Credit Suisse says pension assets at risk unless court delays sentencing
John Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for pension plans will be at risk unless a US court pushes back sentencing of the Swiss bank for aiding tax evasion, following its guilty plea in May.
In a motion filed on Tuesday in a Virginia court, Credit Suisse asked that sentencing, scheduled for next month, be pushed to “at least” the beginning of November because the bank hasn’t yet been able to receive permission from the US Department of Labor to continue to provide services to pension plans in light of its guilty plea, Letzing wrote.
Credit Suisse pleaded guilty on May 19 to conspiring to help Americans evade taxes and agreed to pay $2.6 million in fines.
If Credit Suisse is sentenced as scheduled on August 12 without first receiving Labor Department permission, that would “effectively preclude” the bank from managing finances on behalf of pension plans, it said. Without official consent from the department, counterparties on which Credit Suisse asset managers overseeing the plans regularly rely would likely cut ties with the bank once judgment in the case is entered, the bank said.
Credit Suisse says it manages “several billion dollars of assets for more than 100 such pension plans,” Letzing wrote.
IRS may have issued $439 million in erroneous tax refunds, report says
A new report from the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS might have issued $439 million in potentially erroneous tax refunds claimed on more than 187,000 amended tax returns in fiscal year 2012, Becky Yerak of the Chicago Tribune wrote on Wednesday.
The federal tax agency is also vulnerable to issuing an additional $2.1 billion in undeserved tax refunds on amended returns over the next five years if steps aren’t taken to modernize the filing of amended tax returns, the report noted.
TIGTA reviewed a statistical sample of 259 amended tax returns claiming tax refunds of at least $500. Of those, 17 percent were issued potentially undeserved tax refunds totaling $103,270, Yerak wrote.
TIGTA said the IRS could reduce erroneous refunds and processing costs by revising Form 1040, US Individual Income Tax Return, to allow for corrections to the original filing and to expand e-filing to include amended tax returns. To amend tax returns, taxpayers currently file Form 1040X, Amended US Individual Income Tax Return. The IRS only allows amended tax returns to be filed on paper. The IRS received more than 4 million amended tax returns in FY 2012, Yerak wrote.
In a statement on Wednesday, the IRS said it disagreed with TIGTA’s recommendation to allow taxpayers to use the Form 1040, rather than the Form 1040X, for amended returns.
“Not only would we need to make significant changes to our systems, but distinctions would continue to exist between the original and amended returns, regardless of the form appearance,” the IRS said, according to the article.
Lois Lerner cautioned against email chatter amid lawmaker probes
According to new emails released by Republicans on the House Oversight and Government Reform Committee, former IRS official Lois Lerner warned her colleagues to be careful about what they wrote in emails amid congressional inquiries, Rachael Bade of Politico wrote on Wednesday.
Lerner, the former head of the agency’s Exempt Organizations division, also asked whether the IRS’s internal messaging system could be searched, in the same email to an IRS colleague. It was sent on April 9, 2013, less than two weeks after the IRS inspector general who unearthed the Tea Party targeting practice shared a draft report with the agency.
“I was cautioning folks about email and how we have had several occasions where Congress has asked for emails and there has been an electronic search for responsive emails – so we need to be cautious about what we say in emails,” Lerner wrote to Maria Hooke, the IRS director of business systems planning for the tax-exempt division, according to the article. “Someone asked if OCS conversations were also searchable – I don’t know. … Do you know?”
According to Bade, Hooke responded to Lerner and cc’d Nan Downing, the head of exempt organizations examinations: “OSC messages are not set to automatically save as the standard; however, the functionality exists within the software. … My general recommendation is to treat the conservation as if it could/is being saved somewhere as it is possible for either party of the conversation to retain the information and have it turn up as part of an electric search.”
Republicans latched onto the correspondence to accuse Lerner of trying to hide IRS information from investigators and also chided the IRS for only now telling the panel that there is a whole other method in which agents could communicate, Bade wrote.
“For her to be worried right on the heels of this draft IG report that Congress may search her instant messages. … That is very troubling,” said Representative Ron DeSantis (R-FL), according to the article.
[For some additional reading, Lerner’s attorney tells the Washington Post that his client saved “some emails.”]
Dueling highway funding plans move ahead in US Congress
Lawmakers in the House and Senate plan to advance measures that would provide short-term infusions of cash into the Highway Trust Fund, setting up a clash over their dueling approaches, Laura Litvan and Richard Rubin of Bloomberg reported on Thursday.
