I don’t care if you’re a Republican or a Democrat; you’re an accountant, and the avert-the-fiscal-cliff legislation that the federal government crapped out at the last minute hooks you up. Sure, you’re going to pay more in taxes, but Congress was actually able to bang out some long-term solutions to the expiring tax cuts which is going to make your life easier1.
If I've learned anything from the Pirates of the Caribbean ride at Disneyland, it's that dead men tell no tales; however, the rich ones still pay taxes which is good news, especially for those who can't afford Disneyland. Some Americans are in favor of radically increasing the taxes on the rich while others want to […]
It’s unlikely that the lame ducks will accomplish much.
Jesus, that’s no way to start.
I expect an AMT patch to pass (though you should bet the other way if they offer points). I would bet against the extenders getting past the lame ducks, though it could happen. Action on the Bush tax cuts and the estate tax seems unlikely to me. It would require a triumphal GOP to work out a deal with a President whose response to disagreement so far has been to repeat himself slower and louder. The same dynamics bode poorly for the next Congress when it meets in January.
After such an ugly campaign, we wouldn’t put it past a bunch of losers (read: Democrats) to spite the entire country just because they couldn’t effectively communicate any accomplishments from the past two years. Of course, that’s us being cynical to a fault.
Thinking a little more practically, we agree with Joe on his AMT patch prediction. The rules are such a mess that it could stand a complete overhaul but we realize that’s nothing short of water into wine with less than two months left in 2010.
As far as the tax cuts are concerned, the shred of political capital that the members of Congress who will remain in DC have left simply cannot be lost. And besides, the President and Congress fundamentally agree on a major portion of the policy – that is, to extend tax cuts for the middle class. Again, this could be a pipe dream, but compromising on the extension of the cuts for the wealthiest Americans for two years seems like a simple solution (as bad of an idea as it is).
As for the estate tax – it’s toast. No one seems to give a shit about it except for Jon Kyl but once the first decrepit billionaire (who is unwilling to pull the plug on themselves) kicks the bucket in 2011, thus paying 55% tax on the estate, it will only take one phone call and Congress will spring into action.
Sigh. Place your bets.
“We’re confident that a Congress manned with our pledge signers will be prepared to take the necessary steps to pass permanent repeal of this un-American, outdated policy and stand up for small family businesses, the real job creators in our country.”
~ Dick Patten, President of The American Family Business Institute, says the estate tax is toast now that Senate candidates like Sharron Angle, Ken Buck and Rand Paul are on board with the AFBI’s “Death Tax Repeal Pledge.”
Estate-Tax Rises Again as Issue on Trail [WSJ]
“More than 250 current congressional candidates, mostly Republicans, have signed a pledge this year to support elimination of the tax, according to the advocacy group sponsoring the effort. The signers include 53 incumbents and more than half of Republicans running for House and Senate. During the 2008 elections, when the group first began seeking supporters, only 30 candidates signed up.
The estate tax has become a particularly hot issue in the West, including in Washington state’s Senate contest, and some rural House districts where Democratic incumbents appear vulnerable. a hotter issue in rural areas because it raises particular concerns among farmers and landowners.”
Religious group took alleged terrorist money [WaPo]
“A group of Ohio ministers has asked the Internal Revenue Service to investigate the organization that sponsors the National Prayer Breakfast because it received money six years ago from an alleged Islamic terrorist organization trying to finance illicit lobbying.
ClergyVoice, the activist group that wrote to the IRS commissioner Wednesday, complained that the Fellowship Foundation violated its obligation as a tax-exempt organization not to deal with such entities.
The foundation, an Arlington-based religious enterprise associated with a house at 133 C St. SE where several members of the House and Senate have rented rooms, acknowledged Wednesday that it had received two $25,000 checks, in May and June 2004, from the Missouri-based Islamic American Relief Agency.
The charity was included on a Senate Finance Committee list of terrorist financiers in January of that year.”
Dell’s Settlement of SEC Accounting-Fraud Claims Approved by U.S. Judge [Bloomberg]
“Dell Inc., the world’s third-biggest maker of personal computers, won a judge’s permission to pay $100 million to settle accounting-fraud claims brought by the U.S. Securities and Exchange Commission.
