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Bramwell’s Lunch Beat: Don’t Expect Senate to Tweak House Tax Break Bill

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Dec 5th 2014
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New draft strategic plan for FAF, FASB, and GASB
The Financial Accounting Foundation (FAF) and the two standard-setting bodies it oversees, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB), issued a draft strategic plan on Thursday.

Stakeholders are encouraged to read and share the draft strategic plan, and send their comments via email to [email protected]. The FAF Board of Trustees is expected to consider adopting the plan during its February 2015 meeting.

In her “President’s Desk” column for December 2014/January 2015, FAF President and CEO Teresa Polley wrote the goal of the strategic plan was “to establish clearly articulated, easily understood statements of our vision and our mission, accompanied by a list of our top priorities.”

The top four priorities for the three organizations are:

  • Practicing and promoting continued excellence in standard setting.
  • Demonstrating a commitment to leadership in standard setting.
  • Building and maintaining trust with stakeholders.
  • Contributing to the public discourse on current and future financial reporting issues.

“Our plan was to use this as an opportunity to initiate an in-depth dialogue about these issues, not only internally, but also with our stakeholders, and then craft a high-level planning document to guide us as we move forward in the months and years ahead,” Polley wrote.

Bare-minimum tax break plan won’t get Senate changes, Wyden says
The House of Representatives voted on Wednesday to revive dozens of lapsed US tax breaks only for 2014, and the Senate now looks likely to follow suit within days, wrote Richard Rubin of Bloomberg.

Senate Finance Committee Chairman Ron Wyden (D-OR) told reporters on Thursday that the Senate wouldn’t amend the House bill, setting the stage for an up-or-down vote, probably within a week.

The House’s 378-46 vote late Wednesday would provide $42 billion in temporary relief to taxpayers, including companies that rely on the research tax credit and the production tax credit for wind energy, Rubin wrote. It provides no certainty for the tax breaks in 2015, though lawmakers said the one-year extension was the best available option after a broader deal collapsed.

“The public deserves better than the equivalent of looking at a Magic 8-ball,” Wyden said, according to the article.

Senate leaders haven’t said when they will consider the measure. The bipartisan House vote, tacit support from the White House, and lack of time left before Congress adjourns before the end of the year signal that the Senate will probably pass the bill and examine the tax breaks again in 2015.

[Some additional reading: Ramsey Cox of The Hillreported that Senate Majority Leader Harry Reid (D-NV) said Thursday night the Senate might not be able to pass the House tax extenders bill before the end of the year.]

IRS: Interest rates remain the same for the first quarter of 2015
Interest rates will remain the same for the calendar quarter beginning on Jan. 1, 2015, the IRS announced on Thursday.

According to Revenue Ruling 2014-29, the rates for the first quarter of next year will be:

  • Three percent for overpayments (2 percent for corporations).
  • Three percent for underpayments.
  • Five percent for large corporate underpayments.
  • One-half percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, interest rates are determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points, according to the IRS. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.

The interest rates announced by the IRS on Dec. 4 are computed from the federal short-term rate, which was determined during October 2014 to take effect Nov. 1, 2014, based on daily compounding.

Paul cites high cigarette taxes in death
Sen. Rand Paul (R-KY) says that politicians and taxes are to blame for the police chokehold death of Eric Garner, according to an article by Lucy McCalmont of Politico.

“Obviously, the individual circumstances are important, but I think it’s also important to know that some politician put a tax of $5.85 on a pack of cigarettes, so they’ve driven cigarettes underground by making them so expensive,” Paul said Wednesday on MSNBC’s “Hardball with Chris Matthews,” according to the article. “But then some politician also had to direct the police to say, ‘Hey, we want you arresting people for selling a loose cigarette.’”

A New York City grand jury decided on Wednesday not to return an indictment in the July death of Garner. The 43-year-old father of six died after being placed in a chokehold by a city police officer who was arresting him on suspicion of selling untaxed cigarettes. The grand jury’s decision sparked protests in New York City and an announcement from Attorney General Eric Holder that the US Justice Department is launching a separate federal investigation into Garner’s death, McCalmont wrote.

Canada approves Burger King’s deal to buy Tim Hortons
Paul Vieira of the Wall Street Journalreported that the Canadian government approved Burger King Worldwide Inc.’s $11 billion deal to buy local coffee-and-doughnut retailer Tim Hortons Inc. on Thursday, clearing another hurdle toward the creation of the world’s third-largest fast-food restaurant chain.

The deal, which is partly financed by Warren Buffett, sparked fierce debate in the United States as some lawmakers accused Burger King of buying the Canadian firm to relocate headquarters abroad for tax purposes.

Burger King executives have said the transaction wasn’t driven by taxes. The Canadian government said the global headquarters of the combined company, with about $23 billion in system sales across more than 18,000 restaurants, would be based in Oakville, Ontario, a suburb of Toronto, Vieira wrote.

“Our government is pleased to see companies like Burger King investing in Canada’s economy and looking to benefit from our low taxes and open markets,” Canadian Industry Minister James Moore said in a statement, according to the article.

UK’s ‘Google Tax’ draws skepticism
The British government hasn’t disclosed many details about a new 25 percent tax announced on Wednesday that it intends to levy on companies it accuses of dodging taxes. But tax experts and attorneys are already saying it could conflict with international tax treaties, some of which date back to the 1920s, wrote Lisa Fleisher of the Wall Street Journal.

