Tax extenders head to Senate markup Thursday
The Senate Finance Committee will meet at 10 a.m. ET tomorrow to make revisions to a bill known as the Expiring Provisions Improvement Reform and Efficiency Act, which would address both retroactive implementation of the 50-some major tax extenders that expired last year and the temporary provisions that are set to expire at the end of this year, Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, reported yesterday.
All of the credits and deductions, however, would expire again at the end of 2015. The markup will allow the committee to vote for amendments, and then send the legislation to the full Senate for a vote.
Finance Committee Chairman Ron Wyden (D-OR) on Tuesday reiterated his comments last week that he intends this to be the last bill to renew the so-called tax extenders. He will push for more comprehensive tax reform once the credits and reductions are renewed, according to Chasan.
At hearing, Caterpillar defends tax practices
Caterpillar Inc. officials sparred with members of the Senate Permanent Subcommittee on Investigations yesterday, defending more than a decade’s worth of tax practices that put most of the company’s profits out of reach of US tax authorities, Mary Williams Walsh of the New York Times reported.
Panel Chairman Carl Levin (D-MI) contends that in 1999, Caterpillar gave its Swiss subsidiary its “crown jewels” – a highly profitable business of shipping replacement parts to offshore customers – without charging a valid price. According to the article, he said, “Everybody knows what’s happened here. It’s clearly a tax deal.”
But over the course of the five-hour hearing, Caterpillar officials stuck to their guns, with support from three consultants from PricewaterhouseCoopers (PwC). They warned the senators against oversimplifying the 1999 transaction and said some of the evidence they were relying on was out of date, Williams Walsh wrote.
The Senate investigators homed in on presentation materials that PwC used to pitch tax strategies to Caterpillar, and asked about e-mail messages the consultants had sent, discussing issues like whether the Swiss unit could really claim profits on parts designed in the United States.
“We’re going to have to create a story,” one tax partner on the assignment, Thomas F. Quinn, advised another, according to the article. “Get ready to do some dancing.”
“Senator, that was a very poor choice of words,” Quinn said at the hearing, adding that he was just trying to make sure “that managers understood the tax consequences of their actions.”
Caterpillar’s Swiss tax dodge was its auditor’s idea
Bloomberg View columnist Jonathan Weil also chimed in on yesterday’s Caterpillar hearing, writing that rules prohibit accounting firms from designing the computer systems at publicly traded audit clients, but its OK for them to design the same clients’ tax strategies, such as the offshore tax strategy that Caterpillar bought more than a decade ago from its auditor, PwC.
“The idea behind the ban on IT consulting was to promote auditor independence – which is the legal fiction that an accounting firm should stay at arm's length from its audit clients, even though that's impossible because the clients pay the auditor's fees,” Weil wrote.
“Yet Congress and the accounting firms' regulators continue to let audit firms do tax-consulting work for audit clients. Why is that? The short answer is that the accounting profession has very good lobbyists, and tax consulting is a lucrative business. Aside from that, there isn't a good reason.”
SEC chair discusses probes into high-speed trading
Saw this nugget on our sister site, Going Concern, this morning and thought it would be worth sharing here. According to a Reuters article yesterday, US Securities and Exchange Commission (SEC) Chairwoman Mary Jo White told a House appropriations panel the agency has several active investigations into possible wrongdoing by high-frequency stock traders and other equity market structure issues.
For years, the SEC has been looking into high-speed trading and “dark pool” trading, which takes place away from major exchanges, Reuters reported. Regulators hope to determine whether ordinary investors are at an unfair disadvantage to high-speed traders, who rapidly dart in and out of trades to earn fractions of a penny that add up to big profits over time.
In the last year, the SEC started subscribing to the same proprietary data trading feeds that the high-speed traders use, hoping to better understand how the markets are functioning.
White told lawmakers the SEC has not yet reached any conclusions on what, if any, new rules might be needed.
“Our approach at the SEC … is to be data-driven and disciplined to determine where high-frequency traders fit into the range of market quality issues,” she said, according to the article.
Alignment is key for internal audit to deliver more value
The demands on internal audit have increased significantly in recent years as technology has advanced, regulation has become more rigorous, risks have emerged, and companies have sought more business insights from internal audit teams, wrote Journal of Accountancy Senior Editor Ken Tysiac yesterday.
