Bramwell’s Lunch Beat: GOP Takes Another Shot at Making Tax Breaks Permanentby
SEC, Chinese affiliates of accounting firms near settlement
The US Securities and Exchange Commission (SEC) and the Chinese affiliates of the Big Four accounting firms are close to settling a dispute that had threatened to complicate the audits of dozens of Chinese companies and US multinationals, wrote Michael Rapoport and Jean Eaglesham of the Wall Street Journal. The prospective settlement, which could be announced as early as Thursday, would sanction the Chinese audit firms for refusing to give the SEC documents about some of their US-traded Chinese clients that were under SEC investigation. The firms – the Chinese arms of PwC, Deloitte Touche Tohmatsu, KPMG, and EY – would pay fines totaling about $2 million. The tentative settlement also tosses out a six-month suspension from auditing US-traded companies.
Republicans try again to revive, lock in lapsed US tax breaks
The House Ways and Means Committee voted to revive and permanently extend six lapsed tax breaks that would help small businesses and people who make charitable contributions, wrote Richard Rubin of Bloomberg. The tax benefits expired at the end of 2014 and are among several dozen provisions that Congress has routinely extended after allowing them to lapse. “We’ve all been down this road so many times – retroactive extensions, uncertainty,” said Ways and Means Committee Chairman Paul Ryan (R-WI). “Let’s make these permanent. Let’s give people certainty.” The largest break would let small businesses write off their capital investments immediately instead of deducting them over several years. Others provide incentives for donating the development rights to land, donating food inventory, and making charitable contributions directly from tax-advantaged retirement accounts. The other two benefit S corporations.
Republicans usually opposed to Obama see promise in tax plan
Rubin also wrote for Bloomberg that Republican lawmakers are doing something surprising with President Obama’s proposal to tax US companies’ overseas profits. They’re calling it constructive. Top members of the committees focused on taxes in Congress say they see Obama’s latest plan as a place to start negotiations toward a revamped business tax system that would lower rates, remove breaks, and make it easier for companies to bring home their foreign profits. “They seem to be moving in the right direction,” Rep. Charles Boustany (R-LA) said in an interview. “We have an opening to test their intent on reform, so we’ll work to put proposals forward and see if they’re willing to bite on it.” After years of stalemate on revamping the tax code, lawmakers say they need to move quickly to explore a possible deal before momentum fades and the 2016 presidential election takes attention away.
Companies too big to invert would take brunt of Obama tax plan
President Obama’s proposal to tax the offshore profits of US corporations could encourage all but the largest companies to follow their cash hoard overseas, wrote David Kocieniewski of Bloomberg. The plan would levy a one-time tax of 14 percent on the $2.1 trillion US companies have stockpiled abroad, sidestepping the IRS. It also calls for a 19 percent minimum tax on future foreign earnings. The prospect of those increased taxes could spur some companies to relinquish their US residency altogether – either by merging with a foreign partner in a corporate inversion or finding a foreign buyer, according to J. Richard Harvey, a former senior official for the US Treasury Department and the IRS. Tax lawyers said there could even be a rush to do so to avoid limitations the administration is also proposing on inversions, in which US companies shift their addresses overseas to tax-friendly locations.
Republicans give thumbs down to IRS Commissioner John Koskinen
John Koskinen took over the IRS vowing to restore trust, mend fences, and win back federal funding. But he hasn’t gotten very far, wrote Bernie Becker of The Hill. More than a year into his tenure, some GOP lawmakers say the commissioner has lost his chance to win them over. “The IRS has less credibility now than when he took over,” said Rep. Kevin Brady (R-TX), a senior Republican on the House Ways and Means Committee. “And I think we will need a new commissioner before that credibility is regained.” The IRS chief just saw his already pared-down budget slashed $346 million, and could face further cutbacks, with Republicans still angry about his response to congressional investigations into the its improper scrutiny of Tea Party groups. Koskinen, whose term ends in November 2017, acknowledged that his pitch for a funding boost has fallen flat, but he said winning converts on Capitol Hill was always going to be a long haul. “I didn’t have a timeline,” he said.
