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Bramwell’s Lunch Beat: CEO of Clinton Foundation Admits to Tax Form Errors

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Apr 27th 2015
Staff Writer and Editor AccountingWEB
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Companies leaving trillions in cash overseas
The money US companies in the Russell 1000 Index earned and said they would keep overseas has more than doubled since 2008, according to research firm Audit Analytics, wrote John Kester of the Wall Street Journal’s CFO Journal. Those foreign indefinitely reinvested earnings reached $2.3 trillion dollars in fiscal 2014, the report said. Businesses must pay US taxes on some of their offshore earnings, such as royalties. But foreign earnings companies keep abroad to reinvest there escape domestic tax liability. Repatriating those earnings to the United States would force them to pay a 35 percent corporate tax, less any amount paid to foreign jurisdictions. Some 561 US companies in the Russell 1000 claimed indefinitely reinvested earnings abroad in the last fiscal year.

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Clinton Foundation: ‘We made mistakes’
The acting chief executive of the Clinton Foundation on Sunday addressed mistakes that the philanthropic organization has made, while also emphasizing that its policy regarding donor disclosure and foreign governments is “stronger than ever,” wrote Nick Gass of Politico. Maura Pally, the organization’s CEO and senior vice president, women and youth programs, said that the foundation “will likely refile” tax forms for some years after a voluntary external review, which found that it had “mistakenly combined” government grants with other donations. “So yes, we made mistakes, as many organizations of our size do, but we are acting quickly to remedy them, and have taken steps to ensure they don’t happen in the future,” Pally said. “We are committed to operating the Foundation responsibly and effectively to continue the life-changing work that this philanthropy is doing every day.”

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Clinton Foundation admits making mistakes on taxes
After a Reuters review found errors in how the Clinton Foundation reported government donors on its taxes, the charity said last week it would refile at least five annual tax returns, wrote Eric Beech of Reuters. The errors appeared on the Form 990 that all nonprofit organizations must file annually with the IRS to maintain their tax-exempt status.

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Inversion deals aren’t dead, they’re just more low-key
Brooke Sutherland of Bloomberg wrote that even though you might not hear of them as often as last year, tax inversion deals aren’t dead yet. Just last week, in a deal that was largely upstaged by bigger mergers and acquisitions news in the cable and drug industries, US telecommunications equipment maker Arris Group Inc. agreed to buy British set-top box maker Pace PLC for about $2.1 billion and become a UK company. While the transaction will be affected by the US Treasury Department’s rules on inversions, it will be highly accretive and reduce Arris’ tax rate. Shares of Arris surged 22 percent. The deal “will signal to people that, ‘Hey, the Treasury notice didn’t really end the game here and it’s still a worthwhile thing to do,’” said Robert Willens, a New York-based independent consultant on corporate taxes. “It’s not going to be an isolated event.”

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Tax break used by investors in flipping art faces scrutiny
Introduced in the 1920s to ease the tax burden of farmers who wanted to swap property, a provision in the tax code, known as like-kind exchange, soon became a tool for real estate investors flipping, say, office buildings for shopping malls. Now, this tax break has become a popular tactic for a new niche of investors: buyers of high-end art who want to put off – and sometimes completely avoid – federal taxes when upgrading their Diebenkorns for Rothkos, wrote Graham Bowley of the New York Times. The exchanges have become prevalent enough – and the cost to the government significant enough – that the Obama administration is seeking to eliminate them, a prospect causing no shortage of alarm in sectors of the art world. The maneuver allows an investor to delay paying the hefty 28 percent capital gains tax on sales of art and other so-called collectibles, like stamps and coins, by pouring the profits from one work into the purchase of a similar one.

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IRS technical guidance roundup (week of April 20)
The IRS issued the following technical guidance last week:

Notice 2015-35 provides a list of qualified income tax treaties that exempt all nationals of that country from the tax imposed under Section 5000C.

Notice 2015-37 provides guidance on eligibility for minimum essential coverage under § 36B of the Internal Revenue Code for individuals who may enroll in coverage under Children’s Health Insurance (CHIP) “buy-in” programs that the Department of Health and Human Services designates as minimum essential coverage.

AICPA releases Q&A on ALTA Best Practices Framework
The American Institute of CPAs (AICPA) has issued Questions and Answers (Q&A) Section 9540.01-05 (AICPA Technical Questions and Answers) to provide nonauthoritative guidance to practitioners in connection with the American Land Title Association (ALTA) Best Practices Framework. The Q&As address the types of engagements a practitioner may perform, the applicability to an attest engagement, the suitability of criteria, the nature of examination or review procedures, and the form and content of the report. Q&A Section 9540.05 also includes illustrative reports. ALTA seeks to guide its membership on best practices to protect consumers, promote quality service, provide for ongoing employee training, and meet legal and market requirements. The ALTA Best Practices Framework assists lenders in satisfying their responsibility to manage third-party vendors.

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