According to the article, the biggest difference between the proposals is the Senate plan’s inclusion of two tax-compliance changes projected to generate $3.4 billion over the next decade, according to a summary released by the Joint Committee on Taxation on Thursday.
The House Ways and Means Committee on Thursday morning approved, by voice vote, a plan to provide more than $10 billion for road, bridge, and mass transit projects through May 2015. The panel rejected, by a 16-to-23 vote, a Democratic amendment to provide funds only through December 31 and seek approval of a six-year plan by then, Litvan and Rubin wrote.
The Senate Finance Committee plans to meet at 2:30 p.m. ET time today on a plan designed to draw support from members of both parties. It’s unclear how long a period the Senate bill would cover.
The Senate plan would still have to pass on the floor of the chamber and be reconciled with the House plan.
Lawmakers have just weeks to agree, as the existing two-year funding measure expires on September 30, and the US Department of Transportation predicts the fund will run close to dry by next month.
PwC must face $1 billion lawsuit over MF Global collapse
Jonathan Stempel of Reuters reported on Wednesday that a federal judge rejected PricewaterhouseCoopers' (PwC) request to dismiss a $1 billion lawsuit accusing the auditor of providing bad accounting advice that contributed to the October 2011 collapse of MF Global Holdings Ltd., a brokerage run by former New Jersey Governor Jon Corzine.
On Wednesday, US District Judge Victor Marrero rejected PwC’s argument that the MF Global’s bankruptcy plan administrator, which brought the lawsuit, “stands in the shoes” of the company under the “in pari delicto” legal doctrine, and cannot recover because Corzine and other officials were also to blame for the collapse.
Stempel noted that Marrero has yet to review other PwC arguments for dismissal, including that the administrator had no authority to sue and did not show that the accounting advice was a “proximate” cause of MF Global's bankruptcy.
A PwC spokesman had no immediate comment, according to the article. The auditor’s lawyer did not immediately respond to a request for comment.
The March 28 lawsuit accused PwC of professional malpractice for providing “flatly erroneous” advice on how to account for Corzine’s $6.3 billion investment in European sovereign debt.
[Daniel Fetterman of Kasowitz, Benson, Torres & Friedman LLP, who represents the plan administrator for MF Global, said in a statement emailed to AccountingWEB on Wednesday: "Judge Marrero's decision today is a significant step forward in enabling companies, including the plan administrator for MF Global Holdings, to hold their accounting firms liable for malpractice."]
Happy 61st ‘nameversary’ Internal Revenue Service
This from Kay Bell in her blog, Don’t Mess With Taxes: “On July 1, 1862, President Abraham Lincoln and Congress created the position of commissioner of Internal Revenue and enacted an income tax to pay Civil War expenses.
“George S. Boutwell, a diplomat, congressman, and former Treasury secretary from Massachusetts, was the first person to occupy the hot seat, serving from July 17, 1862 to March 4, 1863.
“And on July 9, 1953, the agency was renamed. Per Treasury Order 150-06, the Bureau of Internal Revenue became known as the Internal Revenue Service.”
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- Ventas fires EY as auditor over independence violation (Going Concern)
- Grant Thornton picks up a new client in the interest of penny-pinching (Going Concern)
- Landmark tax evasion law quietly kicks in (Politico)
- BNP Paribas pleads guilty to criminal charge in federal court (Wall Street Journal)
- American expats’ tax nightmare (Wall Street Journal)
- Vodafone says India budget doesn’t change its tax case (Wall Street Journal)
- Australia’s Senate blocks carbon-tax repeal (Wall Street Journal)
- EU opens investigation into tax exemptions for Dutch ports (Reuters)
- China to exempt electric cars from 10% purchase tax (Bloomberg)
- How the $1 billion Kennedy family fortune defies death and taxes (Forbes)
- Gov. Scott Walker’s opponent spreads falsehoods about his record on taxes (Forbes)
- LA Dodgers draw $18 million verdict in fan beating case … before taxes (Forbes)
- Potato salad Kickstarter guy may have to swallow $21,000 tax bill (Time)
- The criminal side of sales tax compliance (Tax Analysts)
- “Pension smoothing” is a sham (TaxVox)
- Home sales provide most owners a major tax break (Don’t Mess With Taxes)
- Nets to pay record $90M luxury tax (ESPN)
- Christie’s NJ budget delays property tax rebate again, angering seniors (The Star-Ledger)
- No pressure from Big Tobacco on tax, say Senate Republicans (Philadelphia Inquirer)
- Michael Caine, George Michael among celebrities who have used UK tax shelters (Hollywood Reporter)