Lawmakers push bill to stop IRS bonuses
Furious that the IRS handed out more than $1 million in bonuses to employees delinquent on their own taxes, lawmakers on both sides of the aisle are pushing legislation to put a stop to those awards, Bernie Becker of The Hillwrote today.
Senators Kelly Ayotte (R-NH) and Claire McCaskill (D-MO) released legislation this week seeking to ensure that federal employees in trouble with the law or their agency don’t get bonuses. Senators Richard Burr (R-NC) and Joe Manchin (D-WV) rolled out their own bill on the matter Wednesday, as did Representative Sam Johnson (R-TX), a senior Republican on the House Ways and Means Committee.
Treasury Secretary Jack Lew, the IRS, and the National Treasury Employees Union (NTEU) have all said that the union and the agency are discussing ways to stop those bonuses from going out in the future. The IRS has noted that it already had a policy ensuring that senior executives with conduct issues didn’t get performance awards, and the agency was looking to expand it.
Appearing before a Senate Appropriations subcommittee on Wednesday, IRS Commissioner John Koskinen stressed that ensuring employees with conduct issues don’t get bonuses would be a priority as the agency negotiates a new contract with the NTEU, Becker wrote. Under current law, a federal employee’s conduct and reviews of their job performance are kept separate.
“My view is that employees understand they work for the IRS and are held to a higher standard,” Koskinen said, according to the article. “People ought to be comfortable that if you work for the IRS and I’m chasing you for your taxes, I should pay mine.”
Accounting group taps Michael Bloomberg, Mary Schapiro
Andrew Ackerman of the Wall Street Journalreported yesterday that the Sustainability Accounting Standards Board (SASB), a nonprofit attempting to set standards for corporate sustainability and environmental reporting, is turning to two high-profile public servants – former New York City Mayor Michael Bloomberg and former US Securities and Exchange Commission (SEC) Chairman Mary Schapiro – to head its board and help drive adoption of its accounting benchmarks.
The appointments are expected to be announced today. Bloomberg will serve as chair of its board and Schapiro as vice chair, according to Ackerman.
SASB standards give companies guidance on how to disclose environmental, social, and governance material issues in their filings with the SEC. The organization has already released standards for health care, financial, technology, and communications firms. The standards range from reporting product recalls and fatalities in clinical drug trials to greenhouse-gas emissions financed by a bank's lending activities. The board plans to release standards for seven additional sectors over the next two years.
[Click here to read AccountingWEB’s coverage of SASB accounting standards.]
Frustration rises over crowdfunding rules
Some GOP lawmakers believe the two-year-old Jumpstart Our Business Startups (JOBS) Act is in need of major revisions, Ruth Simon and Angus Loten of the Wall Street Journalreported yesterday.
The JOBS Act modified US securities laws, increasing the number of investors a private firm may have to 2,000 from 500, for instance, and eliminating some hurdles for companies seeking initial public offerings. Another provision, yet to take effect, will allow small companies to raise funds from average investors online through a process known as “equity crowdfunding,” Simon and Loten wrote.
However, several House Republicans now are putting forth “JOBS Act 2” proposals, arguing that legislation Congress passed in 2012 is too restrictive for small firms.
Representative Patrick McHenry (R-NC) said he plans this week to introduce proposed revisions to the 2012 law in what he dubs the “Equity Crowdfunding Improvement Act of 2014” legislation. According to Simon and Loten, the proposal, still in draft form, would increase the amount a private company could raise under equity-crowdfunding to $5 million from $1 million, and boost the amount entrepreneurs could raise without providing audited financial statements to $3 million from $500,000.
Another proposal would ease the requirements on crowdfunding websites by allowing them to select which offerings to list without being liable for fraud by the listing companies.
IRS chief says US can’t end companies’ offshore tax deals
On Wednesday, IRS Commissioner John Koskinen told reporters in Washington that the US government probably can’t take regulatory action to stop companies from lowering tax bills through deals that put their legal addresses outside the country, Richard Rubin of Bloombergreported.
Pfizer Inc. this week proposed the biggest such deal yet, a $98.7 billion takeover of AstraZeneca Plc that would move the largest US drugmaker to the United Kingdom for tax purposes and lower its tax rate.
