Missouri transportation sales tax defeated
Voters in Missouri rejected a sales tax increase on Tuesday that would have provided billions of dollars for road and bridge repairs, wrote Jason Hancock of the Kansas City Star.
With 95 percent of precincts reporting, the sales tax hike was defeated with 59 percent voting no and 41 percent voting yes.
“It’s difficult to pass a tax increase in Missouri,” said Terry Ganey, spokesman for Missourians for Better Transportation Solutions, the group opposing the measure, according to the article. “It’s impossible to pass an unfair tax increase in Missouri.”
Lawmakers this year approved a proposed constitutional amendment that would have increased Missouri’s sales tax by three-quarters of a cent for 10 years. Over that time, the state’s tax on gasoline would have been frozen and new toll roads would have been prohibited, Hancock wrote.
The tax boost would have raised an estimated $5.4 billion over its lifetime. Local governments would have gotten 10 percent of that additional revenue. The rest would have gone to the state. More than 800 highway and transportation projects would have been funded by the boost.
Walgreen stays in US as it buys rest of Alliance Boots
Cynthia Koons and Makiko Kitamura of Bloomberg reported on Wednesday that Deerfield, Illinois-based Walgreen Co., the biggest drugstore chain in the United States, said it plans to buy all of Alliance Boots for about $15.3 billion – but won’t use the deal to move its tax address abroad.
Walgreen already owns 45 percent of Bern, Switzerland-based Boots, which has pharmacy and beauty stores in Europe. It will pay about $5.29 billion in cash and $10 billion in Walgreen stock for the remaining stake, the company said in a statement on Wednesday. The stock fell 9.2 percent to $62.75 at 7:10 a.m. in New York trading, Koons and Kitamura wrote.
Walgreen had considered moving its headquarters as a way to lower the tax rate it pays the US government. The drugstore chain has come under political pressure not to do a so-called tax inversion as other health companies, including drugmakers AbbVie Inc. and Pfizer Inc., struck or attempted deals to cut their own rates and leave the United States. Moving overseas could have saved Walgreen at least $4 billion in taxes over five years, according to Ross Muken, an analyst with ISI Group LLC.
“We undertook an extensive and rigorous analysis with a team of leading experts to determine the most optimal – and sustainable – course of action,” Walgreen CEO Gregory Wasson said in the statement, according to the article. “We could not arrive at a structure that provided the company and our board with the requisite level of confidence that a transaction of this significance would need to withstand extensive IRS review and scrutiny.”
[For some additional reading, Forbes business and tech contributor Tim Worstall wrote that the Walgreen/Boots deal wouldn’t have qualified as an inversion anyway.]
White House weighs actions to deter overseas tax flight
Treasury Secretary Jacob J. Lew said on Tuesday that the Obama administration is weighing plans to circumvent Congress and act on its own to curtail tax benefits for US companies that relocate overseas to lower their tax bills, seeking to stanch a recent wave of so-called corporate inversions, wrote Julie Hirschfeld Davis of the New York Times.
US Treasury Department officials are rushing to assemble an array of options that would essentially wipe out the economic incentive for the deals, Lew said. No final decision has been made.
“The question is: Can we do enough that it will materially change the economics of inversions so that companies will make different decisions?” Lew said in an interview, according to the article. “The things we are looking at look to me like they could very materially change the economics of inversions.”
While Lew said legislation was the “best solution” to addressing the issue, the recent flood of inversions has persuaded President Obama’s team that a quicker response may be necessary, Hirschfeld Davis wrote. A Bloomberg analysis estimated American companies are parking as much as $2 trillion in cash overseas.
“If Congress doesn’t act, we can’t wait for months or years to go by and just watch companies make decisions as if nothing will change,” Lew said, according to the article.
US Senate Democrats urge Obama to stop firms from moving tax domiciles overseas
Three prominent Democratic senators on Tuesday urged President Obama to use his executive authority to reduce or eliminate tax breaks for companies that shift their headquarters overseas to cut their US tax bills, wrote David Lawder of Reuters.
Senator Richard Durbin (D-IL), the second-ranking Senate Democrat, along with senators Jack Reed (D-RI) and Elizabeth Warren (D-MA), said immediate action was needed to stop inversions.
“Although we will continue to work toward a legislative solution to the problem, we urge you to use your authority to reduce or eliminate tax breaks associated with inversions,” the senators wrote in a letter to the president, according to the article.
They said companies that have moved their tax domiciles abroad still benefit from US government investments and tax expenditures, from infrastructure spending, patent protections, and tax credits for research, Lawder noted.
"Yet these companies claim to be foreign corporations when it's time to pay their tax bill – denying the United States billions of dollars in tax revenue and thereby increasing the tax burden on other US taxpayers," they wrote, according to the article.
A former US Treasury Department official said last week that the president could invoke a 1969 tax law to bypass congressional gridlock and restrict foreign tax-domiciled US companies from using inter-company loans and interest deductions to cut their US tax bills.
Treasury’s inversion plan highlights mixed congressional track record
Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, wrote on Tuesday that over the past decades, Congress has tried to halt inversions but with a slow and mixed track record.
