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The Daily


Maya Lindsay
Published Date:
Feb 10, 2016

Tax Pros Think Corporate Tax Reform Is Coming Soon: Survey


The latest tax reform business barometer, released Tuesday by the Tax Council and EY’s quantitative economics and statistics practice, finds that 61% of U.S. business tax professionals expect tax reform to happen in 2018 or earlier. Thirty-one percent think it is most likely to occur in 2017. Some 45% of tax executives and practitioners surveyed said reform would be comprehensive, 23% thought it would encompass all businesses, including both C corporations and pass-through businesses, and 17% said it would affect only C corporations. Thirteen percent of respondents expected tax reform to be international only. With regard to interest in international-only reform, 21% said its enactment will increase the likelihood of enactment of a more comprehensive tax reform at a later date, while 51% believed it would hinder comprehensive reform.


Tax Extenders Provide Good News for Tax Season

Accounting Today

Congress’s passage of legislation last December making many expired tax breaks permanent adds an extra measure of certainty for tax preparers helping their clients with tax planning this year. “The Section 179 deduction being made permanent with a set amount and then being adjusted for inflation will allow us to help our clients plan their purchases a whole lot better,” said Texas Society of CPAs chair Allyson Baumeister, who is also a principal in charge of the Forth Worth office at CliftonLarsonAllen. “The R&D tax credit being made permanent is also a huge factor for businesses that have those kinds of deductions to be able to plan as well.” For individual taxpayers, there is more certainty with charitable contributions from individual retirement accounts, and tax credits for education and energy conservation.


Obama's Budget Seeks to Ensure Hedge Fund Managers Pay 3.8% Tax


Some partners in hedge funds, private-equity firms and other businesses organized as so-called pass-throughs would pay a 3.8 percent income tax under President Barack Obama’s 2017 budget request. The proposal would extend a “net investment tax” for Medicare that’s been in place since 2013 to taxpayers who’ve been able to avoid it, according to Obama administration officials. The measure, which is projected to raise $271.7 billion over the next decade, would apply to limited partners who “materially participate” in the ventures. The change is part of a package of revenue proposals that collectively would raise $2.6 trillion from 2017 through 2026, according to the president’s budget request, which was released Tuesday. The revenue it seeks is 67 percent higher than Obama’s 2016 proposal, driven by international tax-reform proposals, changes in the way high-income individuals are taxed and a previously announced fee on oil of $10.25 per barrel.


GASB Proposes Lease Accounting Changes for State and Local Governments

Accounting Today

The Governmental Accounting Standards Board has issued a proposal to establish a single approach for state and local governments to report leases based on the principle that leases are financings of the right to use an underlying asset. The proposed standard would provide guidance for lease contracts for nonfinancial assets—including vehicles, heavy equipment, and buildings—but exclude grants, donated assets, and leases of intangible assets (such as patents and software licenses). Under the exposure draft, Leases, a lessee government would be required to recognize a lease liability and an intangible asset representing its right to use the leased asset. A lessor government would be required to recognize a lease receivable and a deferred inflow of resources. Limited exceptions are provided in the draft guidance, including short-term leases of 12 months or less and financed purchases.


IRS Adjusts Tax Breaks for Inflation

Accounting Today

The Internal Revenue Service has issued inflation adjustments for several tax breaks involving schoolteacher expenses, transit fringe benefits and Section 179 expensing of certain depreciable assets. In Rev. Proc. 2016-14, the IRS provides inflation adjustments for items due to the enactment of the Protecting Americans from Tax Hikes Act (PATH Act) of 2015, the tax extenders legislation that Congress passed in December. The revenue procedure also modifies part of section 3.1 7 of Rev. Proc. 2015 - 53, concerning the inflation adjustment for excludable transit benefits. The law provides that the amount of the deduction allowed for expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by eligible educators in the classroom is adjusted for inflation for taxable years beginning after Dec. 31, 2015.


IRS Grants Long-Delayed Tax Exempt Status to Crossroads GPS


The Internal Revenue Service has granted tax-exempt status to one of the best-known and best-funded politically active nonprofit organizations, Crossroads Grassroots Policy Strategies. Advised by Republican strategist Karl Rove, once a top aide to President George W. Bush, Crossroads GPS has been waiting more than five years on a decision by the IRS. The agency granted tax-exempt status in November but only recently updated its database to reflect the outcome. Crossroads GPS President Steven Law said he was "pleased but not surprised" about the IRS's determination. "For us in some ways it is a nonevent," he said. "We expected to get it, but it took a lot longer than we had hoped." Crossroads GPS has drawn heavy scrutiny because few nonprofits spend more money on political causes — and critics have said it is taking advantage of what amounts to a loophole in campaign finance rules. Nonprofits do not have to disclose their donors to the public. Rove's Crossroads organization also has a super political action committee that reports its donors.


