Bramwell’s Lunch Beat: Bank of America’s Historic Settlement
Americans give up passports as asset-disclosure rules start
Dylan Griffiths of Bloomberg wrote on Thursday that the number of Americans renouncing US citizenship stayed near an all-time high in the first half of the year before rules that make it harder to hide assets from tax authorities came into force.
Some 1,577 people gave up their nationality at U.S. embassies in the six months through June, according to Federal Register data published on Wednesday. While that’s a 13 percent decline from the year-earlier period, it’s only the second time there’s been a reading of more than 1,500, according to Bloomberg News calculations based on records starting in 1998, Griffiths wrote.
Tougher asset-disclosure rules effective as of July 1 under the Foreign Account Tax Compliance Act (FATCA) prompted 576 of the estimated 6 million Americans living overseas to give up their passports in the second quarter. The appeal of US citizenship for expatriates faded as more than 100 Swiss banks turn over data on American clients to avoid prosecution for helping tax evaders.
Swiss banks are trawling through records going back to the 1990s to find clients with US addresses and telephone numbers, and those who received schooling in the country, said Matthew Ledvina, a US tax lawyer at Anaford AG in Zurich, according to the article. Those identified as US persons are either being asked to leave or placed in special US-only sections of the institution, he said.
Bank of America offers US biggest settlement in history
Ben Protess and Michael Corkery of New York Times DealBook reported on Wednesday that Bank of America has agreed to the largest single federal settlement in the history of corporate America.
The tentative deal – which people briefed on the matter said would cost Bank of America more than $16 billion to settle investigations into its sale of toxic mortgage securities – started to take shape last week after the US Justice Department rejected yet another settlement offer from the bank. But, as Protess and Corkery wrote, a wild card entered the fray.
Judge Jed S. Rakoff, a longtime thorn in the side of Wall Street and Washington, issued an unexpected ruling in another Bank of America case that eroded what was left of the bank’s negotiating leverage. Judge Rakoff, of Federal District Court in Manhattan, ordered the bank to pay nearly $1.3 billion for selling 17,600 loans, many of which were defective. Bank of America had previously lost that case, which involved its Countrywide Financial unit, at a jury trial.
“With the bank reeling from the judge’s decision, Attorney General Eric H. Holder Jr. delivered the final blow,” Protess and Corkery wrote. “Mr. Holder, who had rebuffed earlier requests for a meeting with the bank’s chief executive, decided to open the lines of communication.”
Even though the deal would award an eye-popping penalty to the Justice Department and various state attorneys general, it would bring a measure of closure to the bank, which has already paid tens of billions of dollars to settle lawsuits by private investors and regulators over its mortgage operations, the article stated. The deal, capping the bank’s largest remaining legal issue from the financial crisis, would in turn accelerate Bank of America’s effort to return to the business of being a bank.
Obama: Congress should end ‘tax inversions’
During a news conference at the US Africa Leaders Summit in Washington, DC, on Wednesday, President Obama said Congress should try to stop US corporations from transferring their headquarters to foreign takeover targets so they can lower their taxes considerably, wrote David Jackson of the USA Today.
The president said his staff is studying what administrative actions – if any – to take to curb the so-called tax inversions, but suggested congressional action is necessary. “It's true what Treasury Secretary [Jack] Lew previously said, that we can't solve the entire problem administratively,” Obama said, according to the article.
He added that “what we are doing is examining” whether existing statutes can be used to “at least discourage some of the folks who may be trying to take advantage” of inversions.
“My preference would always be for us to go ahead and get something done in Congress,” Obama said.
However, Jackson wrote that prospects for any congressional approval remain highly uncertain amid a continuing Democrat-Republican gridlock on Capitol Hill that's become even more pronounced during the 2014 congressional election year.
Firms warn inversion crackdown carries risks
John D. McKinnon of the Wall Street Journal wrote on Wednesday that talk of cracking down on US corporations that move offshore is making some other companies nervous – notably foreign-owned concerns, which are warning of cuts to their US employment or investment if they're caught in the crosshairs.
The Organization for International Investment (OFII), a trade group of US subsidiaries of big foreign multinationals, told lawmakers in a letter on Tuesday that legislative efforts to limit so-called inversions by US companies could hit its members as well. And, the foreign firms said, so could potential regulatory action by the Obama administration.
Many of the fixes being discussed “would have a negative impact on US subsidiaries … as well as future investment of global resources” in the United States, said OFII President Nancy McLernon, according to the article. “What seems neat and clean when you're thinking about ways to go after inverters is anything but.”
OFII represents numerous traditional multinationals, such as Nestlé USA Inc. and Siemens Corp., as well as a handful of inverted US firms, such as Tyco International Ltd.
