Bramwell’s Lunch Beat: IPO Investors Turn Blind Eye to Material Weaknessesby
House to take up research credit
House Republicans will vote this month to permanently extend the popular tax credit for business research and development (R&D), wrote Bernie Becker of The Hill. Majority Leader Kevin McCarthy (R-CA) said the House would vote the week of May 18 on the proposal from Rep. Kevin Brady (R-TX), a senior Republican on the Ways and Means Committee. The vote will mark the latest measure from House Republicans that would indefinitely extend tax incentives that currently expire on a stop-and-start basis. The House passed a similar measure last year with the support of dozens of Democrats. Congressional scorekeepers have estimated that the R&D measure would cost more than $181 billion over a decade.
Investors in hot IPOs are overlooking some serious risks
Leslie Picker of Bloomberg wrote that roughly 30 percent of companies that went public last year acknowledged they were at serious risk of incorrectly reporting their financial information, according to a study by New York law firm Proskauer Rose LLP. That’s up from 17 percent of issuers in 2013, the study shows. Yet investors weren’t bothered. The 32 companies – from GrubHub Inc. to GoPro Inc. – that reported material weaknesses in their accounting systems last year have surged an average of 42 percent since their stock debuts. Often times, material weaknesses don’t amount to much – which is one reason some investors say they aren’t deterred by such disclosures. While they can increase a company’s risk profile, the warnings are often a result of advisors being too protective, said Eric Jackson, president of Ironfire Capital, a hedge fund in Naples, Florida. “One reason it’s rising is over-lawyering/CPA creep,” he added.
Ryan still hopes for small tax deal
House Ways and Means Committee Chairman Paul Ryan (R-WI) is thinking small – and that’s not a bad thing, Kevin G. Hall wrote in an article for The Olympian. Ryan is still hopeful that a package of fixes to the US tax code is doable over the summer, a timetable he set in February assuming after that point presidential electoral politics will cloud everything. “We realize it will be a limited tax reform. It won’t be a big, comprehensive across-the-board [revamp] because we have Obama,” Ryan told reporters at a breakfast held by the Christian Science Monitor on April 29. “We see tax reform – full and comprehensive tax reform – as a 2017 project. But a down payment on the project in 2015 is very possible. And it’s also part of fixing our international [tax] rules and financing the Highway Trust Fund.” Congress faces a May 31 deadline for replenishing the Highway Trust Fund, and Republicans now in control of both chambers are against raising the federal gas tax.
North Dakota overhauls tax on oil producers
North Dakota is revamping the way it taxes the oil industry amid the recent slump in oil prices, aiming to tone down big fluctuations in tax revenue, wrote Mark Peters of the Wall Street Journal. Gov. Jack Dalrymple last week signed a tax-overhaul bill that was passed in the final days of the legislative session, as concern grew that the state could miss out further on oil-tax collections because of a provision that drops a tax rate to zero for most wells when prices stay below a certain threshold. Under state law, if oil prices remain below $55 a barrel for five months, the extraction-tax rate – one of two major taxes on production in the state – falls to zero from 6.5 percent for most production. Such a rule hasn’t yet been triggered, but state officials forecast it could kick in next month, resulting in an estimated revenue drop of $75 million a month. The tax overhaul passed in recent days would eliminate the rate reset. In exchange, lawmakers would drop the extraction-tax rate to 5 percent from 6.5 percent.
Ex-NFL star Plaxico Burress accused of failing to pay taxes
Former NFL star Plaxico Burress has been indicted on charges he failed to pay taxes, New Jersey prosecutors announced on April 30, wrote Geoff Mulvihill of the Associated Press. The 37-year-old former wide receiver with the Pittsburgh Steelers, New York Giants, and New York Jets was charged last week with willful failure to pay a state tax and issuing a bad check or electronic funds transfer. Burress is the first person in the state to be charged under a law adopted and signed last year that makes issuing a bad electronic funds transfer a criminal offense just like passing a bad check. Each offense could carry up to a five-year prison term if he is convicted. Authorities said Burress filed his state income tax return for 2013 on Oct. 20, 2014, showing he owed nearly $48,000, the amount that would be due for someone with a taxable income of about $550,000. Prosecutors said he submitted an electronic funds transfer, but it failed.
IRS technical guidance roundup (week of April 27)
The IRS issued the following technical guidance last week:
Notice 2015-10 announces that the Department of the Treasury and the IRS intend to issue regulations applicable to claims for refund or credit for amounts withheld under chapter 3 or 4. In general, these regulations will provide that an otherwise allowable claim of refund or credit made by a claimant that is the beneficial owner of a withheld payment is only available to the extent that the relevant withholding agent deposited the amount withheld. The regulations will also provide for a pro rata allocation of the amount available to the claimant for refund or credit when a withholding agent has partially satisfied its deposit requirements. The Treasury Department and the IRS are considering exceptions to the general rules described in the notice that are administrable by the IRS and minimize the potential for fraud or the intentional underdeposit of withholding taxes. The notice requests public comments concerning the administration of the pro rata allocation and procedural rules described in the notice, the potential exceptions described in the notice, and other potential exceptions consistent with the purposes of the guidance described in the notice. The regulations will apply to claims for refund or credit for amounts withheld with respect to the 2015 calendar year and thereafter.
Recent AccountingWEB Articles That You Can’t Afford to Miss:
The Tax Complications for Married Couples Working in Different Cities
Some couples who took “tax home” disputes to the Tax Court did not get the outcomes on outlays that they wanted.
AICPA Identifies 8 Issues That Are Critical for Small Business Tax Reform
Written testimony was sent as part of the record of April 15 House Small Business Committee hearing on tax reform.
GASB to Look at Disclosures on Going Concern and Debt for Governments
Board members also voted to remove a project on economic condition reporting from its current technical agenda.
Receipt Bank Launches Apple Watch Bookkeeping App
The Practice Platform reports dashboard has been released as an app on the Apple Watch. It is also available via a web browser, iOS, and Android apps.