The trend first sparked congressional ire in the 1990s. In the earlier wave of inversions, public companies restructured internally to form a parent corporation in a lower-tax jurisdiction, such as Bermuda. A handful of bills aimed at stopping inversions were introduced in 2002 and 2003, including the Corporate Patriot Enforcement Act of 2002 and the Uncle Sam Wants You Act of 2002, Chasan noted.
But it took until 2004 to stop that wave with the American Jobs Creation Act of 2004, which added a rule to the Internal Revenue Code, known as Section 7874, that curbed the tax benefits.
Even though that law essentially made internal inversions impossible, now it is easier for companies to justify inversions via international acquisitions as business has become more global in the past decade, said Timothy Larson, a tax partner at accounting firm Marcum LLP in New York, according to the article.
Obama aides let Delphi use tax tactic president assails
Zachary R. Mider of Bloomberg wrote on Tuesday that the Obama administration actually helped one $20 billion American company adopt a foreign address to avoid taxes.
As part of the bailout of the auto industry in 2009, Obama’s Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet – as a British company. While executives continue to run Delphi Automotive PLC from a Detroit suburb, the paper headquarters in England potentially reduces the company’s US tax bill by as much as $110 million a year, Mider wrote.
The Obama administration is now trying to rescind the tax benefits of the Delphi deal that it helped broker. In June, the IRS told Delphi that the 2009 address change should be disregarded for tax purposes, and that Delphi must pay taxes as a US company. Delphi says in a securities filing that it will “vigorously contest” the IRS’s demand.
“The recent rise in inversion transactions has the IRS and Treasury and the president understandably rattled, so they’re now trying to play catch up,” said Julie Roin, a tax professor at University of Chicago Law School, according to the article. “They were worried about other things in 2009.”
OCC ‘disappointed’ at lack of accounting convergence
The Office of the Comptroller of the Currency (OCC) expressed disappointment at the failure of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to close the gap between US and international accounting frameworks – one consequence of which could be higher loss reserves at US banks, and the need for regulators to even up a resulting disparity in capital, wrote Lucas Becker of Risk Magazine.
“The OCC is disappointed that standard setters have been unable to achieve full convergence at this juncture, particularly on accounting for financial instruments,” said Jeffrey Geer, acting deputy comptroller and chief accountant at the OCC, according to the article. “We understand the challenges the two boards faced in trying to improve financial reporting in all jurisdictions given the different starting places of current accounting practices worldwide, but converged accounting standards remain a long-term goal.”
The IASB and FASB proposed a joint expected loss model in 2011, which bucketed loans by severity of losses, Becker wrote. The two boards surveyed their respective stakeholders about the proposed model, and received two different answers – the IASB's stakeholders liked the model, while the FASB's US stakeholders thought it was too complex. The FASB instead proposed its own expected credit loss model in 2012, which diverged from the original joint proposal.
The IASB released its final version of the impairment model in July, and the FASB is due to do likewise later this year, but market participants do not expect the two models to be converged.
Call for speakers for IMA’s 2015 Annual Conference & Exposition
The Institute of Management Accountants (IMA) is seeking proposals for presentations and educational programs for its 96th Annual Conference & Exposition to be held on June 20 to 24, 2015, at the Westin Bonaventure in Los Angeles, California. The 2014 Annual Conference, which was held in Minneapolis, attracted more than 900 CFOs, controllers, and other finance practitioners.
Conference sessions are 75 minutes in length and include 10 to 15 minutes for questions and answers (pre-conference workshops can be up to 135 minutes).
Interested persons must complete a speaker proposal form and submit it online to the IMA by 11:59 p.m. on August 31, 2014.
Primary speaker benefits include:
- A complimentary conference registration.
- A $500 stipend to defray travel expenses.
- One night’s lodging (room and tax only) at the Westin Bonaventure.
Speaker proposals will be evaluated by IMA’s 2015 Program Committee for relevant content, including learning objectives, relevance to the profession’s needs, and speaker qualifications. Speakers will be notified of acceptance by mid-November 2014. More information can be found here.
Ivo D. Tafkov receives CGMA-sponsored Early Career Researcher Award
The American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) has named Ivo D. Tafkov, PhD, assistant professor of accountancy at Georgia State University, recipient of the 2014 Best Early Career Researcher Award.
The honor, which recognizes the best overall body of research in management accounting, is sponsored by the AICPA and CIMA, on behalf of Chartered Global Management Accountant designation. It is granted in collaboration with the management accounting section of the American Accounting Association (AAA).
Kristy Towry, PhD, associate professor of accounting at Emory University Goizueta Business School and a previous winner of the Best Early Career Researcher Award, presented Tafkov with the award at the annual AAA Conference in Atlanta.
Tafkov earned the award as a result of research contributions within five years of earning his doctorate. He investigates the effects of economic and behavioral factors on effort and performance. Two research papers on the topic are forthcoming in The Accounting Review. The award is accompanied by a $2,000 grant.
“Dr. Tafkov’s work in the field of management accounting at an early stage of his career is extremely impressive,” said Towry. “I am confident he will build upon his research and continue to advance our understanding of how incentives impact performance.”
Tafkov holds a doctorate from Emory University and an MBA from Kennesaw State University. He received his undergraduate degree from Sofia University in Bulgaria.
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