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Bramwell’s Lunch Beat: Accounting Is an Underrated Job

Sep 12th 2014
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Majority of House of Representatives urges leadership to preserve cash method of accounting for tax purposes
A bipartisan majority of the House of Representatives – 233 members – has signed a letter urging House leadership to preserve the cash method of accounting for tax purposes, writing that legislative proposals requiring a transition to the accrual method of accounting “will have a severely detrimental impact on thousands of businesses in our districts,” according to a release from the American Institute of CPAs (AICPA).

The AICPA has opposed the tax reform proposal from House Ways and Means Committee Chairman Dave Camp (R-MI) that would mandate the use of accrual accounting for businesses and individuals who exceed $10 million in annual gross receipts. The AICPA has partnered with state CPA societies and CPA firms to voice the profession’s concerns about the accrual accounting requirement.

Under the cash method of accounting, income is recognized when it is collected, while the accrual method recognizes income when a service is performed, regardless of when cash is collected. Last month, a group of 46 senators sent a letter to the top tax writers in the Senate expressing similar concerns about the accrual accounting proposal.

In the Sept. 11 House letter, which was sent to Speaker John Boehner (R-OH) and other members of the House leadership, legislators wrote, “If forced to pay taxes before income is received, as would be required under the accrual method, less money would be available to small businesses for growth and job creation. Additionally, cash flow management becomes far more complex as a result and will likely trigger the need for additional outside financing. These factors alone would have a significant negative impact on our local economies.

“While we believe reforms to the tax code should provide a simpler and fairer tax system, requiring the use of the accrual method for entities currently using the cash method will not achieve these goals,” the House letter concluded. “As we seek to best represent the concerns of the constituents in our districts, we strongly urge you to preserve the cash method of accounting.”

AICPA President and CEO Barry Melancon, CPA, CGMA, called the accrual accounting mandate “bad tax policy that should be abandoned by the House and Senate.”

CareerCast releases report highlighting the 10 most overrated and underrated jobs ranked accounting as one of the 10 most underrated jobs of 2014 in a new report the online job search portal released on Wednesday.

“Underrated jobs often share certain traits, such as high growth potential, low stress, and the opportunity to make a difference,” CareerCast Publisher Tony Lee said in a written statement. “While these jobs may not attract as much attention, they can be more fulfilling than a high-stress, high-profile career.”

According to the report, the average annual salary for an accountant is $63,550, and the projected hiring outlook is 13 percent.

“The need for qualified accountants is unwavering in today’s hiring landscape, and those in the field have flexibility in their career paths,” the report stated. “Accountants can be retained by one organization and handle only its financials, while others can operate independently and serve multiple clients.”

CareerCast also listed its 10 most overrated jobs of 2014, one of which was bookkeeping. The report shows the average annual salary for a bookkeeper as $35,170, and the projected hiring outlook is 11 percent.

While bookkeeping ranked high as a low-stress job, businesses are streamlining their bookkeeping processes, contracting out to third-party organizations and digitizing more of their records, which means fewer job prospects, CareerCast noted. Thus, this low-stress job can be considered overrated.

“A low-stress environment is a trade-off for predictable and a lower average annual salary, and automation is a constant threat,” the report stated.

Buffett called Hatch to gauge US tax inversion policy
Sen. Orrin Hatch (R-UT) said on Thursday that billionaire investor Warren Buffett called him to gauge Congress’s direction on curbing tax inversions, according to a Bloomberg Businessweekarticle by Richard Rubin.

Buffett, who is chairman and CEO of Berkshire Hathaway Inc., is helping finance Burger King Worldwide Inc.’s purchase of Tim Hortons Inc. and its move to Canada. That transaction could be affected by legislative and regulatory changes being considered in Washington.

“He called me and he said you’ve got to do something about tax inversions,” said Hatch, deviating from his prepared remarks in a speech at the US Chamber of Commerce in Washington on Thursday, according to the article. “I think he wanted to know where we were going and he knows I’ll tell him the truth, which I did.”

Rubin wrote that the phone call happened before Burger King “reached final agreement” on the deal and “consequently well before it was announced” on Aug. 26, Debbie Bosanek, Buffett’s assistant at Omaha, Nebraska-based Berkshire, wrote in an email to Bloomberg on Thursday.

Hatch said any stopgap measure to stem inversions must be revenue-neutral, apply only prospectively, and move the government toward a tax-code revamp that would mean lighter taxes on US companies’ foreign income. He said the current set of Democratic proposals don’t meet those tests, which he called non-negotiable.

“I know I’ve set a pretty high bar for any potential approach to dealing with inversions, and that’s not by accident,” Hatch said, according to the article.

Senators urge Burger King not to move to lower-tax Canada
Jim Puzzanghera of the Los Angeles Timesreported that five senators on Thursday urged Burger King Worldwide Inc. not to move to lower-tax Canada, accusing the company of trying to avoid paying its fair share for roads and other public services it receives in the United States.

Burger King said last month it would move its corporate headquarters to Canada as part of its purchase of Canadian coffee-and-doughnut chain Tim Hortons.

The letter, organized by Sen. Richard Durbin (D-IL) and signed by Sens. Carl Levin (D-MI), Jack Reed (D-RI), Bernard Sanders (I-VT), and Sherrod Brown (D-OH), was intended to increase pressure on Miami-based Burger King to keep its corporate headquarters in the United States and to highlight the offshore tax-shifting practice known as an inversion that President Obama and many Democrats want to limit, Puzzanghera wrote.