During a PwC webinar on Tuesday, FedEx Chief Audit Executive Robert King, CPA, said, “That bar continues to rise. And quite candidly, as you go down that journey and become seen in your organization as more of a trusted adviser, they continue to raise that bar, because they ask, ‘What more can you do?’” according to the article.
King said the internal audit function at FedEx has followed a process to develop additional value for the company in addition to the traditional assurance function. It’s important, though, that the quality of internal audit’s assurance deliverables to the audit committee does not suffer as the function adds value in other areas, Tysiac wrote.
“That’s always number one for us, that they need that control-level assurance that things are operating as they need to be,” King said, according to the article.
Americans paid 9.8 percent of income in state and local taxes in 2011
Americans paid 9.8 percent of their collective income in state and local taxes in 2011, according to the latest Annual State-Local Tax Burdens report, released this morning by the Tax Foundation. Using the most up-to-date data available, the report illustrates the state and local tax burden on taxpayers in each of the 50 states in 2011.
New Yorkers had the highest burden, paying 12.6 percent of their collective income in state and local taxes. New Jersey (12.3 percent) and Connecticut (11.9 percent) came in second and third, respectively, according to Richard Borean, Tax Foundation manager of communications.
On the other end of the spectrum, Wyoming (6.9 percent), Alaska (7 percent), and South Dakota (7.1 percent) have the lowest burdens.
What your accountant thinks about your Bitcoins
With the tax-filing deadline approaching, Bitcoin has reached a milestone in its long-shot quest to become real digital money. The ranks of taxpayers grappling with how to fit their cyberriches into their returns has grown large enough for the IRS to offer its first set of guidelines. And accountants are facing a small but noticeable uptick in questions from clients, Joshua Brustein of Bloomberg Businessweek wrote on March 31.
Given that few people really understand taxes and even fewer understand Bitcoins, it’s tempting to believe that tax issues surrounding the cybercurrency would be mind-blowingly complex, the article stated. Matthew Whatley, founder of Tax Ninja, said in most cases, things remain fairly simple. The IRS tried to clear things up last week by saying it considered Bitcoin property, not money – and anyone making money from Bitcoins should tell the government about it.
Brustein wrote that Whatley had already been advising his clients to consider Bitcoin investments as capital gains. But the IRS has officially eliminated a trick that could have been a potential windfall in a future where major purchases could be made with Bitcoins.
“There was this giant awesome loophole that existed,” says Whatley, according to the article. “If you had a million dollars in Bitcoin that you originally spent a few thousand dollars for, you could buy a house and not pay capital gains taxes on it.”
House taxwriters lobby for taste of ‘Ways & Means’ brew
Cheers to today’s Politico Morning Tax tipsheet for this fun item for us craft beer geeks. According to the Roll Call gossip blog, Heard on the Hill, Washington, DC-area brewer Port City Brewing Company has worked up a new rye-based American special bitter dubbed “Ways & Means.” And thanks to Representative Xavier Becerra (D-CA), House taxwriters won’t have to wander beyond the Capitol to sample the 4.8 percent-alcohol-by-volume beverage.
Becerra has helped organize a bipartisan reception featuring Port City’s seasonal draft to be co-hosted by House Ways and Means Chairman Dave Camp (R-MI) and ranking member Sander M. Levin (D-MI), Warren Rojas wrote yesterday. The off-the-record mixer is tentatively scheduled to take place on the evening of April 7, after votes have wrapped.”
The experimental IPA is also scheduled for wide release next Monday.
- Deloitte declares weekends are not for working, unless you are working (Going Concern)
- Improving audit reports is focus of hearing (Wall Street Journal)
- The newest trick in Paul Ryan’s Draconian budget (Slate)
- Paul Ryan just made tax reform harder (New Republic)
- GOP budget, Camp’s decision diminish tax reform chances (Don’t Mess With Taxes)
- House Republicans punt on tax reform (TaxVox)
- De-emphasizing tax reform (Washington Post)
- The internal House GOP war over a tax reform that will never happen (The Wire)
- Can a television network be a church? The IRS says yes (NPR)
- The IRS and the Tea Parties: Should you file that form? (American Thinker)
- Get time back with Square and Xero's new integration (Xero)