Footnotes: Forgotten IRS Scandal Facts; CFOs Pulling Back on Hiring; Ways and Means Wants Your Stories | 05.22.13
Six Facts Lost in the IRS Scandal [ProPublica]
CFOs Lower Hiring Projections [AT]
Ways and Means seeks more IRS tales [The Hill]
EU leaders talk tough on tackling Amazon, Google over taxes [Reuters]
Internal Revenue Service Admits Tax Code Too Costly To Administer [Guardian]
Here's the Document that Started Apple's Hidden Irish Tax Scheme [ValleyWag]
Pritzker Understated Income, Files Amended Disclosure [Bloomberg]
PCAOB systems unavailable Memorial Day weekend [JofA]
Apple's Appearance before the Senate Clarifies the Need for Comprehensive Tax Reform [TF]In the Matter of Rehan Saeed, CPA, Respondent. [PCAOB]
Incredibly, the SEC has done something I didn't think was possible. It has, in its implicit blessing of Herbalife's selection of PwC as auditor, given the Big 4 and other audit firms more leverage in future debates over independence with regard to past non-audit services. And the last thing the Big 4 needs is more leverage over one of its regulators.
Yes, I admit that this probably qualifies as "exceptional circumstances." I mean, how often will a partner at a Big 4 firm be busted for sharing a client's material non-public information with a golf buddy that results in his firm pulling three years of audit opinions? Hopefully not that often. Sure, it's good for laughs and pageviews and things, but the audit industry isn't really hurting for bad publicity. Plus, there's integrity and all that stuff.
Bad press or not, audit firms pretty much get their way all the time. Maybe that's why very, very few people show sympathy for them when they get in trouble.
So with this in mind, the SEC, knowing full well had they been all, "Hey guys, rules are rules" wouldn't have taken too much grief about it, made an exception. Okay, maybe that was the reasonable thing to do. But this will bite the Commission in the ass down the road. Any time there's a potential conflict over past services, a company can simply go the Commission and say, "Look our audit committee talked it over. This situation isn't that different from Herbalife. So can you just let us have this one?" The audit firm isn't going to raise a fuss.
And what's the SEC going to do? Say, "Sorry, that was an exceptional circumstance."? That makes them sound flimsy. And if you're a regulator, wouldn't you rather be ballbuster than inconsistent? A regulator should enforce the rules as written, not carve out exceptions when a company gets in a pinch. The worst that happens is the company sues to get a judge to force the SEC to allow the engagement of a conflicted auditor. At least you'd still have some principles left.
But maybe I'm wrong. Maybe audit firms won't pull the Herbalife card that often and it'll just be another example of an industry running roughshod over its regulators and the rules, basking in impunity. I suppose we're all getting used to it.
When I attended my first AICPA Council meeting in 2011, I remarked that the room seemed to be filled with the same "old white guys" that have been "leading" the profession as far back as we can all remember. I asked out loud why I seemed to be the only person under the age of 40 in the room and as a result, a few young folks came out of the woodwork to say "Hey! We're here and we matter!" but not much has changed in the last three years.
In attendance this year as in previous years, Donny Shimamoto is a good example of a younger professional who actually cares about the kind of stuff covered at Council. The thing is - as I pointed out 3 years ago - that though we don't all have the luxury of taking three days to hang out in Washington, DC, what happens at Council affects not only all 360,000+ AICPA members but taxpayers, your clients and your neighbors. Those in attendance don't just come to DC to pat themselves on the back, they come to talk about the direction the profession is going and take to the Hill to speak with Congress about the issues that impact the profession and those which CPAs can help Congress better understand. As freshman rep Tom Rice of South Carolina said during his talk with Barry Melancon, "if we had more CPAs in Congress, we wouldn't be in the mess we're in now." So yes, the spring meeting of Council does eventually cap off with a little self-important lobbying on the part of Council but someone has to remind Congress CPAs are watching.
