Essential reading: top U.S. House tax writer has lymphoma
July 26 (Reuters) – Good morning and welcome to the top tax and accounting headlines from Reuters and other sources.
* Chairman of key U.S. congressional committee has lymphoma – Reuters. U.S. Rep. Dave Camp, a Michigan Republican who chairs the powerful House Ways and Means committee, said on Saturday he will undergo treatment for non-Hodgkins lymphoma, a cancer that starts in parts of the body’s immune system. “After a recent routine yearly physical, it was discovered that I have a very early, highly treatable and curable type of non-Hodgkins lymphoma – large B-cell lymphoma,” Camp said in a statement. He said he and his doctors expect “a full recovery and cure.” http://link.reuters.com/tax69s
* Sarasin to shut out non-compliant clients by year-end – Reuters. Swiss private bank Sarasin plans to shut out clients who don’t pay taxes on assets held in Swiss accounts as it seeks to eliminate the risks that could be triggered by holding money that is not tax-compliant. The bank said on Monday that it would stop dealing with clients whose tax compliance could not be verified. http://link.reuters.com/sax69s
* A tax break’s cost, benefits are weighed – The Wall Street Journal. A New Jersey tax credit gives companies an average of more than $167,000 for every job they create or save from leaving, a program that has become the state’s fastest-growing business subsidy, according to a Wall Street Journal analysis. Considered one of the most generous tax-incentive programs in the nation, New Jersey’s Urban Transit Hub Tax Credit has made awards of nearly $1 billion to 18 companies and developers since 2010, generating or retaining almost 6,000 jobs, according to the state Economic Development Authority, the program’s administrator. http://link.reuters.com/rax69s
Olympic medals: gold to the IRS too?
When the lucky (and good) Americans who medal at the London Games bow their head to receive the gold, silver or bronze, one can only hope the tax man is the last person on their mind.
They’d be unwise to forget him altogether, however. As with so much in life, Olympic glory comes at a price, and by price, we mean tax.
It’s not the hardware itself that’s likely to trigger a tax bill (though it could). It’s the cash that goes along with it.
Athletes who make the podium can look forward to a check from the U.S. Olympic Organizing Committee: $25,000 for gold, $15,000 for silver and $10,000 for bronze. Like lottery winners and Jeopardy champions, those winnings are taxable.
Individual sports including cycling and swimming have started to offer bonuses to their winners too. Wrestlers have a shot at $250,000 per gold metal this year as well.
Even sponsors are paying up for the big win. Yahoo! Sports recently reported that swimming star Ryan Lochte is expected to earn six-figure bonuses from Gatorade, Speedo and other major sponsors. Rival Michael Phelp’s 2008 $1 million windfall from Speedo was given to charity.
It’s all taxable, explains Alex Knight, a tax partner at Atlanta’s Habif, Arogeti & Wynne: “It’s no different from winning Wheel of Fortune or the lottery.”
Calendar
* IRS hearing on proposed regulations that implement fees associated with the Patient Protection and Affordable Care Act on some insurance policies and self-insured health plans. 10 a.m. EDT, IRS Auditorium. Washington.
* U.S. Internal Revenue Service workshops on tax topics. Las Vegas.
* National Association for Business Economics seminar on transfer pricing, the differences between international accounting standards and U.S. generally accepted accounting principles, and more. Speakers will include Joe Andrus, head of the transfer pricing unit at the Organisation for Economic Co-operation and Development, and Michael McDonald of the U.S. Treasury Department. Arlington, Virginia.
Wednesday, August 1
* Senate Finance Committee hearing on tax reform and the taxation of business entities. 10:30 a.m. EDT, Dirksen Senate Office Building. Washington.
