Herbalife says KPMG's resignation hindered stock buybacks [LAT]
Herbalife Ltd. said it had to scale back plans to repurchase its shares after KPMG resigned in early April as its auditor and withdrew its review of the company's annual financial statements for the last three years. The Los Angeles nutritional products company canceled plans to borrow money that "would have been used to repurchase a meaningful amount of company stock," John DeSimone, Herbalife chief financial officer, told analysts Tuesday in a conference call. […] "We were going down a path; that path has now been blocked by the KPMG issues," he said, noting that the company will continue to repurchase some stock "on an opportunistic basis."
Google ordered back to parliament to answer tax questions [Guardian]
Google and its auditor Ernst & Young will be recalled to parliament to restate their evidence on the internet search giant's tax position following an investigation into Google's advertising sales practices. Matt Brittin, Google's European boss, told parliament's public accounts committee last November that his sales team was based in tax-sheltered Dublin and that the job of UK staff was to market Google as an advertising space rather than to negotiate and close deals with advertisers. Evidence gathered by Reuters from Google's own website, interviews with clients and former staff, and Google staff profiles on the internet, appears to show that some staff closing deals are based in London. If this is found to be the case, Google's UK tax bill could increase significantly.
IRS eyes U.S. accounts at Caribbean bank [Reuters]
The Justice Department said on Tuesday that a federal court had authorized the Internal Revenue Service to seek information on U.S. taxpayers who may have accounts at Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB). In a move resembling a recent IRS inquiry into Americans with Swiss bank accounts, the Justice Department said a court order would let the IRS serve a 'John Doe' summons seeking records of FCIB's U.S. correspondent account at Wells Fargo & Co. A correspondent account is a bank deposit account maintained by one bank for another bank. The order would allow the IRS to identify U.S. taxpayers with "interests in financial accounts at FCIB and other financial institutions that used FCIB's Wells Fargo correspondent account," the Justice Department said in a statement.
GOP plan to tie tax reform to nation’s debt ceiling stirs Democratic tensions [The Hill]
A new GOP effort to pass tax reform by tying it to the next increase in the nation’s debt ceiling could split Democrats on Capitol Hill. On Tuesday, the House Democratic point men on taxes and the budget came out against the idea of connecting the two issues, but the Senate’s top tax-writer, Finance Committee Chairman Max Baucus (D-Mont.), may go along. Rep. Chris Van Hollen (D-Md.), the ranking member of the House Budget Committee, was adamant that there should be no linkage. “The president has been very clear. There is no negotiating over whether or not the United States pays its bills or not,” Van Hollen said Tuesday. House Ways and Means Committee ranking member Sandy Levin (D-Mich.) concurred. “Tax reform must stand on its own feet,” Levin said.
How to Improve the Tax Subsidy for Home Ownership [TaxVox/TPC]
The congressional Joint Committee on Taxation estimates the mortgage interest deduction will cost $380 billion over the next five years, making it one of the largest individual tax preferences in the Internal Revenue Code. The Urban-Brookings Tax Policy Center estimates that 40 million taxpayers will benefit from the deduction in 2015. In spite of its widespread use and large fiscal cost, the deduction does little to promote home ownership. It provides no subsidy to the nearly two-thirds of taxpayers who do not itemize and only a modest subsidy to those in the 15 percent bracket. The subsidy’s value is largest for families in high tax brackets who are most likely to own a home even without preferential tax treatment. Instead of promoting more home ownership, the deduction mostly encourages those who already own homes to buy larger and more expensive houses with borrowed money. If Congress wants to encourage homeownership, it could direct more of the tax subsidy to prospective homebuyers who straddle the line between renting and buying. Two ways to better target the subsidy: Replace the deduction with a uniform percentage tax credit for mortgage interest, or provide an investment credit for first-time home purchases.
Did accounting firm auditing JobsOhio have conflict of interest? [CD]
As KPMG was auditing JobsOhio’s books last fall, the global auditing and consulting firm also was seeking $1 million in taxpayer money from JobsOhio for an unnamed client. JobsOhio, the state’s privatized development agency, says that the grant request was handled separately from and without the knowledge of the firm’s auditing division. But some say the timing raises ethical questions. The situation also exposes weaknesses in the laws creating Gov. John Kasich’s JobsOhio, because recipients of state aid are kept secret until the project is approved. While saying he didn’t have enough information to “make a determination” on the propriety of this situation, state Auditor Dave Yost called it “concerning.” Noting that auditors face strict ethical guidelines, the auditor said, “Any time you have questions of independence in our business, it’s concerning.”
Court denies HealthSouth's motion over dismissal of Ernst & Young claims [BBJ]
The ruling stems from the accounting scandal that occurred more than a decade ago at the Birmingham-based provider of inpatient rehabilitation clinics. HealthSouth has claimed, among other things, that Ernst & Young, from 1996 to 2002, "acted recklessly and with gross negligence and failed to perform reviews and audits of the company's financial statements with due professional care as required by law and by its contractual agreements with the company," After an American Arbitration Association panel dismissed HealthSouth's claims in December, HealthSouth (NYSE: HLS) asked the court to vacate the panel's decision. When it dismissed the claims in December, the AAA panel concluded that HealthSouth could not pursue its claims since its former officers and employees committed fraudulent acts when they inflated the company's earnings.
Zittnan is replacing Vince Tomkinson who is going to run the firm's Chicago office while Freeman is succeeding Zittnan.
Trusts and material participation: the IRS is just making it up [Tax Update]
Joe Kristan shows how the new 3.8% Net Investment Income tax will hit trusts.
Pancho Villa and Three Hundred Million Joints [Tax Analysts]
David Brunori crunches a lot of number around the amount of pot in Colorado, plus mentions some tax and political implications.