Another Council staple under the age of 40 is the new chair of the Maryland Association of CPAs, Byron Patrick. Fresh off debuting his new CPA tattoo at the Maryland Innovation Summit (which, I might add, he got from my tattoo artist in Annapolis), he attended Council again this year as MACPA Chair, which shows just how on top of things Maryland is by fast-tracking a young CPA to such an admired position within their own organization. Sure, he's lucky that he owns his own technology firm and lives close enough to be able to take a few days to run around Washington but more importantly, he gets that whatever happens at Council matters for his CPA, his firm and his career.
Last but not least, I have to point out that I finally had the opportunity to meet the one and only AICPA VP Susan Coffey and she is more amazing in person than I could have imagined. She was totally cool with us calling her an "accounting hottie" and I plan to frame the photo Jackie Brown of the MACPA took of us at dinner above my mantel just because.
This is your profession. And if I can drag myself up there to hear about what's big for you guys, maybe you can bring yourself to read about it. I'll make it easy with a few key points from this year's meeting:
- Globalization is a big, big deal. As much as I'd like to say it's about revenue, it's all about relevancy. The CPA remains an internationally-recognized and admired designation, and if the AICPA wants to legitimize its other offerings, I guess international "credential-sharing" is the way to go.
- Diversity, diversity, diversity. Let me tell you, I went into Monday's diversity panel anxious to troll but came out of it thinking maybe, just maybe, the profession is ready to have this conversation. The big takeaway I got from the panel was when they said diversity will no longer be an issue when we don't have to talk about it anymore. There are socioeconomic roadblocks and the same old stereotypes that have existed for generations but if the profession is going to get beyond talking about how much more diverse it should be, it needs to start reaching out not only to high school students but middle schoolers, and show that it welcomes sharp minds from all socioeconomic backgrounds. Without mentoring and evangelism at the high school level, the profession is still missing out on recruiting the next generation's best and brightest, regardless of where they come from. Incoming AICPA chair Rich Caturano has made diversity his big issue so I look forward to seeing how he's going to make a genuine push for inclusion that isn't filled with talking points and affirmative action-type responses.
- The AICPA is doing alright, financially at least. Apparently, the AICPA has recouped its investment in revamping the CPA exam years ahead of schedule and is doing pretty good.
Why should you care? Because eventually, you guys are the ones who are going to have to go to Council, speak to your Congressional leaders about issues that impact the profession and be up there in Barry's place talking about where the profession is headed. You don't have to care but you should. Because if you don't, no one will.
"I have not done anything wrong. I have not broken any laws. I have not violated any IRS rules or regulations," Lerner, the head of an IRS division overseeing tax-exempt groups that targeted conservative groups, said before the House Oversight Committee. Lerner then said she was following her counsel's advice not to testify. " "I know that some people will assume that I have done something wrong," she said. "I have not." [The Hill]
Accounting News Roundup: Don't Forget, It's Not Just Apple!; Moss Adams Ordered to Pay After Contempt Ruling; Leave the IRS Alone | 05.22.13
Google Joins Apple Avoiding Taxes With Stateless Income [Bloomberg]
The shifting of profits by multinational companies is costing the U.S. and Europe at least $100 billion per year in lost tax revenue, according to Kimberly Clausing, an economics professor at Reed University in Portland, Oregon. “Over the decades, Congress and governments around the world have allowed a system to develop which allows multinational companies to earn income tax-free by using contracts to shift the income, on paper, to companies in low-and zero-tax countries,” said Michael Durst, a retired international tax attorney based in Washington. The result “is eroding public confidence in the fairness of tax systems in the United States and around the world.” Similar practices by an assortment of companies -- from Google Inc. (GOOG), owner of the world’s most popular Internet search engine, to Forest Laboratories Inc. (FRX), the maker of antidepressant drug Lexapro -- are drawing increased scrutiny from regulators in the U.S. and around the world, particularly as European nations face a backlash against austerity measures.
