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Bramwell's Lunch Beat: PwC’s Holy Audits, Dewey Trial II, Toshiba Fined

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Dec 7th 2015
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PricewaterhouseCoopers to audit the Vatican
Accounting giant PricewaterhouseCoopers (PwC) will carry out the Vatican's first external audit, as Pope Francis seeks to make the Holy See's finances more transparent, the Agence France-Presse reported. PwC will work “in close cooperation” with the Vatican's Secretariat for the Economy, headed by Australian cardinal George Pell, a statement on Dec. 5 said. The pope unexpectedly took part in a meeting of his economy council on Dec. 3 to thank its members and encourage them to continue overseeing the Vatican's administrative and financial workings. The move to submit the Vatican's finances to an external auditor comes a month after the publication of a book describing the pope's fury over uncontrolled spending and an inadequate accounting system.

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Manhattan prosecutors will not retry former Dewey chairman
Matthew Goldstein of the New York Times wrote that prosecutors in Manhattan have decided not to retry Steven Davis, the former chairman of Dewey & LeBoeuf LLP, the once-prominent New York law firm that collapsed in bankruptcy in 2012. However, two other former Dewey executives – former CFO Joel Sanders and former executive director Stephen DiCarmine – are expected to be headed to a new trial on charges they oversaw an accounting fraud at the firm. The criminal trial of the three Dewey executives ended in a mistrial in October. Prosecutors are considering dismissing the charges against Davis by offering him a deferred prosecution agreement that would require him to refrain from any improper conduct for a period of time. Such an agreement, if approved, would enable prosecutors to avoid retrying Davis without dismissing the charges outright. Prosecutors and the lawyers for the three defendants are scheduled to be in court on Monday.

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Dems threaten Reid tax deal
Alexander Bolton of The Hill wrote that rank-and-file Senate Democrats are threatening to sink an effort by the White House and Minority Leader Harry Reid (D-NV) to extend a centerpiece of President Obama's 2009 stimulus package. Reid and the White House want to permanently extend three tax credits at the core of the stimulus bill: the Child Tax Credit, the Earned Income Tax Credit, and the American Opportunity Tax Credit for college expenses. To win over GOP support, Reid is offering to make permanent two major business tax breaks backed by the GOP: the research and development tax credit and the Section 179 expensing credit for small business. Instead, it's dissent within Reid's own caucus that threatens to derail the talks. “I'm going to have trouble supporting any extenders package,” said Sen. Claire McCaskill (D-MO). “I think it's too big and there are way to many goodies being given out to special interests.”

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Toshiba accounting scandal draws record fine from regulators
Japanese regulators, trying to shore up confidence in the country's securities markets after a $1.9 billion accounting scandal at Toshiba Corp., on Monday recommended imposing a record fine of 7.37 billion yen ($60 million) on the electronics and industrial company, wrote Atsuko Fukase of the Wall Street Journal. The fine would be the biggest ever in Japan for accounting-related violations, though it is small compared with penalties US companies have faced in such cases. The Securities and Exchange Surveillance Commission said they pursued their investigation into Toshiba with special rigor because it unfolded as Prime Minister Shinzo Abe is trying to increase companies' accountability to shareholders and boost transparency in a bid to attract more foreign investment. The commission doesn't have the authority to impose the fine itself, but it has asked the Financial Services Agency to do so.

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IRS technical guidance roundup (week of Nov. 30)
The IRS issued the following technical guidance last week:

Notice 2015-83 provides special rules regarding the process for allocation of the available amount of national volume cap for tax-exempt tribal economic development bonds under § 7871(f) of the Internal Revenue Code for bonds issued under a “draw-down” loan structure in which the lender advances funds for the loan on different dates. The notice allows additional time to use allocated volume cap for issuance of tribal economic development bonds as draw-down loans if an issuer meets certain requirements.

Revenue Procedure 2015-57 applies to a taxpayer who took out federal student loans to finance attendance at a school owned by Corinthian Colleges Inc. that are discharged under US Department of Education's defense to repayment discharge process or closed school discharge process. Rev. Proc. 2015-57 provides that the IRS will not assert that a taxpayer within the scope of this revenue procedure whose federal student loans are discharged under the Education Department's defense to repayment discharge process must recognize gross income as a result of this discharge process. This revenue procedure identifies the statutory provisions under which taxpayers whose federal student loans are discharged under the Education Department's closed school discharge process may exclude the discharged amount from gross income.

In addition, the IRS will not assert that these taxpayers must increase their taxes owed in the year of discharge, or in a prior taxable year, as a result of either discharge process if in a prior year he or she received an education credit under Section 25A attributable to payments made with proceeds of the discharged loan. The IRS also will not assert that these taxpayers must increase their income in the year of the discharge if he or she took a deduction under Section 221 in a prior year attributable to interest paid on a discharged loan or a deduction under Section 222 in a prior taxable year attributable to payments of qualified tuition and related expenses made with proceeds of the discharged loan.

Quick Links:

  • Wal-Mart sues Puerto Rico over ‘astonishing' tax increases (Bloomberg)
  • There's a huge tax deal in the offing. Here's what's on the table. (Washington Post)
  • United against the ‘Cadillac tax' (Washington Post)
  • Some ETFs could drop an unexpected tax hit for 2015 (Wall Street Journal)
  • Congress could have paid for the highway bill with taxed owed, but it didn't (The Hill)
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