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Bramwell's Lunch Beat: Lawmakers Unveil ‘Patent Box’ Corporate Tax Plan

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Jul 30th 2015
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Lawmakers unveil tax plan on intellectual property
House Republicans' quest to overhaul the tax code took a step forward on Wednesday, as top members of the Ways and Means Committee rolled out a plan to stop the worrisome migration of US intellectual property to other countries, wrote John D. McKinnon of the Wall Street Journal. The legislation, which was officially unveiled on Wednesday by Reps. Charles Boustany (R-LA) and Richard Neal (D-MA), would create what is known as a “patent box.” It would give companies an ultralow 10 percent tax rate on income they generate from patents and other intellectual property. Supporters hope the move will halt a trend that has seen many American multinational firms locate more of their valuable intellectual property in lower-tax countries, even when it is developed in the United States. That has allowed them to avoid the relatively high US corporate tax on the resulting profits, which often accumulate offshore.

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Federal judge threatens to hold IRS chief in contempt
John D. McKinnon also reported for the Wall Street Journal that a federal judge threatened to hold IRS Commissioner John Koskinen in contempt of court on Wednesday, after the agency didn't comply with an order to provide documents in a case about its alleged targeting of conservative groups. US District Judge Emmet Sullivan issued the order at a status hearing in the case brought by the conservative activist group Judicial Watch. “Of course, the IRS will comply with the judge's order,” the IRS said in a written statement. It is the second contempt threat Koskinen has received this week. On Monday, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) wrote a letter to President Obama, urging him to remove Koskinen from office. The move raised the possibility lawmakers would seek to hold Koskinen in contempt of Congress – or attempt to impeach him.

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IRS chief brushes aside GOP threats
During a Senate Judiciary subcommittee hearing on Wednesday, Koskinen brushed aside the threats from Republicans on the House Oversight Committee, suggesting that he is a target of their ire because they didn't like what congressional investigations into the IRS's improper scrutiny of Tea Party groups have found, wrote Bernie Becker of The Hill. “I understand the committee's disappointed that there hasn't been more evidence supporting where they originally started,” Koskinen said after the Senate hearing. “I've testified honestly and truthfully about what I knew at the time I knew it. We've provided them a phenomenal amount of information. And if it hasn't met all their expectations about the substance of it, that's not our fault.”

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IRS: College tax status not at risk over gay marriage
Also during Wednesday's Senate hearing, Koskinen said religious colleges that don't accept gay marriage aren't at immediate risk of losing their tax-exempt status, the Associated Press reported. At the hearing, Sen. Mike Lee (R-UT) noted that Bob Jones University lost its tax-exempt status over its racial policies in the 1970s. Koskinen noted that changes in public policy could force the IRS to re-evaluate that position in the future, but said that won't happen in the next several years and would have to be preceded by a draft regulation with time for public comments.

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Taxes drove Valeant, Burger King deals, Senate report says
Richard Rubin of Bloomberg wrote that tax savings drove the acquisition strategy of Valeant Pharmaceuticals International Inc. and led to Burger King's move to Canada, according to a Senate Permanent Subcommittee on Investigations report. Committee Chairman Rob Portman (R-OH) is using a Thursday hearing on the report to build support for tax-law changes that reduce companies' incentives to move their legal addresses out of the United States through inversions – and make it less likely they could be bought by foreign companies. At the hearing, executives from Valeant and Burger King's owner, Restaurant Brands International Inc., will describe their strategies. And current and former executives for three US-based companies will talk about the competition they face from overseas. “We now have the facts to be able to show that in specific transactions, that US taxes played a major role, and a role that was negative for US jobs and investment,” Portman said on Wednesday.

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IASB proposes clarifications to revenue standard
The International Accounting Standards Board (IASB) on Thursday published for public comment some proposed clarifications to and transition reliefs for IFRS 15, Revenue from Contracts with Customers. The exposure draft proposes to clarify:

  • How to identify the performance obligations in a contract.
  • How to determine whether a party involved in a transaction is the principal (responsible for providing the goods or services) or the agent (responsible for arranging for the goods or services to be provided to the customer).
  • How to determine whether a license provides the customer with a right to access or a right to use the entity's intellectual property.

In addition, the IASB proposes two reliefs to aid the transition to the new revenue standard. The public comment period ends Oct. 28. The IASB expects to complete its discussions on these issues by the end of 2015, after which the final amendments to the standard will be issued.

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