Congress Can Make Apple Pay Any Taxes It Wants To [MoJo]
[I]t's true that, in theory, Congress can address this anytime it wants. They set the rules, and they don't really have much standing to complain when companies exploit those rules to pay as little in taxes as possible. After all, what do you expect them to do?
CPA firm ordered to pay $180K to Meridian trustee [ST]
Seattle accounting firm Moss Adams was ordered Friday to pay $180,000 over a judge’s earlier contempt ruling for not fully complying with a subpoena for audit documents from Meridian Mortgage investment funds and its founder, Frederick Darren Berg. Judge Karen Overstreet ordered the CPA firm to pay Meridian bankruptcy trustee Mark Calvert to reimburse costs he says were incurred because Moss Adams took more than two years to turn over some documents from its work for Berg, hindering Calvert’s investigation on behalf of creditors. Calvert’s attorney, Michael Avenatti, said his research indicates the sanction is a record amount against a U.S. audit firm in a contempt-of-court case. A bushel of Pinocchios for IRS’s Lois Lerner [FactChecker/WaPo]
This could at least partially explain why she'll be taking the fifth today. A Better Way to Tax U.S. Businesses [HBR]
Not much new here, but a lot of basics to reform all in one place. Oklahoma tornado victims get tax filing and payment extensions [JofA]
On Tuesday, the IRS announced relief from filing and payment deadlines for victims of Monday’s destructive tornadoes in Oklahoma (IR-2013-53). Because the tornado damage was so widespread, the relief has been granted for individuals and businesses in Cleveland, Lincoln, McClain, Oklahoma, and Pottawatomie counties in Oklahoma, and the IRS may add other areas in coming days based on the Federal Emergency Management Agency’s (FEMA) damage assessments. The IRS will automatically abate any interest, late-payment, or late-filing penalty for taxpayers in these counties. Stop Hating on the IRS [Slate]
Yeah! No, seriously. Quit it.
Footnotes: Public Companies, Public Tax Returns?; Lerner Will Take the Fifth; Tea Party Protest Not Too Much | 05.21.13
Why public companies should have public tax returns [Felix Salmon]
Lois Lerner will invoke her Fifth Amendment privilege. [LAT]
New Accounting May Prompt Shift to Short-Term Leases, Fitch Says [Bloomberg]
Deloitte’s Echevarria Joins 9 Others on Obama Voting Commission [Bloomberg]
Just imagine if Apple could replace all those tax lawyers with creative new software geeks or industrial designers. It might win back some of the market share it has been losing to Android in recent years. [TaxVox]
MoreTaxpayers e-file from Home in 2013 [IRS]
"Dozens" of Tea Party Patriots Protest IRS Offices Nationwide [Gawker]
Woman Brags About Hitting Cyclist, Discovers Police Also Use Twitter [Jalopnik]
Acting IRS Commissioner Admits That Planting a Question About Reviewing 501(c)(4) Orgs at a Sleepy Tax Conference Wasn't Such a Great Idea After All
Under less-than friendly questioning from members of the Senate Finance Committee Steven Miller was all, "Yeah, that was my bad."“I will take responsibility for that,” Miller said, expanding on last week’s admission that he knew mid-level manager Lois Lerner had answered a question planted by a member of an IRS advisory council. “Now that we had the (inspector general’s) report, we had all the facts … we thought we’d get out an apology.” The report he referenced was a much-anticipated audit, released last week by the Treasury Department’s Inspector General for Tax Administration J. Russell George. “Obviously the entire thing was an incredibly bad idea,” Miller said of the planted question. As opposed to just letting the TIGTA report come out in due course, yeah I suppose it was a bad idea. As opposed to a plane banner? That's a toss-up. [KCS]
~ See update below
It seems fitting that PwC would replace KPMG as Herbalife's auditor, doesn't it?