The measure, unveiled in Parliament on Wednesday as part of a broader government spending and taxation plan, is officially called the “diverted profits tax.” But after Chancellor of the Exchequer George Osborne cited multinational technology companies as potential targets of the new tax, the British press quickly dubbed it the “ Google tax.”

Because of a web of treaties – many of them bilateral and individually negotiated between states over the years – many of these companies, like Facebook Inc. and Google Inc., are legally able to move much of their taxable profits offshore to lower-tax regimes.

The proposal would tax at 25 percent profits the government determines a company inappropriately shifted to lower-tax regimes, Fleisher wrote. The United Kingdom has recently moved aggressively to lower its headline corporate rate, which now stands at a maximum of 21 percent.

“The big technical companies are not stupid,” said Heather Self, a partner at law firm Pinsent Masons LLP, according to the article. “I find it very hard to believe that they will have a structure that fits the definition of being abusive.”

CAQ, Audit Analytics release findings from new Audit Committee Transparency Barometer
The Center for Audit Quality (CAQ), along with research firm Audit Analytics, has completed an extensive analysis of 2014 audit committee disclosures in proxy statements, applying a “barometer” for the first time to measure the robustness of these disclosures among 1,500 Standard & Poor’s (S&P) composite companies.

The Audit Committee Transparency Barometer measures the content of proxy statement disclosures in certain key areas, including auditor oversight and audit committee scope of duties. This information will serve as a baseline reference point measurement for reporting by companies in these indices in future proxy seasons.

In this research effort, the CAQ and Audit Analytics reviewed the most current proxies – filed through the end of June 2014 – of 1,500 S&P composite companies, including companies in the S&P 500, S&P MidCap 400, and S&P SmallCap 600.

Some of the key findings include:

  • Eighty-three percent of S&P 500, 69 percent of S&P MidCap, and 58 percent of S&P SmallCap companies discussed in their proxy statements how nonaudit services may impact independence.
  • Forty-seven percent of S&P 500, 42 percent of S&P MidCap, and 50 percent of S&P SmallCap companies disclosed in their proxy statements the length of time an auditor has been engaged.
  • Thirteen percent of S&P 500, 10 percent of S&P MidCap, and 8 percent of S&P SmallCap companies discussed in their proxy statements the audit committee’s considerations in appointing the auditor in terms of qualifications, geographic reach, and firm expertise.
  • Thirteen percent of S&P 500, 4 percent of S&P MidCap, and 1 percent of S&P SmallCap companies discussed in their proxy statements audit fees and their connection to audit quality.

“We think it is important to provide a baseline for audit committee disclosures, with the intent of tracking trends and leading practices on an annual basis moving forward,” CAQ Executive Director Cindy Fornelli said in a written statement. “Greater transparency about the audit committee’s roles and responsibilities provides an opportunity to communicate more clearly to shareholders about one of its key responsibilities, auditor oversight, which in turn may enhance audit quality.”

Quick Links:

  • Those who know, know BDO got their AS5 kicked in latest PCAOB inspection report (Going Concern)
  • 7 risk areas for the 2014 audit cycle (Journal of Accountancy)
  • Schorsch’s RCS Capital jumps after settling ARCP lawsuit (Bloomberg)
  • SEC charges Virginia Beach-based holding company with accounting violations (SEC)
  • London mayor is poster boy for expat tax woes (Wall Street Journal)
  • Britain and the ‘Google tax’ (Wall Street Journal)
  • UK tax change prompts rethink on fund structures (Wall Street Journal)
  • Agreement deadline on EU financial transactions tax could be missed (Wall Street Journal)
  • China’s tax authority targets income of foreigners, wealthy Chinese (Wall Street Journal)
  • British Treasury targets banks to increase tax revenue (DealBook)
  • The next tax fight (New York Times)
  • Of taxes, pigs and Congress (New York Times)
  • Congress needs to get its priorities straight on the tax extenders (Center for American Progress)
  • Should you file your own tax return? (Fox Business)
  • What if your employer didn’t pay withheld tax to the IRS? (Fox Business)
  • The reasons to be skeptical about the UK’s Google Tax (Forbes)
  • The ‘Netflix tax’ – headaches on the horizon for digital content providers (Forbes)
  • IRS approach to taxation of bitcoin (Forbes)
  • Alibaba, taxes and death (of small merchants) (Forbes)
  • Job creation by tax reduction (Forbes)
  • Recovered IRS emails can’t be revealed because of privacy … that was already breached (Forbes)
  • Extenders bill is a wasteful corporate giveaway (Tax Justice Blog)
  • Why now may be the time to implement higher gas taxes (Tax Justice Blog)
  • Dave Camp’s reform plan should not be the starting point for the tax debate (Tax Justice Blog)
  • Thomson Reuters releases Checkpoint special report on key tax developments in 2014 (Thomson Reuters)
  • Enhanced professional tax preparation software for the 2014 tax season released by Wolters Kluwer, CCH Small Firm Services (Wolters Kluwer, CCH)
  • LedgerDocs’ QuickBooks Online integration completes the accounting loop (LedgerDocs)
  • SmartVault lands $4.5 million in series B funding round (SmartVault)
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