The accord reached in July allows founder Michael Dell to remain chief executive officer after paying a $4 million fine. U.S. District Judge Richard Leon approved the settlement today at a hearing in Washington.
Dell, 45, and the personal-computer maker failed to tell investors about “exclusivity payments” received from Intel Corp. in exchange for shunning products made by rival chipmaker Advanced Micro Devices Inc., the SEC said in a complaint filed in July. The payments allegedly helped Dell reach earnings targets from 2001 to 2006.”
US regulator threatens ban on Euro-firms [Accountancy Age]
“The US audit watchdog, the Public Company Accounting Oversight Board (PCAOB), is considering de-registering non-US audit firms based in countries where it has no power to conduct inspections, including Europe.
Rhonda Schnare, international affairs director at the PCAOB, said de-registering firms was one option on the table if nations did not co-operate with US audit inspectors.
‘Bringing enforcement proceedings against non-US audit firms is one option and the board is evaluating all of its options… The issue is one of the [PCAOB’s] highest priorities,’ she said.
‘The board cannot de-register firms without going through an extensive process that would involve bringing individual disciplinary hearings against the firms, and that is certainly one of the options the board has.’ ”
President Obama Proposes More Tax Credits for Higher Education [Tax Foundation]
“Even ignoring the possible issue of economic incidence and whether or not this credit would mostly lead to higher tuition instead of lowering the net price faced by students, one of the problems with this credit is the downside of tax credits known as “buying out the base.” The credit will indeed entice some additional amount of people at the margin to go to college. However, it will mostly give a huge windfall to those who were going to go to college in the first place. If more people in college is truly what you want, there are likely better ways to do it than via a refundable tax credit that doesn’t target those at the margin.”
Accounting firm RubinBrown forms team for life sciences [KCBJ]
“RubinBrown LLP, which is based in St. Louis and has offices in Kansas City and Denver, created the Life Sciences Services Group earlier this month.
The firm has identified about 15 existing team members to serve on the life sciences group, about five of whom are in Kansas City, said Todd Pleimann, managing partner of the firm’s Kansas City branch.
However, he said, the firm probably will add more to the team in the future, possibly hiring from outside.
‘We really feel that the life sciences, and particularly animal health, is really key for the Kansas City metropolitan area,” Pleimann said. “We know there is going to be a lot of growth in this area.’ ”
Does Overstock.com CEO Patrick Byrne Know When to Shut Up, Especially While the SEC Investigates his Company? [White Collar Fraud]
Deloitte Touche Tohmatsu quits Swiss system to make UK its new legal home [The Guardian]
“With zero fanfare, Britain has gained a multinational. The global accountanc ouche Tohmatsu has quietly shifted its legal registration from Switzerland to London, flying in the face of threats by other City firms to flee the Square Mile.
The firm, which has 169,000 staff around the world and is vying with PricewaterhouseCoopers for the title of the world’s biggest professional services group, is thought to have moved because of legal controversy surrounding its previous status as an obscure Swiss entity known as a verein – a membership structure originally intended for sports clubs, voluntary organisations and unions.
The change – which became effective over the summer but was not announced publicly by Deloitte – has little tax implication for the Treasury because Deloitte’s decentralised structure means taxes are paid by its member firms on a country-by-country basis. But it amounts to a vote of confidence in English corporate law over Switzerland’s regime.”
H.P. Settles Lawsuit Against Hurd [NYT]
“A fierce and public feud between Oracle and Hewlett-Packard, two of the world’s largest technology companies, has ended after all of two weeks.
On Monday, the companies announced a settlement to a dispute that centered on Oracle’s hiring of Mark V. Hurd, the former chief executive of H.P., as a president. H.P. sued Mr. Hurd this month, claiming he would violate agreements to protect H.P.’s secrets by taking on such a high-level role at Oracle. The parties declined to reveal details about the settlement but said Mr. Hurd would protect H.P.’s confidential information.