Essential reading: Tax haven clampdown yields cash but secrecy still thrives, and more
Welcome to the top tax and accounting headlines from Reuters and other sources. * Tax haven clampdown yields cash but secrecy still thrives. Chris Vellacott and Sinead Cruise – Reuters. A global campaign to tax trillions of dollars hidden in offshore tax havens has made revolutionary progress, an official leading the drive said, rejecting suggestions that the super rich are running rings around Western authorities. Leaders of the G20 group of leading Western and developing nations launched the campaign three years ago, aiming to claw back billions in lost tax revenue at a time when many governments are trying to cut huge budget deficits. Link
* Senate passes middle-class tax cut bill in symbolic move. Richard Cowan and Kim Dixon – Reuters. President Barack Obama’s fellow Democrats in the Senate on Wednesday won passage of a bill to renew tax cuts for tens of millions of Americans, while letting some rates rise for the wealthiest, in a largely symbolic vote. The legislation, certain to be rejected by the Republican-controlled House of Representatives, lets Democrats claim in advance of the November 6 elections that they passed tax cuts for most Americans, only to be stymied by Republicans. Link
* Pricewaterhouse had brief window into Peregrine’s books. Sarah Lynch – Reuters. PricewaterhouseCoopers, one of the world’s largest accounting firms, reviewed the accounts of failed futures brokerage Peregrine Financial Group while the alleged fraud at the brokerage was occurring, a top regulator told lawmakers on Wednesday. Gary Gensler, chairman of the Commodity Futures Trading Commission, revealed that PwC was retained in 2000 after Peregrine settled an enforcement action from the CFTC. Link
* About 50 political groups win tax-exempt status-IRS. Patrick Temple-West – Reuters. A senior Internal Revenue Service official on Wednesday put a number for the first time on how many political groups, including some “Tea Party” organizations, have gained IRS tax-exempt status in recent years. Link
* Small business audits often find no more taxes due-IRS watchdog. Reuters. The U.S. Internal Revenue Service’s watchdog criticized the agency for doing a high number of small business, “S-corporation” audits without finding additional taxes owed. Link
* Who deserves a tax break? The New York Times editorial. In a rare show of old-fashioned democracy, Senate Republicans allowed Democrats a simple-majority vote on Wednesday to pass a bill extending tax cuts on income up to $250,000 a year. Republicans, knowing the measure would be killed in the House because it raises taxes on the rich, chose not to filibuster it in hopes of “exposing” a few vulnerable Democrats to a tough vote. There was nothing tough about it, however, and Democrats at least finally put the Senate on record in favor of a sensible tax plan. Link
Essential reading: Democrats aren’t all on same page on Bush-era tax cuts, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Democrats aren’t all on same page before vote on Bush-era tax cuts. Jonathan Weisman – The New York Times. On the eve of the first showdown vote on expiring Bush-era tax cuts, it’s the Democrats who appear to be splintering. The Senate will vote Wednesday on whether to proceed to a tax bill that would extend current tax rates and other tax breaks for the middle class and working poor, while allowing income tax, capital gains and dividend rates to rise on earnings over $250,000. The measure will almost certainly fall to a Republican filibuster. Democratic leaders are hoping to get the support of 50 of the 53 Democrats and Democratic-leaning independents in the Senate. Link
* White House tries to prod Congress with new tax report. Jared Favole – The Wall Street Journal. The White House is trying to ratchet up pressure on congressional Republicans, saying a new report shows middle-class families would see their tax bills increase by an average of $1,600 if Congress doesn’t extend tax cuts set to expire at year’s end. “Congress faces a choice,” says a new report released by the White House National Economic Council, which details the costs and benefits of different proposals from President Barack Obama and congressional Republicans over how to handle the Bush-era tax cuts that will expire at the end of the year. Link
* Obama attacks Romney on tax cuts for wealthier Americans. Amy Gardner – The Washington Post. At appearances in Portland Tuesday and in Oakland, Calif., late the night before, Obama issued blistering attacks against Republican Mitt Romney’s plan to cut taxes for the wealthiest Americans. The message has become a cornerstone of the president’s strategy. Link * U.S. Treasury to release foreign tax pact rules within days. Reuters. The U.S. Treasury Department will release before the end of July new compliance rules for foreign governments eager to cooperate with looming U.S. tax laws and spare their domestic banks from U.S. fines, a Treasury official said on Tuesday. The expected rules are part of Treasury’s implementation of the Foreign Account Tax Compliance Act, or FATCA, a 2010 anti-tax evasion law. Link * Little headway in U.S. Congress for online sales tax. Reuters. U.S. lawmakers debated, but found little agreement on Tuesday on a proposal to impose a national standard for letting state governments impose sales tax on online retail sales. Legislation along these lines has languished for years in the Senate and the House of Representatives, for reasons that were clearly on display at a House committee hearing. Link
