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Bramwell’s Lunch Beat: Arthur Andersen Name Is Making a Comeback

Sep 2nd 2014
Staff Writer and Editor AccountingWEB
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Treasury Secretary Lew to speak on tax reform, inversions
Damian Paletta of the Wall Street Journalwrote on Friday that Treasury Secretary Jacob Lew is planning a September 8 speech about a controversial corporate strategy known as tax inversions, suggesting that the White House could be progressing in its effort to upend the practice.

Lew isn't expected to roll out the White House's new strategy to tackle tax inversions in this speech, but he could offer new clues to the Obama administration's approach, Paletta wrote. The speech likely will be monitored closely by Congress and others with a stake in the White House's eventual actions.

Lew's comments on inversions next Monday are expected to be part of broader remarks about corporate tax reform, an issue that is mostly dead on Capitol Hill ahead of the November elections.

The White House long has opposed inversions but has done little to intervene. Several weeks ago, the White House decided to try to fashion an administration response, focusing on ways to remove some of the incentives for companies to participate in these legal structures. The Obama administration hasn't yet disclosed what these deterrents might look like. The process is being led by Lew and Treasury officials, though a number of agencies are being consulted, according to the article.

Tax firm to revive Arthur Andersen name
Michael Rapoport of the Wall Street Journalreported on Monday that a San Francisco-based tax-consulting firm run by former Arthur Andersen partners is buying the rights to the Andersen name and plans to rename the firm Andersen Tax.

Andersen collapsed more than a decade ago in the wake of the Enron Corp. scandal. But the former Andersen partners are betting the 12 years since the accounting firm's demise have helped wash away any taint associated with Enron, and that the century-old Andersen name will have connotations more positive than negative to potential clients.

Former Andersen employees “have been going around with a scarlet letter 'A,'” says Mark Vorsatz, the former Andersen partner leading the charge, according to the article. “We're going to make that A stand for Andersen.”

Vorsatz's tax firm is changing its name from the less-memorable moniker WTAS LLC, short for Wealth & Tax Advisory Services. Twenty-three Andersen partners, including Vorsatz, formed WTAS in the wake of Andersen's collapse, Rapoport wrote. WTAS is acquiring the rights to the Andersen name from Arthur Andersen LLP, the surviving entity that holds the remnants of the former Andersen business. Terms of the deal weren't disclosed.

Vorsatz, WTAS's chief executive, argues that a tax-only Andersen firm – with none of the auditing of corporate books that helped get the original Andersen into trouble – could pose a competitive challenge to the Big Four in the tax-advice business.

[Click here to read the press release on the name change.]

Public pensions funds stay mum on corporate expats
New York Times DealBook editor-at-large Andrew Ross Sorkin wrote on Monday that amid the outcry about the recent merger mania to take advantage of the tax-avoidance transactions known as inversions, certain key players have been notably silent: public pension funds.

Many of the nation’s largest public pension funds – managing trillions of dollars on behalf of police and fire departments, teachers, and others – have major stakes in American companies that are seeking to renounce their corporate citizenship in order to lower their tax bill.

While politicians have criticized these types of deals, public pension funds don’t appear to be using their influence as major shareholders to encourage corporations to stay put, Sorkin wrote.

The California Public Employees’ Retirement System (Calpers), the nation’s largest public pension fund and typically one of the most vocal, has remained silent. “We don’t have a view on this from an investor standpoint – we’re globally invested, as you know, and appreciate that tax reform is a government role,” said Anne Simpson, Calpers’ senior portfolio manager and director of global governance, according to the article. “We do expect companies to act with integrity, whatever the issue at hand – that goes without saying. We also want to see a focus on the long term.”

Burger King has maneuvered to cut US tax bill for years
Burger King may have taken a lot of flack in the past week for a proposed deal to purchase Canadian doughnut-and-coffee chain Tim Hortons that should curb its US tax bill, but in many ways it is consistent with the burger chain’s aggressive tax-reduction strategies in recent years, Tom Bergin of Reutersreported on Tuesday.

A Reuters analysis of Burger King’s regulatory filings in the United States and overseas, which was also reviewed by accounting experts, shows that it has been making major efforts to reduce its US tax bill for some time.

The chain’s effective tax rate of 26 percent over the past three years compares with rates above 31 percent at McDonalds Corp., Starbucks Corp., and Dunkin Brands Group Inc. KFC and Pizza Hut owner Yum Brands did have a similar tax rate to Burger King though this reflects the 74 percent of its revenues that were generated outside the United States, in markets where tax rates are typically around 25 percent, Bergin wrote.

The Burger King rate is 30 percent lower than the average tax rate it paid in the five years before it was bought in 2010 by private equity group 3G, still the company’s majority shareholder.

