MF Global asks judge not to toss suit against PricewaterhouseCoopers
Joseph Checkler of the Wall Street Journalreported on Friday that MF Global Holdings Ltd. is urging a judge not to toss its $1 billion lawsuit against PricewaterhouseCoopers (PwC) LLP for the alleged bad accounting advice that MF Global says led to its 2011 collapse.
In a filing early last week with the US District Court in Manhattan, lawyers for the administrator in charge of MF Global fought PwC’s argument that MF Global doesn’t have the standing to sue PwC. A PwC spokewoman declined to comment, according to the article.
MF Global lawyers challenged PwC’s contention that the suit should be dismissed for the simple fact that it didn’t give erroneous advice that lead to MF Global making the investments that led to the collapse, Checkler wrote. MF Global said that until the matter is actually argued, a dismissal isn’t warranted.
“If PwC believes the facts show otherwise, it can try to prove so at the trial,” lawyers for the MF Global administrator said in the filing, according to the article. “But there is no basis to dismiss this case outright based on the allegations of the complaint.”
Consumers’ next Obamacare challenge: Tax forms
Paige Winfield Cunningham and Mackenzie Weinger of Politicowrote on Monday that Obamacare’s major math problems will start in 2015, as the IRS tries to ensure that millions of Americans are correctly calculating their benefits and that those who don’t have coverage are penalized unless they qualify for an exemption.
That means much new paper-shuffling between now and April 15, which could be especially confusing for low- and middle-income Americans unaccustomed to lots of reporting to the IRS. The insurance exchanges and employers must send consumers details about their health plan and benefits or exemptions in time for them to file a tax return. If any of that information is delayed or wrong, tax refunds could be delayed.
Last month, the Obama administration released drafts of the forms employers and individuals will have to fill out. But those leave unanswered many questions about how it’ll all work, Winfield Cunningham and Weinger wrote. The details are expected to be included in “practical” instructions the agency plans to release later this month that will detail how to complete the new forms, the IRS said.
At this point, the new forms look “very daunting” for taxpayers, said Mark Ciaramitaro, vice president of healthcare services at H&R Block, according to the article. “Overall, we expect the complexity level is just going to go up for a significant group of moderate- to low-income people, whether they got insurance through the marketplace or they didn’t.”
Kinder Morgan deal risks big tax bill for investors
Kinder Morgan Inc.’s $44 billion plan to consolidate its pipeline companies was greeted with excitement by Wall Street, which expects the new streamlined company to snap up other pipeline partnerships. But tax experts say that some investors in Kinder Morgan’s master limited partnerships (MLPs) may not be happy as the consolidation could leave them with big, unexpected tax bills, Laura Saunders, Alison Sider, and Russell Gold of the Wall Street Journalwrote on Monday.
Houston-based Kinder Morgan said on Sunday it would swallow three affiliated companies, two of which are organized MLPs. Such partnerships have attracted investors because they offer hefty distributions that qualify for deferred taxes, Saunders, Sider, and Gold wrote.
Several tax advisers said individual investors in Kinder’s MLPs could face unwelcomed tax bills. Because Kinder Morgan Energy Partners, one of the two MLPs, is organized as a partnership that benefits from substantial deductions, the taxes on its substantial quarterly payouts were deferred, the article stated.
When the units are sold or exchanged – as they will be in the reorganization – the deferred taxes come due.
“In this deal, one group of stakeholders will owe tax so that the company as a whole can benefit,” said Robert Willens, an independent tax expert in New York, according to the article.
[Laura Saunders of the Wall Street Journal on Tuesday provides some answers to investors’ tax questions about the Kinder Morgan deal.]
US Treasury looking at increase in master limited partnerships
The move by Kinder Morgan to swallow two of its organized MLPs has prompted the US Treasury Department to look into increased use by companies of the MLP as a business structure, Kevin Drawbaugh of Reutersreported on Monday.
The Treasury statement, sent in an email, came in an answer to questions from Reuters following Kinder Morgan’s news.
“We at Treasury are looking into the effects of these transactions on future tax revenues,” the spokesperson said, according to the article. “Instances where the tax base may be eroded serve as a reminder of why we need Congress to enact business tax reform that broadens the tax base and lowers tax rates.”
The IRS said in early April that it had temporarily stopped issuing private letter rulings that companies often seek to get the agency’s blessing when setting up new MLPs, Drawbaugh wrote.
IRS Commissioner John Koskinen told reporters that the agency had imposed a “pause” on the rulings so it could review the qualifications for MLPs. An IRS spokesman said on Monday that the pause remains in place, according to the article.
Hertz delays quarterly earnings on accounting review
Tom Lavell and Mark Clothier of Bloombergreported on Tuesday that Hertz Global Holdings Inc., the car- and equipment-rental company that’s splitting in two, delayed publishing its quarterly financial report as it continues reviewing accounts for the past three years.
Hertz wasn’t able to meet yesterday’s deadline, or a five-day extension period, for submitting its 10-Q form to the US Securities and Exchange Commission (SEC) because of a “previously announced thorough review of its internal financial records” for the three years through 2013, the Naples, Florida-based company said today in a filing.
The rental provider’s audit committee said in June that financial statements for 2011 need to be restated, affecting figures reported in the next two years. Errors emerged when Hertz was preparing first-quarter accounts, including in capitalization and depreciation timing for “certain nonfleet assets.” It also found mistakes in accounting for money it couldn’t collect from customers who damaged vehicles or equipment, Lavell and Clothier wrote.