* Awakening voters’ curiosity about Romney’s tax returns and Bain years. Alex Sargent – The Washington Post opinion. Pew Research asks Americans if they want to know more about Mitt Romney’s resume, tax returns, and identity, and comes back with this: When it comes to specific details of Romney’s background and experience, 41 percent of voters say they would like to learn more about Romney’s record as governor, 36 percent would like to learn more about his tax returns, while 35 percent want to know more about his record as chief executive of Bain Capital. Link
* The tax cliff endangers seniors. Lewis Hay – The Wall Street Journal. Most people know that the U.S. government is rapidly approaching the edge of a fiscal cliff that will raise taxes for millions of Americans—at every income level and age. What is less known is that seniors, many of whom depend on investment income to fund their retirement, will be hurt the most. Link
* Kasich’s tax swap – The Wall Street Journal editorial. The U.S. fracking boom can improve a state’s tax climate, as evidenced by Governor John Kasich’s plan to convert Ohio’s energy wealth into a tax cut. The Buckeye State currently imposes a relatively low 20-cent severance tax on oil and three cents for gas. But hydraulic fracturing for natural gas and especially crude is now surging in the Appalachian foothills on the eastern side of the state. Link
Essential reading: Firms pass up tax breaks, loopholes impact U.S. deficit, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Firms pass up tax breaks, citing hassles, complexity. John McKinnon – The Wall Street Journal. Many companies are saying “no, thanks” to tax breaks and are likely paying more taxes than legally required. Corporate breaks that Washington hopes will boost the economy often prove ineffective. Firms are leaving tens of billions of dollars on the table every year. Out of 1.78 million corporate tax returns in the United States, only about 20,000 claimed any of the three dozen main business tax credits in the code, according to Internal Revenue Service estimates. Link
* Tax loopholes block effort to close gaping U.S. deficit. Jonathan Weisman – The New York Times. Senator Mike Crapo made sure that a $3 billion loophole — protecting “black liquor,” an alcoholic sludge used as fuel in timber mills and factories — remained open in the negotiations over the highway bill that President Obama signed this month. Many budget experts criticize the loophole as a tax dodge because it allows the sludge to qualify for an energy subsidy created to wean the country off imported oil for vehicles, which black liquor does not do. Link
* Cost difference: GOP and Democrats tax plans not so far apart. John McKinnon – The Wall Street Journal. Democrats sought to highlight the lower cost of their bill to extend Bush-era tax cuts, compared to the GOP version, in an analysis they released Friday night. Senate Democrats touted their $250 billion plan as $155 billion cheaper than a competing Republican version that costs about $405 billion. The real difference between the competing plans, of course, is the GOP extension of tax breaks for families making more than $250,000 next year. That costs about $49 billion, according to the latest estimate from congressional experts. Link
* Crackdown on tax-dodge sellers. Vanessa Houlder – The Financial Times. Sales people promoting abusive tax dodges will be forced to hand over client lists, under proposals aimed at cracking down on those who “artificially and aggressively” reduce their tax bills. The UK Treasury is also considering extending the financial services misselling rules to penalize advisers who market schemes that clearly do not work, as part of new measures aimed at pricing open schemes and warning taxpayers of the risks of aggressive avoidance. Link
* Art’s sale value? Zero. The tax bill? $29 million. Patricia Cohen – The New York Times. The object under discussion is “Canyon,” a masterwork of 20th-century art created by Robert Rauschenberg that art dealer Ileana Sonnabend’s children inherited when she died in 2007. Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero. The IRS has appraised “Canyon” at $65 million and is demanding that the owners pay $29.2 million in taxes. Link
* Super rich hold $32 trillion in offshore havens. Reuters. Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion in lost income tax revenues, according to research published on Sunday. The study estimating the extent of global private financial wealth held in offshore accounts – excluding non-financial assets such as real estate, gold, yachts and racehorses – puts the sum at between $21 and $32 trillion. Link
Calendar
Some important tax and accounting events in the week ahead:
Monday, July 23 – Wednesday, July 25 * American Institute of Certified Public Accountants conference on gift and estate taxation, the generation-skipping transfer tax, income tax considerations related to trusts, estates, and large IRAs, and more. Las Vegas.
Monday, July 23 – Tuesday, July 24 * Practicing Law Institute seminar on foreign tax credits, tax treaties, international tax reform, the Foreign Account Tax Compliance Act, and passive foreign investment companies. New York and webcast.
Tuesday, July 24 * U.S. House of Representatives Judiciary Committee hearing on the Marketplace Fairness Act, which would permit states to require online retailers to charge sales tax. 10:00 a.m. EDT, Rayburn House Office Building. Washington.
Wednesday, July 25 * Internal Revenue Service webinar on what is considered a church for tax purposes, the process of applying for tax-exempt status, and record-keeping and filing requirements.
Thursday, July 26 * U.S. House of Representatives Financial Services Committee hearing on the 10th anniversary of the Sarbanes-Oxley Act. 9:30 a.m. EDT, Rayburn House Office Building. Washington.
