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Bramwell's Lunch Beat: Tax Dodging, Solving Inversions, Sanders on Taxes

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Feb 1st 2016
Staff Writer and Editor AccountingWEB
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The corporate tax dodge continues
The editorial board of the New York Times called it “galling” that Congress has done nothing to stop corporate inversion deals. One legislative remedy would be to deny investors the use of low capital-gains tax rates when they sell stock in an inverted company, on the sensible ground that the company's reduced tax bill is enough of a break. Corporate boards would surely think twice about approving an inversion if it meant higher taxes for investors, the op-ed says. “But Congress won't lift a finger,” the editorial board wrote. “Many lawmakers, chiefly Republicans, seize upon the wave of inversions as proof that corporate taxes in the United States are too high. Reform the corporate code by slashing rates, they argue, and inversions will end. Granted, corporate tax reform is needed. But allowing inversions to proceed in order to make a partisan point is not the way to approach it.”

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Greener pastures, lower taxes: How to solve the inversion controversy
Here's another take on inversions, courtesy of an article by Trent Gillies of CNBC. Nearly 50 US companies have used inversions to reincorporate overseas during the past 10 years, more in the previous two decades combined. However, is it good business or greed? “We've always had that debate, and it's got to be a balance,” Aspen Institute President and CEO Walter Isaacson said in an interview on CNBC's On the Money. Inversion proponents argue that the solution appears simple: Rather than penalizing companies, the United States should make its tax code more competitive. “We have to take away the perverse incentives, especially in the tax code, that allow these things to happen,” Issacson said. “We have a very, very complicated tax code with all sorts of loopholes and deductions, and I think across the board you have support for simplifying the tax code to about 25 percent, which I think would solve a lot of these problems.”

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Sanders names names of corporations that would pay more taxes if he's in the White House
John Wagner of the Washington Post wrote that Democratic hopeful Sen. Bernie Sanders on Jan. 29 singled out some of the country's largest corporations whose taxes would increase if he is elected president. Appearing before a boisterous crowd of about 1,000 people in Davenport, Iowa, Sanders said General Electric, Boeing, and Verizon had paid no federal income taxes during tax years 2008 through 2013, a stretch when they collectively made profits of more than $102 billion. “Under a Sanders administration, they are going to start paying taxes,” Sanders vowed, prompting sustained applause from a crowd packed into a downtown ballroom. Earlier Friday, Sanders' campaign released a top 10 list of “corporate tax dodgers” that included the three companies he mentioned in Iowa.

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Sanders defends tax increase pledge after Pelosi's comments
Appearing on NBC's Meet the Press on Sunday, Sanders shot back against House Minority Leader Nancy Pelosi's (D-CA) comments that Democrats aren't “running on any platform of raising taxes,” wrote Rebecca Savransky of The Hill. Sanders said the United States is spending “far more than other countries on health care.” “My proposal will save middle-class families thousands of dollars a year on their healthcare costs. Most people tell me, yes, they would be happy to pay $1,000 more in taxes if they're paying $5,000 less in healthcare premiums,” he said. Sanders said the United States needs to follow every other major country in controlling healthcare costs and guaranteeing health care to everyone. He also said he doesn't think House Democrats will mind that his plans include raising taxes.

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IRS technical guidance roundup (week of Jan. 25)
The IRS issued the following technical guidance last week:

Notice 2016-13 provides transition relief for Section 529 qualified tuition programs that timely file a 2015 Form 1099-Q, Payments From Qualified Education Programs, that does not reflect the repeal of the aggregation requirement under Section 529(c)(3)(D) of the Internal Revenue Code applicable to distributions from qualified tuition programs. 

Notice 2016-14 provides guidance for the 2016 fee year on how the definition of expatriate health plans under the Expatriate Health Coverage Clarification Act of 2014 applies for purposes of the health insurance provider's fee imposed by § 9010 of the Affordable Care Act.

Notice 2016-16 provides that certain types of midyear changes to certain retirement plans do not violate safe-harbor rules and additional participant notice and election opportunities for some midyear changes. Contributions to a Section 401(k) or 401(m) retirement plan must not discriminate in favor of highly compensated employees. The nondiscrimination rules may be met through a safe-harbor structure that includes limits on midyear changes and a requirement to provide notice to plan participants.

Quick Links:

  • Sanders gambles on raising taxes (The Hill)
  • Marginal tax rates on income go up across the board under Sanders' plan (Tax Foundation)
  • Sanders offering largest US tax increases ever, group says (Tax Analysts)
  • Was involvement of private foundation in Trump event illegal? (Tax Analysts)
  • Attack ad misrepresents John Kasich's record on taxes in Ohio (Washington Post)
  • 3 myths about inversions and US corporate taxes (Fortune)
  • Is the ‘tampon tax' unfair to women? (CNN)
  • The ‘tampon tax' in the spotlight (The Atlantic)
  • Why are states letting the NFL rule their sales tax out of bounds? (TaxVox)
  • Google defends UK tax accord as legal, not ‘sweetheart deal' (Bloomberg)
  • EU antitrust chief rejects US criticism of Apple, Starbucks tax cases (Reuters)

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