Hertz outlined plans in March to spin off its equipment-leasing business to focus on car rentals, creating two publicly traded companies.
Chiquita banana brand receives a counter to its inversion plan
David Gelles of New York Times DealBookreported that Chiquita Brands International, the banana producer that is seeking an inversion with a $526 million deal for its Irish rival Fyffes, received an unsolicited offer on Monday from an unlikely pair of private companies.
The Cutrale Group, a wholesale orange juice supplier, and the Safra Group, a private bank, have offered to acquire all of Chiquita shares for $13 a piece, or about $611 million, representing a 29 percent premium to Chiquita’s closing share price on Friday.
Gelles wrote that the unexpected offer sets up a stark choice for investors: proceed with Chiquita’s inversion-driven growth plan or cash out now. Chiquita’s shares jumped more than 30 percent on Monday, to slightly above the offer price, as investors responded to the bid.
If Cutrale and Safra succeed in acquiring Chiquita, the Fyffes deal would not happen, scuttling one of the year’s inversion deals, in which a US company reincorporates abroad through a deal, lowering its tax rate and freeing up overseas cash.
IRS officials don’t recall physical damage to Lerner’s hard drive
According to new court documents released on Monday, a pair of IRS technicians said under oath that they tried unsuccessfully to recover data from former agency official Lois Lerner’s hard drive, wrote Bernie Becker of The Hill.
Neither technician said they saw any sign of physical damage on the hard drive, painting a similar picture to what IRS officials have been saying for months – that Lerner’s computer crashed on its own in 2011, leaving missing an untold number of her emails over a two-year span.
The IRS employees made the statements in response to a lawsuit filed by Judicial Watch, a conservative watchdog that has sought a wide range of Lerner’s emails as part of a Freedom of Information Act request, Becker wrote.
In July, Judge Emmet Sullivan of the US District Court in Washington gave the IRS a month to detail why it can’t recover all of Lerner’s emails, and ordered the agency and Judicial Watch to work with another judge to try to recover missing emails.
Judicial Watch President Tom Fitton said the filings fell far short of what the group was expecting. “This latest IRS filing seems to treat as a joke Judge Sullivan’s order requiring the IRS to produce details about Lois Lerner’s 'lost' emails and any efforts to retrieve and produce them to Judicial Watch as required under law,” Fitton said in a statement, according to the article. “Frankly, it seems the cover-up continues.”
USCIB elects new officers, trustees and board members
The United States Council for International Business (USCIB), a pro-trade group involved in international regulatory diplomacy on behalf of America’s leading global companies, recently elected a new slate of officers, board members, and trustees to govern the organization over the next two years.
Among the highlights, Dennis Nally, chairman of PricewaterhouseCoopers International Ltd., has been elected vice chairman of the USCIB. Nally has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences.
Elected as USCIB trustees for the first time were Stephen Chipman, CEO of Grant Thornton LLP, and John Veihmeyer, global chairman of KPMG and chairman and CEO of KPMG in the United States. Chipman, in his more than 30 years with Grant Thornton, has held numerous leadership positions throughout Europe, North America, and Asia, developing a unique combination of international and US business experience. Veihmeyer, with more than 35 years of experience working with CEOs, senior executives, and board members at many of the world’s leading companies, is a top global business leader and an influential and sought-after advisor on business and financial issues.
Click here for a complete list of USCIB’s new officers, board members, and trustees.
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- CPAs point back after Obama’s accountant-blaming fingerpointing (Going Concern)
- The FASB wants to dumb down inventory impairment (Accounting Onion)
- Loan accounting: It’s high time for the SEC to step up to the plate (Accounting Onion)
- Changes in percentage-of-completion estimates: Earnings bonanza (Audit Analytics)
- REDW adds Mike Chelius as principal (REDW)
- EY hires former Booz & Co exec to lead public sector practice (Reuters)
- Puerto Rico July tax revenue beats forecast on excise tax (Reuters)
- Alaska’s new oil tax faces repeal vote during state primary (Reuters)
- GAO: Investors double-dipping on tax credits (Daily Caller)
- Pipeline billionaire spurns the tax break he popularized (Bloomberg)
- Justice’s IRS connection (Wall Street Journal)
- Welcome to the world of ‘pension smoothing’ (Wall Street Journal)
- Kids older than your Scotch? No tax break (Detroit News)
- Reams of info from Swiss banks sent to IRS (Due Diligence)
- New guidance for REITs = new opportunities for taxpayers (Due Diligence)
- Congress must act on tax avoidance (The Oregonian)
- Walgreen listened to angry customers during flirtation with overseas tax inversion (Deerfield Review)
- Straight talk on inversions (Forbes)
- ‘Teenage Mutant Ninja Turtles’ is surprisingly all about taxes (Forbes)
- How lottery winners, losers & underground brokers beat taxes (Forbes)
- Constitutionally challenged co-defendant does not create mistrial for tax fraudster (Forbes)
- Final IRS rules on partnership technical terminations will surprise some tax pros (Forbes)
- Use your Roth IRA to save for both retirement and college (Forbes)
- Kansas and Missouri show the dangers of tax competition (Tax Analysts)
- James-Love NBA combo is tax boon to two Cleveland towns (Don’t Mess With Taxes)
- Bruce Rauner, release those tax returns (Chicago Tribune)
- Why billionaire’s low tax rate isn’t a big deal in Illinois governor’s race (Christian Science Monitor)
- Intel’s tax deal: $100B to spend on manufacturing (Portland Business Journal)
- Denver City Council signs off on ballot measure to hike preschool tax (Denver Post)
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.