“We believe you will find that turning your back on your loyal, US taxpaying customers by renouncing your corporate citizenship is not in the best interest of Burger King or its shareholders,” the senators wrote to Burger King Chief Executive Daniel Schwartz, according to the article. “Many of your loyal customers may choose to spend their hard-earned money at one of your many competitors, instead of supporting a company that wants all the benefits of America but refuses to pay its fair share to support our nation.”

Burger King executives have said the deal was not driven by an attempt to lower its taxes, noting that Canada's rate isn't significantly lower than the overall tax rate the company paid last year.

GOP chairman calls out Obama on tax reform
Bernie Becker of The Hillreported on Wednesday that House Ways and Means Committee Chairman Dave Camp (R-MI) rebuked President Obama for not releasing a detailed plan to overhaul the tax code.

“I think we all get elected to lead. We need some leadership,” Camp said, according to the article.

The Ways and Means chairman released his own broad tax reform plan in February, only to see his draft win little support from his own party. Appearing at an event with Jason Furman, one of Obama’s top economic advisers, Camp noted that the White House had only rolled out a general draft on business taxes well over two years ago. A more detailed proposal from Obama, Camp said, could give new life to the stalled tax reform effort, Becker wrote.

“I could negotiate with myself. I don’t think it would get anywhere,” Camp said at an event hosted by the Business Roundtable, a group of top corporate chief executives. “But I can’t really counter what I’ve done with nothing. You can’t counter a specific plan with a framework.”

Furman, the chairman of the Council of Economic Advisers, made clear that the administration wasn’t on the same page with Camp when it came to his decision to release a detailed tax reform draft.

“We will do whatever we judge is the best way to advance this and make it happen,” Furman said, according to the article. “If you put out too many specifics in the wrong way and the wrong timing, that can just lead people to start shooting them down and undermining them.”

Treasury weighing action on hedge-fund tax ‘loophole’
Zachary R. Mider of Bloombergreported on Thursday that the US Treasury Department said it’s considering ways to end a “loophole” that allows hedge-fund managers to avoid taxes by routing their investments through an insurance company in low-tax countries like Bermuda.

In an Aug. 9 letter obtained by Bloomberg, the Treasury told Senate Finance Committee Chairman Ron Wyden (D-OR) that it’s concerned about such arrangements and is weighing legislative and administrative responses.

Individual investors in hedge funds that trade frequently generally must pay the ordinary income-tax rate on their earnings each year, whether they withdraw money from the fund or not. The current top marginal tax rate is 39.6 percent. By investing in a fund indirectly, through an insurer in a country with no corporate income tax, they can defer taxes until they sell the investment and pay the lower long-term US capital gains rate of 20 percent, Mider wrote.

The IRS has occasionally challenged aspects of such arrangements, Assistant Treasury Secretary Alastair Fitzpayne responded in the Aug. 9 letter. Treasury has had “significant difficulties” in tackling the issue because the relevant laws are vague, Fitzpayne wrote, according to the article.

For tax authorities, the key is determining whether a company is truly in the insurance business, or just a US investment manager in disguise. “While there may not be a bright line, I am concerned that under the current tax administration practices and constraints there isn’t any line at all,” Wyden wrote on Thursday in a response to Fitzpayne, according to the article.

M&T Bank unit to pay $18.5 million in SEC accounting case
Alan Katz of Bloombergreported on Thursday that Wilmington Trust Co., a unit of M&T Bank Corp., agreed to pay $18.5 million to settle US Securities and Exchange Commission (SEC) claims that the bank failed to report construction loans that weren’t being repaid.

In the second half of 2009, Wilmington Trust omitted about $669 million in loans that were 90 days or more past due, the SEC said in a statement on Thursday. The bank also understated its loan-loss provision during that period, the agency said.

“Investors must know when banking institutions are unable to recover on material amounts of outstanding loans, which means those institutions must carefully adhere to relevant accounting rules,” Andrew Ceresney, director of the SEC’s enforcement division, said in the statement.

M&T said in a 2012 filing that it had received a notice of potential regulatory action by the SEC, Katz wrote.

“While we cannot speak to things that happened at the former company, it’s important to resolve issues from the past so we can continue to build on Wilmington Trust’s legacy both in Delaware and the wealth trust management business.” said Michael Zabel, a spokesman for M&T, according to the article.

[Click here to download the SEC release.]

Quick Links:

  • The SEC is tired of procrastinating late filers taking their sweet ass time (Going Concern)
  • The obvious link between inadequate staffing and stress explains why you hate your life (Going Concern)
  • EY sued by man claiming he was disabled due to pending ulcer, high blood pressure (Going Concern)
  • Backdoor tax increases may hit investors (Wall Street Journal)
  • The Senate still wants to tax the net (Wall Street Journal)
  • Chamber releases tax reform ads (The Hill)
  • Democrats’ whopper of a strategy flop (Politico)
  • ‘Tax reform’ cry hampers effort to curb inversions (Bloomberg)
  • The church of corporate inversions (Tax Analysts)
  • The corporate income tax has always been about power (Tax Analysts)
  • Colorado marijuana tax revenues surge as recreational sales surpass medical (Washington Post)
  • Nevada lawmakers approve Tesla tax breaks (USA Today)
  • Client sues tax advisor for bad advice: Is the settlement payment tax-free? (Forbes)
  • The cost of tax compliance (Tax Foundation)
  • Does the Export-Import Bank make or lose money? (TaxVox)
  • Former Big Dig chief pleads guilty to tax crimes (Boston Globe)
  • Tax relief for terrorist attack victims and their families (Don’t Mess With Taxes)

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