However, in a filing with the Securities and Exchange Commission on Monday, H.P. said it had modified its separation agreement with Mr. Hurd. He effectively waived about half the compensation owed him. Mr. Hurd agreed to give up his rights to the 330,177 performance-based restricted stock units granted to him on Jan. 17, 2008, and to the 15,853 time-based restricted stock units granted on Dec. 11, 2009.”
FinancialForce gets jiggy with iPad [AccMan]
FinancialForce snags Life Champions from Sage with the lure of the iPad: “Field agents will be equipped with iPads and will record new opportunities directly in Salesforce CRM. Credit card payments can be processed on the spot and transactions seamlessly created in FinancialForce Accounting.”
Tax Preparer Who Threatened Prosecutor Is Sentenced to 3 to 6 Years [New York Law Journal]
“A tax preparer who sent threatening letters to a Manhattan assistant district attorney who had twice prosecuted him was sentenced Friday to three to six years behind bars.
Prosecutors arrested Jack Chang, 55, last summer after Gilda Mariani, the chief of the money laundering and tax crime unit in the district attorney’s office, received two ominous letters. One was addressed to her husband at her home and contained a white powder that turned out to be cornstarch. The other was delivered through interoffice mail.
Both depicted a tombstone with Mariani’s name and contained virtually the same message: ‘I finally got my 9 mil gun and I am insane, you are responsible for my insanity and I will make sure that you get at least one for each and every year I spent incarcerated.’ ”
Caron: The Costs of Estate Tax Dithering [TaxProf Blog]
“President Obama was widely criticized for ‘dithering’ over the decision of whether to add more troops in the Afghanistan War. Yet Presidents and Congresses over the past decade escaped similar opprobrium for ‘dithering’ in the face of the long-scheduled one-year repeal of the estate tax beginning January 1, 2010, to be followed by the reinstatement of the tax on January 1, 2011. Although the “smart money” agreed after the passage of the Bush tax cuts in 2001 that the Administration and Congress would never allow the repeal-reinstatement scenario to play out, that is precisely where we now find ourselves.”
Hiring of town accountant upsets group [Seacoastonline]
They’re mad as hell and they’re not going to take it any more.
Pay package increases for Koss CEO [Milwaukee Journal-Sentinel]
“Michael Koss, the top executive at Koss Corp., received a 41.6% boost in his pay package last year, the same fiscal year that an embezzlement of about $34 million was discovered at the company, new documents filed with regulators disclosed.”
John Kyl and Blanche Lincoln must have figured that they could not allow one more billionaire (without naming names) get away with dodging the estate tax. The two Senators have introduced a proposal that would set the exemption at $5 million with a tax rate of 35%:
The proposal would require the Senate Finance Committee to amend H.R. 5297, the Small Business Lending bill, to permanently set the estate tax rate at 35 percent, with a $5 million exemption amount phased in over 10 years and indexed for inflation. It would also provide a “stepped up basis” for inherited assets.
“It’s time to take decisive action on the estate tax, and provide the permanent solution that Arkansas’s hardworking farmers and small businesses are desperately seeking,” Lincoln said. “Uncertainty in the estate tax law has caused incredible difficulties for these individuals, which is why I have fought for a quick resolution to the issue that is both permanent and fair. One way to improve upon an already strong legislative initiative that includes tax incentives and a number of other benefits for small businesses is to ensure that we reach a permanent solution on the estate tax to provide small business owners and famers with the certainty they need.”
See how she slipped in the “farmers”? “Small Businesses”? You sure this doesn’t have anything to do with a certain savvy billionaire who figured, “Yeah, 80 is a nice round number. Let’s do this.”
But they’ve got a plan! “The Lincoln-Kyl proposal provides an election for deceased taxpayers to either retain this year’s estate tax rate, which is zero percent with “carry over basis,” or file under the provisions of the new bill.”
By now most of you have heard that George Steinbrenner passed away this morning at age 80. We’d ask that you to wait at least a few hours before you start dispensing with the Costanza or GS quotes in Larry David’s voice (“Big Stein wants an eggplant calzone!”) but we realize not every one was a fan of the Boss.