On May 21, 2013, the Audit Committee of the Company’s Board of Directors engaged PricewaterhouseCoopers LLP (“PwC”) to serve as its new independent registered public accounting firm to audit the Company’s financial statements for its fiscal year ending December 31, 2013 and to re-audit the Company’s financial statements for the fiscal years ended December 31, 2010, 2011 and 2012.
Now that the question of "Who?"1 has been answered, there is the question of what services PwC provided to Herbalife prior to becoming auditor and therefore could potentially violate independence rules. The filing has all the details and we bolded some of it for you:
As part of the engagement process, the Company and PwC identified certain non-audit services that PwC or another firm in the global network of firms had performed for the Company that are not permitted under the SEC’s auditor independence rules. The Audit Committee and PwC discussed these non-audit services and concluded that the provision of these non-audit services will not affect PwC’s objectivity or its impartiality and will not impair its ability to serve as the Company’s independent registered public accounting firm. In reaching this conclusion, the Audit Committee and PwC noted that all of these services, with one exception described below with respect to the Company’s U.S. payroll department, were provided to entities that were immaterial to the Company’s consolidated financial statements in each of the prior years. PwC also noted that none of the professionals who provided such services will serve on the re-audit or future audits.
Ahh, yes. Immaterial. Pass further review. Music to an auditor's ears.
What are all these services that aren't worth calling home about? Mostly "corporate and administrative legal advisory services" provided in Eastern Europe, but also:
- Financial reporting, secondment and bookkeeping services in Israel
- Secondment services and "tax services pursuant to a contingent fee arrangement" in India
- Payroll and executive recruitment in Ghana
- Payroll and administrative services in Colombia
- "Seconded two PwC staff members who served in the U.S. payroll department for the Company for a few months in 2010."
Okay, but what about the numbers? Well, the filing states that "[t]he assets and revenues of the non-U.S. subsidiaries in the countries noted above represented in the aggregate less than 5% and 8.5% of the Company’s total consolidated assets and revenues, respectively, in each year from 2010 through 2013." Individually, none of the countries "represented more than 2.5% or 3.6% of the Company’s total consolidated assets or revenues."
And PwC's fees for these services were minimal, too. Altogether they were $55k in 2013; $250k in 2012; $192k in 2011 and $330k in 2010. And, naturally, there's this:
PwC and the other firms in the global network of firms ceased providing these services to the Company’s subsidiaries upon being engaged as the Company’s auditor.
So independence sticklers don't have anything to complain about, right? Well, there is the matter of those re-audits of Herbalife's financial statements for 2010 and 2011. For starters, there's this classicly opaque disclosure:
During the fiscal years ended December 31, 2011 and 2012, and the subsequent interim period through May 21, 2013, neither the Company, nor anyone on its behalf, consulted PwC regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company’s consolidated financial statements, in connection with which either a written report or oral advice was provided to the Company that PwC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a “disagreement” as such term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions or a “reportable event” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.
What's missing? 2010 of course! Our friend Francine McKenna says it seems that "[Herbalife] consulted PwC on GAAP/SEC reporting issues in 2010," and that it could be an issue.
