New slant on corporate taxes
Change is coming atop some key congressional committees, which could tip the balance in the long-running debate on overhauling corporate taxes, Maxwell Murphy, a senior editor for the Wall Street Journal’s CFO Journal, wrote today.
US-based multinationals have accumulated nearly $2 trillion in profits overseas, at least $650 billion of which is cash, according to International Strategy & Investment, an investment-research firm. The cumulative foreign profits of these companies rose 12 percent last year, and have grown at a compound annual rate of 20 percent since 2005, the article stated.
“The companies argue that the disparity between United States and foreign taxes traps their foreign earnings overseas,” Murphy wrote. “To bring that cash home, they and their supporters say, the United States should join most of the world’s other industrialized countries in adopting a so-called territorial tax system. A territorial system allows companies to pay little or no taxes on foreign profits above what they have already paid abroad.”
The United States requires companies to pay the difference between lower foreign taxes and the US corporate tax rate of 35 percent when they bring their international earnings home.
“There is wide recognition that the system we have now is the worst of all possible worlds,” said Pamela Olson, deputy US tax head for accounting firm PricewaterhouseCoopers LLP, who served as the US Treasury Department’s assistant secretary for tax policy under former President George W. Bush, according to the article.
Tax preparers targeting poor with high fees
Tax season brings the biggest one-time influx of money many Americans see all year, but it also attracts unscrupulous tax return preparers, Campbell Robertson of the New York Timeswrote yesterday.
“Ms. [Brittany] Dixon, a supermarket cashier and college student, took her tax documents – a W-2 form and some education expenses – to the first place she saw, in a storefront near the interstate,” Robertson wrote. “The preparation took about a half-hour, and Ms. Dixon was told the amount of her refund – and that she would be charged nearly $400, about a quarter of the total, in fees.
“She told the preparer not to file, she said, and found a service willing to do her taxes at no cost,” he continued. “But by then, the first preparer had already filed and taken its cut. ‘That was my whole car note,’ Ms. Dixon said,” according to the article.
Stephen Black, the director of Impact Alabama, a not-for-profit based at the University of Alabama that trains college students to provide free tax help, told Robertson that his volunteers routinely saw low-income taxpayers who had paid hundreds of dollars to commercial preparers, often for inaccurate returns, and were often unaware that the prices are excessive.
“Exorbitant pricing is rampant,” he said, according to the article.
["Unethical" tax preparers is the focus of a Senate Finance Committee hearing that was held this morning.]
House panel set to refer Lerner case to Justice Department
John D. McKinnon of the Wall Street Journalreported yesterday that the Republicans on the House Ways and Means Committee are set to vote at 9:30 a.m. ET Wednesday morning to refer actions by retired IRS official Lois Lerner to the US Justice Department as a potential criminal matter.
“This kind of gameplaying about prosecutions suggests how easy it is to call someone a criminal and get the media to print it,” said William Taylor III, Lerner’s lawyer, according to the article.
The referral essentially means that lawmakers believe the actions by Lerner, the former head of the IRS exempt organizations division and a key figure in the IRS’s targeting scandal last year, might have violated criminal laws. McKinnon noted what’s unclear is exactly which actions the committee is examining. That could become clearer after the committee votes.
The House Oversight and Government Reform Committee is expected to vote on Thursday to hold her in contempt of Congress. Within the past year, Lerner declined to testify twice before the panel, citing her Fifth Amendment privilege. Some committee members contend that she effectively waived her rights against self-incrimination by making a statement of innocence at a hearing last year, McKinnon wrote.
Issa report: IRS applied ‘systematic scrutiny’ only to conservative groups
A new report from House Oversight and Government Reform Committee chairman Darrell Issa (R-CA) tries to discredit Democratic claims that the IRS targeted both liberal and conservative groups for extra scrutiny during the past two election cycles, Josh Hicks of the Washington Postreported yesterday.
Before the 2010 election, the IRS began using “be on the lookout” lists, or BOLOs, to screen for groups that might be involved in too much political activity to qualify for tax-exempt status, Hicks noted. An inspector general’s report last year found that the agency inappropriately singled out applicants based on their names and policy positions.
In Issa’s report, released yesterday, he revealed that all three of the IRS’s test cases involved conservative organizations: the Prescott Tea Party, the American Hunto, and the Albuquerque Tea Party. Two of the groups dropped their applications as the review process dragged on, according to the findings.
The report also contends that “only tea party applicants received systematic scrutiny because of their political beliefs,” even though the IRS screened for progressive groups as well, the article stated.
Representative Elijah Cummings (D-MD), the committee’s ranking Democrat, accused Issa of “cherry picking evidence and simply disregarding documents that directly contradict his partisan narrative.”
“Chairman Issa has in his possession – right now – IRS documents that show definitively that both progressive and conservative groups were highlighted for scrutiny,” Cummings said in a statement on Monday, according to the article.
Chairman term limits make Congress a better place
Bloomberg View columnist Albert R. Hunt wrote on April 6 that the hand-wringing over term limits for committee chairman is misplaced.
“Four House committee chairmen have announced retirements this year. In several cases, including [House Ways and Means Committee Chairman Dave] Camp's, a major contributor to their decision was the reform introduced in 1994 by Speaker Newt Gingrich that required Republicans to serve as committee chairmen for no more than six years. This rule is criticized when it forces out respected members. Yet it's one of the few Gingrich reforms that endures and, on balance, has been positive,” Hunt wrote.
“It recognizes that longtime committee leaders can become captive of the interests and agencies they oversee. New committee chairmen are more likely to bring fresh perspectives. Sure, critics say, but you lose expertise. Yet the rule doesn't require term-limited chairmen to leave Congress or even the committee. (Democrats are more stuck in the old system.)”
- Why accountants can (and should) take over the business world (Going Concern)
- Rein in shady tax preparers (New York Times)
- Food bank’s tax service puts money in the hands of those in need (New York Times)
- ‘Flash Boys’ fuels more calls for a tax on trading (New York Times)
- Congressional committee chairs have lost most of their prestige, allure (Washington Post)
- Reforming the audit profession: The cost of cosiness (The Economist)
- SEC Goldman lawyer says agency too timid on Wall Street misdeeds (Bloomberg)
- ‘House of Card’ in setback as Maryland balks at tax deal (Bloomberg)
- 10 questions to ask when working with an accountant (Entrepreneur)
- New IRS commissioner talks tax, scandal and Congress (Forbes)
- If you have high income, your taxes are going up (TaxVox)
- Mama Mia! Swedish tax break prompted ABBA’s wild outfits (Don’t Mess With Taxes)
- Tax reform: Don’t discourage much-needed retirement saving for economic growth (Financial Advisor)
- Award payment to SEC’s first-ever whistleblower quadruples (Compliance Week)
- Cutting short the ‘extenders’ would boost the economy (Washington Times)
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.