The silver lining in Big Stein’s death is that since the estate tax still remains in limbo among the hallowed walls of Congress, his $1.1 billion fortune (Forbes’ latest ranking) could possibly pass to his heirs tax free.
It’s an especially well-timed passing if you read yesterday’s morbid Wall St. Journal article. If you didn’t happen to read it, the article more or less made the case for every wealthy person to give serious consideration to paging Jack Kevorkian, taking a nice warm bath with a toaster or whatever their preferred method of self-imposed death would be.
Steinbrenner is the third billionaire to pass on to the big baseball diamond in the sky (btw, can someone up there keep him away from Billy Martin?) this year – Walter Shorenstein and Dan Duncan are the others – and if the family is as shrewd about their money as they are about their baseball team, they will likely fight any retroactive provisions in the new estate tax (assuming it ever passes).
As with mentioned in the Duncan post, we hope that the Steinbrenners are able to keep their fortune; not because we’re opposed to taxing the rich (just ask AG), it’s because we’re opposed to an incompetent and impotent Congress who allowed the estate tax to expire in the first place. Besides, GS went out with the Yankees as reigning champs, so it seems fitting that he gets a final win against the tax man as well.
RIP Big Stein.
The New York Times has interesting story on Dan Duncan, a Houston billionaire who couldn’t beat death but his heirs may just beat the taxes thanks to Congress falling asleep at the wheel.
Duncan did all right for himself. He became the richest man in Houston and was ranked 74th on Forbes’ latest list by creating a natural gas empire that he started with a couple of trucks and $10k. Getting self-made crazy rich involves a little bit of luck so now it appears that he has passed on a little of that luck on to his heirs who may be inheriting his $9 billion fortune tax-free.
The Times story says that the Treasury collected $25 billion in estate taxes in 2008. With that kind of haul how could Congress let this happen? Joe Kristan passed along a little background to us from a Tax Analysts report 2001, some time ago that explains:
Although President Bush is scheduled to sign the tax bill into law next week, the bill contains a sunset provision that invites further debate in Congress during the next decade on whether many of the provisions will become permanent or take effect at all.
Just after H.R. 1836 becomes fully phased-in and estate taxes are repealed, the entire tax cut bill would expire as of December 31, 2010, under the bill’s sunset provision unless Congress enacts new law before that date.
The sunset provision opens up a new arena for debate among conservatives who are eager to make the provisions permanent and liberals who would prefer to postpone phasing in the provisions to pay for other government programs. Meanwhile, tax planners are left questioning the final outcome as they examine the new law.
As originally designed, the bill would have extended through 2011 and made the tax cuts permanent. However, that bill would have been subject to a budgetary procedure known as the “Byrd Rule,” which requires 60 votes in the Senate to alter revenue beyond a 10-year period. To avoid the procedure, Republican taxwriters adjusted the tax cut agreement for H.R. 1836 by allowing the provisions to sunset by December 31, 2010.
Democrats have argued that the sunset provision masks the true cost of the bill because the revenue loss accounts for only nine years of the budget window and less than one year of the bill’s full effect, including repeal of the estate tax. “Not only have they increased the back-loading to hide the true cost of this tax bill, but they have actually eliminated a year from the calendar,” said Senate taxwriter Kent Conrad, D-N.D., in a May 26 floor statement. “What they have done is graduated to a whole new level of accounting gimmickry to disguise the full cost of this tax bill.”
Joe’s emphasis. He then wrote to us, “Stupid? Well, it’s Congress, what do you expect?”
Blame who you want – George W. Bush for signing the expiration into law in 2001 or the Democratic controlled Congress for letting it expire – but at this point in time, regardless of your political persuasion, Duncan’s family and other wealthy families (some wealthier than others) are catching a huge break.
The Duncans didn’t talk to the Times for the story but it does state, “Many lawyers say Mr. Duncan’s heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax.”
Good for them. If Congress tries to pull a fast one on them with a retroactive tax they should fight it tooth and nail. Despite the fiscal situation facing the country, Congressional incompetence and inaction shouldn’t get a mulligan.