GOP wants White House’s O-care plan B
Obama administration officials are refusing to say whether they have an Obamacare backup plan if the US Supreme Court torpedoes the law. But Republicans don’t believe them, wrote Sarah Ferris of The Hill. GOP lawmakers on the Senate Finance Committee repeatedly pressed Health and Human Services (HHS) Secretary Sylvia Mathews Burwell on the issue. But Burwell on Wednesday did not budge during a tense back-and-forth, with a half-dozen Republicans claiming that the administration must have a “plan B.” The case, which begins oral arguments next month, could make billions of dollars of healthcare subsidies disappear in 37 states. And with such high stakes, former HHS officials said they are confident the administration is preparing a backup plan. “Of course they have one, they should all resign if they don’t,” said Tom Scully, an HHS official under former President George W. Bush. “And they certainly should not discuss it either.”
PCAOB attempting to make standard setting more efficient
The Public Company Accounting Oversight Board (PCAOB) is exploring ways to make its standard-setting process more efficient, Chairman James Doty said on Wednesday during an open meeting of the SEC, wrote Ken Tysiac of the Journal of Accountancy. In December, SEC Chief Accountant James Schnurr said that there may be an underlying problem with the PCAOB’s standard-setting process that is preventing the board from moving projects forward in a timely and effective manner. As the SEC met and approved the PCAOB’s $250.9 million budget for 2015 on Wednesday, Doty said he has been meeting with Schnurr in an effort to improve the board’s standard-setting process. The PCAOB considers extensive feedback during its standard-setting process, and it can take more than five years between the initial consideration of a standard and final issuance.
Audit watchdog faces SEC over bid to name accountants
Also during yesterday’s SEC meeting, the PCAOB vowed to press forward with a controversial plan to name the auditors of public companies that has been the focus of a five-year battle with industry, wrote Dave Michaels of Bloomberg. The PCAOB plans in the coming months to reissue the proposal, which has been opposed by accounting firms that say it will make auditors a bigger target of lawsuits. PCAOB Chairman James Doty told SEC members that the new measure should be more acceptable to the SEC and the audit industry. “We have reached an approach that we think is workable and avoids some of the problems that we discovered,” he said. The PCAOB says affixing a name to audits, which have long carried only the firm’s identity, would improve accountability and let investors discern good auditors from bad ones. The SEC has questioned whether disclosure would create barriers for companies raising capital.
UBS faces a new tax-evasion probe
Federal prosecutors have launched a new probe into whether Swiss bank UBS AG helped Americans evade taxes through investments largely banned in the United States, wrote Christopher M. Matthews and Devlin Barrett of the Wall Street Journal. UBS, which paid $780 million in 2009 to settle a separate US Justice Department tax-evasion probe, is in the cross hairs again for allegedly helping wealthy clients hide assets, this time through so-called bearer securities. These securities, which were largely phased out of the US financial system beginning in 1982 because of their potential use in tax evasion and money laundering, function essentially like cash, allowing whoever holds the certificate to anonymously claim its value. Prosecutors in the US attorney’s office in Brooklyn, New York, are weighing evidence gathered with the FBI to determine whether employees of the bank helped facilitate tax evasion or engaged in securities fraud.
China to crack down on tax collection from multinational companies
China’s tax officials plan to step up efforts to collect taxes from multinational corporations in the latest of a series of moves in the last year, mostly against Western companies, wrote Keith Bradsher of the New York Times. The State Administration of Taxation said on Tuesday that it would be looking in detail at how companies move money and allocate costs among their Chinese operations and their overseas businesses. Although such a review could also be applied to the many Chinese businesses that have set up holding companies in the Cayman Islands and elsewhere to avoid taxation, accountants said the main target of the latest initiative appeared to be foreign-owned firms. “The focus right now is multinationals’ paying their fair share of taxes,” said Howard Yu, a corporate tax partner at PwC in Beijing. He added that the Beijing office of the national tax agency had set up an international division with an emphasis on auditing multinationals.
IRS is coming after Tom Brady’s Super Bowl MVP truck
As the MVP of last weekend’s Super Bowl, New England Patriots quarterback Tom Brady was awarded a 2015 Chevy Colorado truck. But that vehicle is considered a taxable prize under Section 74 of the Internal Revenue Code, wrote Forbes contributor Ryan Ellis. “It’s taxed at Tom Brady’s marginal income tax rate of 39.6 percent (plus state income tax, but I’ll leave the focus on federal here),” Ellis wrote. “According to TrueCar.com, the fair market value of a 2015 Chevy Colorado is in the neighborhood of $34,000. This is likely an understatement, since it includes none of the options that Chevy no doubt added to the vehicle. So Tom Brady will pay ($34,000 x 39.6 percent) in taxes, or $13,500 in income tax on this prize.”