McKinnon wrote that foreign firms’ concerns could complicate efforts to move against inversions. They could also encourage policy makers to adopt relatively narrow restrictions that would leave the United States vulnerable to tax avoidance.
These are the companies abandoning the US to dodge taxes
The Washington Post Wonkblog listed those tax-dodging companies, spanning from 1983 to 2014, in a table that can be accessed here.
Robert Redford sues NY over $1.6M tax bill
Legendary actor Robert Redford is suing the state of New York over a $1.6 million tax bill related to the 2005 sale of a television channel, Jon Campbell wrote on Wednesday for the USA Today.
Redford sold a 20 percent stake in the Sundance Channel in 2005. Later, the state Department of Taxation and Finance audited the channel's filings and claimed Redford owed $845,000 in state taxes and $723,404 in interest.
In the lawsuit filed last week, Redford’s attorney claims the actor paid the proper taxes in his home state of Utah, Campbell wrote. The Sundance Channel is a limited liability company registered in New York, but Redford's stake in the company was through what is known as an “S corporation,” which requires shareholders to claim losses or gains on their income-tax returns.
The lawsuit, which was filed in state Supreme Court in Albany County, asks the court to toss the outstanding tax bill. Redford, 77, is also seeking fees for his attorneys, according to the article.
Kenneth A. Merchant receives 2014 AICPA Distinguished Achievement in Accounting Education Award
Kenneth A. Merchant, PhD, CPA, CGMA, is the recipient of the 2014 Distinguished Achievement in Accounting Education Award from the American Institute of CPAs (AICPA). He was honored at the annual meeting of the American Accounting Association (AAA) in Atlanta on Wednesday.
The award, presented annually since 1985, recognizes full-time accounting professors who excel as educators and have achieved national prominence in the accounting profession.
Merchant is the Deloitte & Touche LLP chair in accountancy at the Leventhal School of Accounting in the University of Southern California’s Marshall School of Business, and serves as a consultant to British Airways, World Bank, and McGraw-Hill, among other companies.
“Ken’s scholarship, teaching, and overall dedication to accounting education are extraordinary,” said Steve Matzke, AICPA director of faculty and university initiatives, who presented the award. “He embodies everything the Distinguished Achievement Award is meant to recognize, and his impact on the profession will be felt for years to come.”
Merchant, licensed as a CPA in Texas since 1972, previously served as dean of the Leventhal School of Accounting and was a research professor at the University of Maastricht in the Netherlands. From 1978 to 1990, he taught business administration at Harvard University. He has received awards from the AAA, including one for Lifetime Contribution to Management Accounting, and the Institute of Management Accountants. He served an honorary professor of accounting at the University of International Business and Economics in Beijing from 2009 to 2011.
A prolific writer, Merchant is the author or co-author of 11 books and many professional articles.
- NASBA doesn’t think the CPA exam is the worst part about becoming a CPA (Going Concern)
- EY is not against using the Deloitte LinkedIn group for recruiting purposes (Going Concern)
- Which Big 4 firm makes more from consulting than audit and tax combined? (Going Concern)
- Accounting is most profitable industry, study shows (Chicago Tribune)
- Ready or not (and you’re probably not) lease accounting changes are coming (GlobeSt.com)
- Why Albany, New York CPA firms are in the midst of a hiring spree (Albany Business Review)
- More details on Deloitte’s C. Fla. IT operations hub (Orlando Business Journal)
- SEC agrees to hear China group’s appeal for audit firms (Journal of Accountancy)
- Regulator seeks tough penalty for tax evasion case (Associated Press)
- Experts: Walgreen won’t go abroad – but others will (Associated Press)
- Deals’ demise wrecks funds’ bets (Wall Street Journal)
- Obama’s tax law rewrite (Wall Street Journal)
- Treasury’s tax powers could limit benefits of inversions (Bloomberg)
- Why Walgreen couldn’t risk quitting the US for lower taxes abroad (Bloomberg)
- The muddled road to overhauling corporate taxes (New York Times)
- The biggest winners from the tax inversion wave? Lawyers, of course (Fiscal Times)
- Companies should think twice before making blatant tax dodges (Time)
- Obama joins blame game as companies flee US for lower tax rates (Forbes)
- Wall Street be damned, moving out of America to dodge taxes would have decimated Walgreens (Forbes)
- As US firms flee to Europe, can Washington get its act together on tax reform? (Washington Post)
- Kansas bond rating downgraded after tax cuts (Washington Post)
- Does Congress really care about the deficit? Not when it comes to vets and highways. (TaxVox)
- Doing business in California (Tax Analysts)