Essential reading: Ann Romney says no more tax returns, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Ann Romney: No more tax returns. John McKinnon – The Wall Street Journal. Mitt Romney’s wife, Ann, said the Romney campaign won’t be releasing older tax returns in order to block further attacks from President Barack Obama. But Democrats – and some Republicans – are still calling for Romney to release more than two years of tax returns. Link
* Non-partisan report sees no harm in U.S. tax hikes for wealthy. Kim Dixon – Reuters. Letting tax rates for the wealthy rise will not put a short-term damper on the economic recovery, according to a report by the non-partisan research arm of the U.S. Congress. The study by the Congressional Research Service is likely to be used by Democrats in the looming battle over whether to extend tax cuts originally enacted during the administration of President George W. Bush when they expire at the end of the year. Link
* How the division on taxes adds up. Jonathan Weisman – The New York Times. Congress has reached a bitter stalemate over $28 billion. That is the difference in cost between extending all the Bush-era tax cuts set to expire on Jan. 1 for one year and allowing the tax cuts to expire on earnings over $250,000, which the Democrats want, according to a new analysis by Congress’s bipartisan Joint Committee on Taxation. It amounts to about 3 percent of the expected trillion-dollar budget deficit this year. Link
* Manufacturers leery of losing breaks for tax rate cut. Patrick Temple-West – Reuters. Manufacturing executives told lawmakers on Thursday they are not ready to trade major tax breaks for a 10-point cut in the corporate tax rate to 25 percent, a key feature in the major Republican proposals for tax reform. Link
* Huron Consulting settles SEC charges over accounting scandal. Jonathan Stempel – Reuters. Huron Consulting Group Inc agreed to pay a $1 million civil fine to settle U.S. regulatory charges over a 2009 accounting scandal that caused its shares to plunge and led to the replacement of its entire management team. The settlement announced by the U.S. Securities and Exchange Commission ended a three-year probe. Link
* Even if we go over the fiscal cliff, the Bush tax cuts could be applied retroactively. Suzy Khimm – The Washington Post. Democrats are now threatening to go over the fiscal cliff on Jan. 1 if Republicans aren’t willing to agree to tax hikes for the wealthy. Even if legislators still haven’t come to a deal by the fiscal cliff deadline, Congress could decide to restore the tax cuts so they would start Jan. 1. That’s especially likely to happen for the middle-class Bush tax cuts, which both parties support preserving through 2013. Link
Essential reading: Boxed in on taxes, Romney says Obama dislikes success, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Boxed in on taxes, Romney says Obama dislikes success. Sam Youngman and Steve Holland – Reuters. Mitt Romney accused President Barack Obama on Wednesday of demonizing business success, as the Republican tried to ignore questions about his personal finances that threaten to damage his presidential bid. Some senior Republicans worry that Romney is becoming boxed in by the Obama team, just at the time in the race when many Americans begin to tune in and form clearer opinions about candidates before the November 6 election. Link
* Defense firms open to higher taxes to avert cuts. Damian Paletta – The Wall Street Journal. Two top defense contractors told a House committee Wednesday that Congress should consider including increasing taxes as part of a package of changes to reduce the deficit, a sign that industry fear over the impact of spending cuts next year could challenge party orthodoxy. Top executives from Lockheed Martin, Pratt & Whitney, EADS North America, and Williams-Pyro told the House Armed Services Committee that the $50 billion in projected military spending cuts set to begin in January already has had a chilling impact on military planning, delaying projects and raised the possibility of layoffs before the end of 2012. Link
* U.S. utilities fear approach of fiscal cliff. James Politi – The Financial Times. The largest US utilities blitzed Capitol Hill this week to lobby for a deal to avert the effects of the “fiscal cliff” on their industry, warning that increases in tax rates on dividends could damage their normally steady shares and delay investments in the country’s electrical grid. The threat of tax increases on dividends has alarmed companies with steady cash flows that pay a lot out to shareholders. Link
* Aiming for Romney, Democrats push for disclosure of offshore accounts. Ashley Southall – The New York Times. Senate Democrats intensified their campaign to pressure Mitt Romney to release more information about his finances with a push for legislation requiring candidates for federal office to disclose holdings in foreign tax havens. Senator Richard J. Durbin, the majority whip, and Senator Carl Levin, took to the floor to urge support for the Financial Disclosure to Reduce Tax Haven Abuse Act. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee is preparing similar legislation that would require presidential candidates to release at least 10 years of tax returns and disclosures of overseas accounts and other financial transactions. Link