10 Practice Management Tips for Accounting Firms

CPA Practice Advisor

Art Kuesel is a rising star in the world of CPA firm marketing. With 14 years of solid CPA firm experience under his belt, Art started his own firm, Kuesel Consulting, three years ago. He works with CPA firms in sales coaching, sales and marketing training and creating and implementing growth plans, often often serving as firms’ outsourced marketing director. Art has been named as a Top 100 Most Influential Person in Public Accounting. His clients include scores of the Top 250 Firms including a third of the T100. I invited Art to speak to my three Chicago area roundtable groups recently. Here are some nuggets Art shared with us. The way to finish a job. When you complete a client project, instead of asking “is there anything else I can help you with,” Art suggests an alternative: ask if the client needs help in a specific area like estate planning or R&D credits. Be proactive. Art asked the groups: “How many of you do succession planning for your clients?” Half said yes.


Obama Budget Includes Tax Increases and Tax Preparer Regulation

Accounting Today

The Obama administration released its fiscal year 2017 budget containing a number of tax increases on high-income taxpayers, oil and foreign income, along with tax breaks for the middle class and small businesses, plus a provision giving the Treasury Department the explicit authority to regulate all paid tax preparers. Among the changes proposed for reforming the international tax system, the budget plan would impose a 19-percent minimum tax on foreign income, impose a 14 percent one-time tax on previously untaxed foreign income, and limit the ability of domestic entities to expatriate. The budget plan would also restrict deductions for excessive interest of members of financial reporting groups, provide tax incentives for locating jobs and business activity in the U.S. and remove tax deductions for shipping jobs overseas, limit shifting of income through intangible property transfers, and restrict the use of hybrid arrangements that create stateless income.


Monsanto to Pay $80 Million to Settle Charge of Improper Accounting

New York Times

Monsanto will pay $80 million in penalties to the Securities and Exchange Commission to settle claims that it misstated earnings after failing to properly account for the costs of a sales rebate program for its flagship herbicide product, Roundup. The S.E.C. said Monsanto, an agribusiness giant based in St. Louis, had insufficient internal controls to properly track millions of dollars in rebates it offered to Roundup retailers and distributors. The rebates were part of a promotion that Monsanto ran after sales of a generic version of the product undercut its business in 2009. Monsanto booked substantial revenue as a result of the sales promotion from 2009 through 2011, but it did not recognize related costs, which led it to misstate corporate profits over a three-year period.


U.S. Stocks Steady at End of Volatile Session

Wall Street Journal

U.S. stocks steadied late in the session, but investors remained cautious after a sharp selloff this year. The Dow industrials slipped 13 points, or less than 0.1%, to 16014, after falling close to 146 points earlier in the day. The S&P 500 declined fractionally and the Nasdaq Composite dropped 0.4%. Investors were hesitant to buy stocks aggressively, jittery from stocks’ tumble this year and concerned about the potential for gains going forward. “There’s a lot of anxiety out there now,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. Some investors are paring down their exposure to stocks in favor of investments considered safer such as U.S. government debt. “Clients just want a smoother ride here,” said Robert Williams, a managing director at Sage Advisory Services. Mr. Williams said he has been reducing exposure to the U.S. stock market broadly and high-yield debt and instead is planning on buying the iShares 3-7 Year Treasury Bond ETF this month.


The High Consequences of Low Interest Rates

Wall Street Journal

At the start of 2016, Americans were bracing for interest rates to rise significantly for the first time since the financial crisis. Instead, rates have slumped anew, rattling financial markets and undoing the plans of investors, consumers and businesses alike. A little more than a month after the Federal Reserve lifted its benchmark rate from near zero, rates across the market are falling. The yield on the 10-year U.S. Treasury note, a benchmark for everything from mortgage rates to corporate lending, this week fell below 1.7%, its lowest level in a year. On two-year notes, a widely watched gauge of bank funding costs, yields have also dropped significantly. The slide has alarmed investors because borrowing costs tend to rise in a healthy economy, reflecting growing demand for money among consumers and businesses and bolstering the profits of banks and other financial firms.