Accounting experts say the Canadian move will allow Burger King to double-down on those efforts as it will open up new tax-saving opportunities for the company. It could, for example, apply the tax structures it currently employs in major markets like Germany and Britain, and which allow the group to operate almost tax free in those places, to its business in the United States, they said, according to the article.

Several Swiss banks pull out of US tax program: paper
Silke Koltrowitz of Reuterswrote that at least 10 Swiss banks have withdrawn from a US program aimed at settling a tax dispute between them and the United States, Swiss newspaper NZZ am Sonntag said on Sunday, quoting unnamed sources.

Approximately 100 Swiss banks came forward at the end of last year to work with US authorities in a program brokered by the Swiss government to help the banks make amends for aiding tax evasion.

“At least 10 banks that had decided at the end of 2013 to pay a fine have withdrawn their decision,” NZZ am Sonntag said, quoting unnamed lawyers and auditors. It did not name the banks concerned, Koltrowitz wrote.

The newspaper said the banks were convinced they had not systematically broken US law and lawyers of the US Justice Department had actually been surprised to see them take part in the program and did not object to the banks leaving the program, according to the Reuters article.

KPMG boosts ranks of female partners
KPMG has claimed it is making progress on raising the number of women it has at a senior level, with the appointment of 52 partners in its UK business, Harriet Agnew of the Financial Timeswrote on Monday.

The professional services firm – the last of the Big Four to boost its top ranks this year – has made 29 promotions and 23 hires at partner level. The number of promotions is the same as last year, while the number of external partners has roughly tripled – from seven hires in 2013, Agnew wrote.

Simon Collins, KPMG’s UK chairman, who once described the accounting profession as “stale, male, and pale,” made tackling the lack of women in KPMG’s senior jobs a key priority when he was named UK chairman a little more than two years ago.

While only 15 percent of KPMG’s partners are female, a third of newly promoted partners are women and it more than doubled the number of successful female partner candidates compared with last year, according to the article.

3 colleges say they’re owed $17m in tax credits
Sarah Shemkus wrote for the Boston Globe on Tuesday that a trio of colleges and universities is suing the Massachusetts Department of Revenue, claiming the state agency unfairly denied them millions of dollars in tax credits for environmental cleanup work done on contaminated properties.

In a complaint filed this month in Massachusetts Superior Court, Northeastern University, Boston University, and Wellesley College said the state essentially changed its own rules when it rejected the schools’ applications for the credit.

The lawsuit centers on the state’s Brownfields Tax Incentive program, which offers tax credits to property owners who perform environmental cleanup work on former commercial and industrial properties left contaminated by the previous occupants, Shemkus wrote. The credits are worth between 25 and 50 percent of the costs incurred in the cleanup. In 2012, the latest year for which data are available, the state issued $17.8 million in brownfields tax credits. In 2011, $51.4 million in credits was issued.

In 2006, the Massachusetts Legislature amended the program, which was created in 1998, to allow nonprofit organizations, such as colleges and universities, to claim the credit. Nonprofits do not pay taxes, but they can claim these credits and sell them to companies or individuals looking to reduce the taxes they owe in Massachusetts.

“The university has incurred expenses to clean up environmental contamination,” Boston University spokesman Colin Riley said, according to the article. “The statute says the university is entitled to apply for and receive the tax credit.”

Quick Links:

  • The PCAOB has added some interesting new language to inspection reports (Going Concern)
  • This PwC job listing gives just a little too much information (Going Concern)
  • COSO transition getting a close look from auditors (Journal of Accountancy)
  • Auditor independence: Another case of misplaced loyalty (re: The Auditors)
  • Accounting for brands: Untouchable intangibles (The Economist)
  • Top 10 US colleges for an accounting degree (USA Today)
  • UK accounting watchdog fines Mazars two million pounds (Reuters)
  • Changes in lease accounting rules draw closer (Wall Street Journal)
  • Australia repeals mining tax (Wall Street Journal)
  • Washington-area business owners’ tax burden mounts as economy rebounds (Washington Post)
  • Credit Suisse, Julius Baer held possible merger talks, SZ says (Bloomberg)
  • Japan needs sustained recovery before tax rise: adviser (Bloomberg)
  • Back to school on sales tax holidays (US News and World Report)
  • The Financial Times slams ‘the world’s dumbest idea’ (Forbes)
  • How accounting firms become family offices (Forbes)
  • Debt from KPMG tax shelter survives bankruptcy (Forbes)
  • Serious lessons from comedian Chris Tucker’s $14 million IRS bill (Forbes)
  • Burger King deal gives Dems appetite to tackle tax gambit (The Hill)
  • Tax inversions are ‘shortsighted’: Labor secretary (CNBC)
  • Checking out charities before you give (Don’t Mess With Taxes)
  • San Francisco first California city to test urban farming tax break law for property owners (CBS San Francisco)

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