statutorily binding tax ruling system.”
[For additional reading, check out a Wall Street Journal article on what the tax probe means for the tech industry.]
WH threatens veto of GOP tax cut extensions
Bernie Becker of The Hill reported on Tuesday that the Obama administration threatened to veto the House GOP’s efforts to permanently revive expired tax breaks.
The House is expected to vote this week to extend incentives that would allow small businesses to more quickly write off investments, known as Section 179, and to help S corporations.
In a statement, the White House said it supported extending the Section 179 provision; however, it could not get on board with extending the $73 billion tax break without an offset. The administration made a similar argument when the House passed an extension of the business research and development credit last month.
House Ways and Means Committee Chairman Dave Camp (R-MI) and other Republicans have said that Congress often extended lapsed tax breaks, commonly known as “extenders,” without an offset.
Wall Street loses ally with Eric Cantor loss
MJ Lee and Zachary Warmbrodt of Politico wrote on Tuesday that Wall Street and the financial services industry lost a top ally in congressional leadership after House Majority Leader Eric Cantor (R-VA) was defeated by Randolph Macon College economics professor David Brat in a primary election last night.
They noted that many lobbyists on K Street whose clients include major financial institutions consider Cantor a go-to member in leadership on policy debates, including overhauling the mortgage finance market, extending the government backstop for terrorism insurance, how Wall Street should be taxed, and flood insurance.
“When Dave Camp abandoned the business community with his tax reform draft, Cantor was incensed and promised to stand strong,” one industry source said, referring to the House Ways and Means Committee chairman’s proposal earlier this year to offset the cost of tax reform, in part, by taxing Wall Street banks, according to the article.
The GOP leadership scramble
Another Politico article from last night briefly touches upon what Cantor’s defeat might mean to the future political plans of Representative Paul Ryan (R-WI).
Ryan “is next in line for the Ways and Means Committee gavel and has said he wasn’t running for leadership, a stance he may now have to rethink,” Lauren French and John Bresnahan wrote.
In today’s Politico Morning Tax tipsheet, Mackenzie Weinger wrote, “While Cantor was not on any of the tax-writing committees, he played a big role in pushing back against Dave Camp's tax overhaul dreams. And like most other Republicans he backed keeping the favorable tax treatment of carried interest in a big way. Private equity giant Blackstone Group was his biggest campaign donor in 2014, according to OpenSecrets.org.
“Paul Ryan is widely presumed to be the next Ways and Means chair, and he's said he's not interested in a leadership slot. But does Cantor's surprise defeat – not to mention the prospect of Speaker John Boehner's retirement – make policy wonk Ryan rethink his plans? A jump to leadership by Ryan could clear the path for Kevin Brady to take over the tax-writing committee next year.”
IRS backs investors seeking change to hedge fund fees
The IRS issued a ruling that clears the way for institutional investors to seek changes to incentive fees assessed by hedge funds, which may make it cheaper for them to invest in such offerings, Miles Weiss of Bloomberg Businessweek reported on Tuesday.
The ruling, 2014-18, clarifies that hedge funds can charge incentive fees cumulatively rather than annually without running afoul of a tax law change adopted in 2008. These fees, typically equaling 15 percent to 20 percent of an investor’s profits, comprise a big portion of a hedge fund manager’s annual revenue.
Weiss noted that institutions have been pushing managers to charge incentive fees on a cumulative basis, rather than locking in a share of profits annually, to ensure that both sides share the risk of having gains from good years being wiped out later on.
Marijuana activists sue to halt Colorado pot tax collections
A group of marijuana activists in Colorado are suing to prevent the government collecting taxes derived from the state’s legal pot industry, saying it violates the right against self-incrimination guaranteed by the US Constitution, Keith Coffman of Reuters reported on Tuesday.
The lawsuit, filed by local lawyer Rob Corry this week in Denver District Court, asks that a judge issue an injunction ordering the state and city of Denver to halt the practice.
The 37-page complaint – which includes a history of marijuana prohibition in the United States – said that because of the federal ban, people who buy or sell pot implicate themselves in a crime, which violates the Fifth Amendment to the US Constitution.
Corry also said the state’s 25 percent combined sales and excise taxes on marijuana sales have undermined what voters intended when they approved legalized cannabis in part to take the criminal element out of marijuana use, according to the article.
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- Senators weigh tax ‘holiday’ to help fund highway repairs (Reuters)
- Closing the box? Europe probes patent tax breaks (Wall Street Journal)
- Sam Brownback’s tax-cut push puts Kansas out on its own (Wall Street Journal)
- New Jersey e-cigarettes tax plan has some fuming (Wall Street Journal)
- Does Uncle Sam make money lending to students? (Washington Post)
- A tug-of-war of tax breaks tightens across the Hudson (New York Times)
- LA half-cent tax proposal for street, sidewalk repair is pulled (Los Angeles Times)
- Did multinationals use a foreign earnings tax holiday to burnish their financials rather than reduce taxes? (TaxVox)
- Ohio lawmakers turn a surprise surplus into a huge tax cut (TaxVox)
- A Coke and a smile and a tax (Tax Analysts)