* Obama plan to lift to tax rates would plague millions of small businesses, study warns. J.D. Harrison – The Washington Post. Should Congress allow the tax rates for the nation’s highest earners to expire at the end of the year, millions of small businesses could be forced to cut jobs and wages, placing an enormous strain on the already sluggish economic recovery, according to a new study. Commissioned by a host of pro-business advocacy groups, Ernst & Young conducted this latest study in an effort to predict the long-term economic impact of letting the top rates increase at year’s end — and the findings stand in stark contrast to the repeated assurances from Democrats that their proposal would have minimal effect on small business owners. Link
* UC regents link tuition hikes to Gov. Brown’s tax measure. Larry Gordon – The Los Angeles Times. Most University of California students will get a breather of at least four months without a tuition increase. But then, all bets are off. That’s the result of a UC regents vote Wednesday freezing all undergraduate and some graduate school tuition as part of a funding deal with the state legislature. If Gov. Jerry Brown’s tax hike measure on the November ballot fails, the regents warned that tuition might rise 20 percent, or more than $2,400. Link
Essential reading: Pressure on Romney ramps up from both sides, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* With or without tax return release, pressure on Romney ramps up from both sides. Felicia Sonmez and Philip Rucker – The Washington Post. The political pressure on Mitt Romney to release more of his personal income tax returns is causing some divisions inside the GOP presidential candidate’s camp, according to a Republican strategist close to the campaign. Although some advisers are arguing privately that Romney needs to release additional filings to curb the political fallout, others are resisting that suggestion, reflecting the candidate’s longtime reluctance to publicly disclose information about his personal finances. Link
* Romney explains Cayman Island investments. John McKinnon – The Wall Street Journal. Mitt Romney, in an interview with the National Review, improved greatly on his campaign’s halting explanation of why he has held investments in the Cayman Islands, a Caribbean tax haven. Romney suggested that his Cayman Islands investments are basically standard-issue private equity partnerships, not tax shelters. Cayman Islands is a favorite destination for private equity managers to locate new partnerships, mostly because foreign investors can participate while avoiding some U.S. tax entanglements. The same often goes for U.S. tax-exempt entities such as pension funds. Link
* Romney’s secrecy becomes focus of Obama’s attack strategy. Jeff Mason – Reuters. Mitt Romney has secrets. Lots of them, perhaps. That provocative claim is at the core of President Barack Obama’s latest attacks on his Republican rival, a strategy that is dominating the narrative of the presidential campaign and leading anxious Republicans to question Romney’s tactics. Unlike most politicians seeking national office, Romney initially declined to release any of his tax returns. In January, under pressure from his opponents in the Republican primaries, he released his 2010 return and an estimate for 2011. Link
* Coalition urges tax hikes, entitlement cuts to tame national debt. Lori Montgomery – The Washington Post. A coalition of business leaders, budget experts and former politicians launched a $25 million campaign Tuesday to build political support for a far-reaching plan to raise taxes, cut popular retirement programs and tame the national debt. With anxiety rising over a major budget mess looming in January, the campaign — dubbed “Fix the Debt” — is founded on the notion that the moment is finally at hand when policymakers will be forced to compromise on an ambitious debt-reduction strategy. Link
* Democrats propose plan to sidestep GOP anti-tax pledge. Jonathan Weisman – The New York Times. Senate Democrats are proposing a novel way to circumvent the Republican pledge not to vote for any tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class shortly thereafter. Virtually every Republican in Congress has taken the pledge, pushed by Grover Norquist’s Americans for Tax Reform, never to vote for a tax increase — a pledge both parties see as a serious impediment to a tax compromise. But if tax rates snap back to the levels of the Clinton presidency on Jan. 1, any legislation to reinstate some of those tax cuts — but not all of them — would be considered a tax cut. Link
* Kansas Republicans war over “Ryan plan” style tax cuts. Nick Carey – Reuters. Fiscal conservatives in Kansas have turned their state into a laboratory to test reforms similar to the “Ryan plan,” named after Republican Paul Ryan, for massive tax cuts at the national level — and the result has been a Republican civil war. Backers of recent state tax cuts argue they will create jobs and boost the economy to partially offset lost revenue, with budget cuts solving the remaining shortfall. The tax cuts go into effect in January, and the Kansas Legislative Research Department calculates the lost revenue will amount to the equivalent of 36 percent of the state budget within five years. Link