“We’ve done, I think, probably all we can within the statute,” Koskinen said, according to the article.
He added that the trend of corporate moves point up the need to revise the US tax code.
“We try to make sure people are within the bounds, but if they’re within the bounds, if they play according to the rules, then they have a right to do that.”
Pfizer would join at least 19 other companies making or contemplating similar transactions, including Chiquita Brands International Inc. and Omnicom Group Inc., the largest US advertising firm, according to Rubin.
However, cracking down on deals in which US companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration, a US Treasury Department official, who sought anonymity to discuss the administration’s plans, told Bloomberg.
Harder to recognize
In an in-depth article for CFO, David M. Katz wrote on April 28 that the forthcoming revenue recognition standard from the Financial Accounting Standards Board (FASB) will require finance executives to use more brainpower than ever before.
The FASB and the International Accounting Standards Board (IASB) have worked for more than a decade to come up with a converged standard on revenue recognition. Katz wrote that melding FASB’s grab-bag of prescriptive rules with the IASB’s slim set of principles for reporting revenue proved to be a long, arduous process, and the original timetable of two years eventually lengthened to 12. FASB is expected to issue a final standard in the first half of the second quarter of 2014.
Although many companies won’t have to change the way they report sales under the proposed standard, others will have to alter their accounting systems to fit the new model. And because the model is based on broad principles rather than narrow rules, finance executives and corporate accountants will have to use their judgment much more than in the past, Katz noted.
“Judgment will particularly come into play in contracts in which the transaction price can vary over the course of the arrangement,” he wrote. “For one thing, vendors will need to choose one of two methods to employ in gauging a variable transaction price. If a seller has a large number of contracts with similar characteristics, it may want to use the ‘expected value’ approach, which involves calculating the most probable value from a range of possible amounts. If the contract has only two possible outcomes – for instance, if an entity either achieves a performance bonus or doesn’t – the vendor might do better calculating the ‘most likely’ amount from a range of possible outcomes.”
Credit Suisse executives clashed on tax probe
Gina Chon and Kara Scannell of the Financial Timesreported yesterday that the former head of Credit Suisse’s private bank for the Americas, Anthony DeChellis, told government investigators he had clashed with superiors about the bank’s disclosures to a tax-evasion probe, according to people with direct knowledge of the situation.
The claim suggests there was disagreement at senior levels of Credit Suisse over its handling of an investigation for which it has set aside almost $1 billion for legal provisions, they wrote. The bank has not settled with investigators and still faces the threat of criminal charges.
Internal e-mails seen by the Financial Times support the claim by DeChellis, who had met with the US Justice Department and a Senate subcommittee on the bank’s behalf once before. Chon and Scannell noted that his decision to take his concerns to investigators came in April 2013, shortly after he was told the bank wanted to move him from his job.
This February, the Senate Permanent Subcommittee on Investigations accused Credit Suisse of helping more than 22,000 US clients avoid US taxes. The e-mails show DeChellis raised concerns a year earlier about what he believed were new documents related to US-linked accounts, according to Chon and Scannell.
Watchdog waiting for IRS PPACA fraud systems
Testifying before a Senate Appropriations subcommittee on Wednesday, Treasury Inspector General for Tax Administration (TIGTA) J. Russell George said the IRS currently has no way of knowing how well it can detect health insurance premium tax credit fraud, according to Allison Bell of BenefitsPro.com.
The Affordable Care Act created a “refundable tax credit” that moderate-income consumers can pay for “qualified health plan” coverage bought through the public exchanges.
But exchange system managers and IRS officials have argued the design of the program should limit tax fraud, because premium tax credit cash is supposed to go directly to carriers, not the consumers, Bell wrote.
George said the IRS is planning to use two systems to fight any Affordable Care Act tax credit fraud that occurs – but those systems are still under development.
“Until these new systems are successfully developed and tested, TIGTA remains concerned that the IRS’s existing fraud detection system may not be capable of identifying Affordable Care Act refund fraud or schemes prior to the issuance of tax refunds,” George testified.
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