Yellen wins backing of senators to lead Fed
Congratulations to Janet Yellen, who was confirmed by the Senate on January 6 as chairwoman of the Federal Reserve, marking the first time that a woman will lead the country’s central bank in its 100-year history, the New York Times reported.
“As a Fed official, Ms. Yellen, sixty-seven, has been an influential proponent of the Fed’s extraordinary measures to revive the economy, even though interest rates are already close to zero,” Annie Lowrey wrote. “But as chairwoman, Ms. Yellen will face the arduous task of overseeing the gradual unwinding of those measures, despite an uncomfortably high unemployment rate of 7 percent and subdued inflation.”
Yellen was approved by a vote of fifty-six to twenty-six, with many senators absent from the Capitol on Monday because of the inclement weather in Washington, DC.
What the proposed ad tax could mean for you
Congress recently proposed a measure that would limit the immediate deductibility of advertising costs as part of a broader tax-reform effort. In a January 6 article for Advertising Age, Andrew Osterland breaks down how the proposed ad tax could affect small businesses and startups.
The proposal, introduced by House Ways and Means Committee Chairman Dave Camp (R-MI) in November 2013, would enable companies to deduct 50 percent of their advertising costs in the year they are incurred, with the remaining 50 percent amortized over the following ten years, Osterland reported. Senate Finance Committee Chairman Max Baucus (D-MT) proposed a five-year amortization period.
“For large companies with big advertising budgets, the policy change would be a nuisance in the short-term but ultimately it would only delay – not limit – the deductibility of advertising expenses,” he wrote.
“The proposal would likely have a more significant effect on startups and small businesses for which cash management is crucial,” Osterland added.
New IRS commissioner addresses agency challenges
During the first meeting he held with the media on January 6, new IRS Commissioner John Koskinen said his top priorities include restoring public trust, finding adequate funding for the agency, and fighting tax fraud and evasion, the Washington Post reported.
The IRS came under fire last year for its role in improperly scrutinizing the federal tax-exempt status of conservative groups like the Tea Party. During the meeting, Koskinen suggested that the agency’s problematic behavior toward advocacy groups was partly due to confusion about the existing tax-exemption rules and how to apply them, the article stated. He noted new guidelines the Treasury Department proposed in November 2013 to help the IRS determine which type of activities will disqualify groups from tax-exempt status.
Businesses bracing for accounting shift
Albuquerque Journal Staff Writer Winthrop Quigley wrote on January 6 about the Senate Finance Committee’s proposal that would force many businesses to maintain their accounts using the accrual method of accounting instead of the cash method of accounting.
Under the cash method of accounting, the business records transactions only when cash changes hands, while the accrual method requires the business operator to record transactions when they occur, even if no cash changes hands.
Last month, the American Institute of CPAs (AICPA) sent a letter to Senate Finance Committee Chairman Max Baucus (D-MT) expressing concern with the proposal. The AICPA believes it would “restrict the use of the long-standing cash method of accounting for the thousands of US businesses that rely on it.”
Commuters pinched on tax break as Congress deadlock lasts
Heidi Przybyla and Richard Rubin of Bloomberg wrote on January 6 about another of the fifty-five tax breaks that expired at the end of 2013, this one a commuter tax break worth as much as $115 a month for mass-transit users.
“Both [Republican and Democratic] parties usually come together each year at some point to approve the commuter tax break and others – tax provisions valued at $50 billion a year,” the article stated. “Most of the items, such as the tax credit for research and development, can easily be restored retroactively and handled on tax returns filed in 2015.
“Mass-transit users, who receive their tax break monthly, are harder to make whole,” Przybyla and Rubin continued. “In other words, commuters lose the cash until Congress acts.”
According to the article, commuters can set aside money in tax-free accounts for transit and parking costs each month. The amount was capped at $245 a month last year. While the parking benefit increased to $250 for 2014, the transit benefit dropped to $130, pinching commuters in New York, Washington, and other cities.
Alexander: Stop wasting taxpayer dollars on wind energy tax break
And while we’re on the subject of the expired tax breaks, Senator Lamar Alexander (R-TN) told Congress on January 6 that it should not renew the wind energy tax credit. Instead, he said the money would be better spent reducing the federal debt, The Hill reported.
The senator argued the tax break is outdated because the wind industry is now fully developed. Alexander also said wind turbines are a “scar on the landscape,” the article stated.