Bramwell's Lunch Beat: The Fixes Are in for FATCA

A better path to corporate tax reform
Robert Pozen, a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution, wrote an opinion piece for the Wall Street Journal this week on how he would solve the challenges of corporate tax reform.

He believes legislators should change the tax treatment of foreign profits of US corporations. Foreign profits are subject to a 35 percent US tax under current law, but that tax may be deferred indefinitely if those profits are kept abroad, the article stated.

What Pozen proposed is a global competitiveness tax of roughly 17 percent on all foreign profits of US corporations.

“The tax could not be deferred,” he said. “However, if a US corporation had already paid taxes of 17 percent or more to a foreign country, it would not be taxed again if these foreign profits were repatriated to the United States.

“Why 17 percent? This is the effective marginal rate paid, on average, by corporations in advanced industrial countries (excluding the United States’ exorbitant 35 percent),” Pozen continued. “A global competitiveness tax would encourage US corporations to put foreign profits to use in the United States, while removing the incentive for companies to transfer foreign profits to tax havens.”

[Click here to read an additional Wall Street Journal article on the White House targeting overseas corporate tax avoidance in its budget for fiscal year 2015.]

Treasury tweaks global tax dodge law one last time
Patrick Temple-West of Reuters reported yesterday that the US Treasury Department made some last-minute changes to the Foreign Account Tax Compliance Act (FATCA) before it goes into effect on July 1.

The Treasury said on Thursday that the largely technical reporting changes are “the last substantial package of regulations” needed to implement FATCA, the law enacted in 2010 that is meant to fight offshore tax evasion by Americans, the article stated.

Temple-West wrote the latest changes to the law involve making it easier for some foreign financial institutions to report customer information to the United States, addressing the concerns of both US and foreign banks.

[To read some additional articles about the final FATCA changes, click here (Journal of Accountancy), here (Wall Street Journal), and here (UPI).

House GOP to go after IRS
Representative Peter Roskam (R-IL) has authored two bills to be considered next week that are aimed at protecting taxpayers from IRS abuses, Pete Kasperowicz of The Hill reported today.

One of Roskam’s bills is the Taxpayer Transparency and Efficient Audit Act, HR 2530, which would require the IRS to tell taxpayers when it shares their tax information with another government agency and limits the time people can be subjected to an IRS audit to one year, the article stated.

“Republicans are wary that the IRS will improperly share personal tax information with other agencies as it tries to implement Obamacare and make determinations about who may qualify for tax credits when buying health insurance,” Kasperowicz wrote.

The other bill from Roskam is the Protecting Taxpayers from Intrusive IRS Requests Act, HR 2531, which would prevent the IRS from asking about people's religious or political beliefs, according to the article.

Both of Roskam's bills will be called up under a suspension of House rules, which means they'll need a two-thirds majority vote to pass.

House tees up vote to delay IRS rules on tax-exempt groups
Kasperowicz also reported for The Hill that the House next week is expected to pass a bill from House Ways and Means Committee Chairman Dave Camp (R-MI) – Stop Targeting Political Beliefs by the IRS, HR 3865 – that would delay pending IRS regulations aimed at limiting the political activities of certain tax-exempt groups.

The IRS proposed rules last November that would prohibit 501(c)(4) organizations with tax-exempt status from doing voter registration and performing other “get out the vote” activities. The IRS says its aim is to clearly define what activities these groups can participate in and still maintain their tax-exempt status, the article stated.

“But some Republicans see the regulation as a follow-up to the controversial IRS policy of examining only the tax-exempt status of conservative groups,” Kasperowicz  wrote yesterday. “Camp said his committee investigated the IRS targeting scandal and found that the IRS selected only conservative groups to audit.”

Camp's bill would delay the IRS rule for one year; the IRS is still taking public comment on it through February 27.

IRS is not yet prepared for expected deluge of calls about health care reform, commissioner says
During a stop at the IRS’s processing campus in Kansas City, Missouri, yesterday, new IRS Commissioner John Koskinen admitted the agency is not yet prepared to handle all the phone calls it expects when health reform hits millions of Americans’ tax returns next year, Mark Davis of the Kansas City Star reported.

Koskinen expects a deluge of calls next tax season when the Affordable Care Act first shows up on Americans’ tax returns. But, he said, the IRS lacks enough employees to handle the phone calls it is getting this tax season without Obamacare, Davis wrote.

“If our resources continue to be constrained, we’re going to face the same problem” next year, Koskinen said, according to the article.

Koskinen noted the Affordable Care Act triggered forty-seven system changes the IRS needs to complete for next tax season – and he’s “comfortable and confident” those will get done, according to Davis.

The five tech trends turning beancounters into business advisors
Sandi Smith Leyva of Accountant’s Accelerator wrote an article for CPA Trendlines on the top five technology areas that she believes are essential to best serve your clients.

“After over thirty years in this profession, accounting has never been more promising and more exciting,” she wrote. “The main reason is technology is driving data entry costs so low that it’s just about to disappear. That means we can finally focus on helping small businesses get more out of their accounting dollars through more analysis and better tools.”

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