Furthermore, there's this question from the Office of the Chief Accountant's "Application of the January 2003 Rules on Auditor Independence" under Nonaudit Services:Nonaudit Services Question 16 Q: A firm was not independent with respect to Company A for Year 1 because the firm performed bookkeeping or other prohibited services for Company A during the audit and professional engagement period of Year 1. For Year 2, however, the firm is independent with respect to Company A. The firm is auditing the Year 2 financial statements. In the course of conducting the audit for Year 2, the firm becomes aware that there will be restatements of prior year's financial statements. Can the accounting firm re-audit the prior period financial statements? A: Rule 2-01 does contain a specific "cure" if the independence issue related to the prior period is a financial interest. However, if the independence problem is caused by something else (e.g., having provided prohibited non-audit services in that prior period), there is no cure and the firm's independence would continue to be impaired. Since the accounting firm would need to be independent with respect to that prior period in order to issue an opinion on that period, the accounting firm would be precluded from re-auditing the prior period financial statements. This "no cure" seems problematic doesn't it? Francine thinks so, writing us, "[It's] incurable like a case of herpes. Can take some valtrex to inoculate you for the future exposures but never quite the same again." So is PwC independent in fact and appearance? Going forward, yeah, it doesn't seem like a problem. The re-audits are where things get tricky. They can't really take those services back, can they? And while I'm guessing the firm did their homework, they probably didn't run anything by the SEC before making their pitch to Herbalife. PwC spokeswoman Caroline Nolan could not comment beyond the firm's statement: "Herbalife announced Tuesday that PwC has been appointed as the company's independent auditor. PwC believes it is well-positioned to perform an objective and quality audit for a company of Herbalife's global reach and scale." Perhaps what the firm is banking on is that up until this point, the enforcement of independence by the PCAOB and SEC has been lax. There's that and the real money doesn't care about independence anyway. The stock is up. Run along, auditing purists. UPDATE: Good news, everyone! Herbalife got the SEC's blessing! From a Dow Jones Newswires (if you have a Factiva account you can read it) article written by Michael Rapoport we learn this: Ultimately, Herbalife's auditor search became knotty enough that the company said it had to seek guidance from the Securities and Exchange Commission, to resolve concerns that any potential new auditors had conflicts of interest that would prevent them from taking on Herbalife as a client. It goes on to say that Herbalife CFO John DeSimone "secured a determination from the commission that it wouldn't object to the move, after Herbalife's audit committee concluded that PwC's past work for the company wouldn't interfere with its ability to be impartial as an auditor." And to alleviate anyone's concerns about the payroll work that PwC "seconded" a couple of staff people for, the company said it would engage another firm to do the re-audit. The SEC only commented for the article to say that in "exceptional circumstances" will companies ask for guidance from the Commission when situations arise like this. DeSimone sorta explained: "What we provided (to the SEC) is reasons why the audit committee thinks PwC can still be impartial and objective despite the technical independence violations," Mr. DeSimone said. Of course if the business world had more than four and two (three?) half-firms to choose from, this might not be such a problem, and the SEC wouldn't have to make exceptions to its rules. I suppose we'll all live.
1 Sam Antar would like the record to reflect that he predicted this.
Apple Avoided Taxes on Overseas Billions, Senate Panel Finds [WSJ]
Apple Inc. paid no corporate income tax to any national government on tens of billions of dollars in overseas income over the past four years, Senate investigators found, a revelation that fuels the debate over whether the U.S. tax code needs an overhaul. The disclosure follows a lengthy examination of the technology giant's tax practices by the U.S. Senate's Permanent Subcommittee on Investigations, which is expected to air its findings at a hearing on Tuesday. Apple Chief Executive Tim Cook is preparing to testify at the hearing, and is expected to propose changes to a tax code that provides American companies strong incentives to keep overseas earnings bottled up at foreign subsidiaries. Apple used technicalities in Irish and American tax law to pay little or no corporate taxes on at least $74 billion over the past four years, according to the Senate panel's findings. The investigation found no evidence that Apple did anything illegal. Aides to the subcommittee said they have never seen a company use a subsidiary that didn't owe corporate income taxes to any country.
E.G.: "Apple Operations International, has no employees and no physical presence, but keeps its bank accounts and records in the United States and holds its board meetings in California. It was incorporated in Ireland in 1980, and is owned and controlled by the U.S. parent company, Apple Inc. Ireland asserts tax jurisdiction only over companies that are managed and controlled in Ireland, but the United States bases tax residency on where a company is incorporated. Exploiting the gap between the two nations’ tax laws, Apple Operations International has not filed an income tax return in either country, or any other country, for the past five years. From 2009 to 2012, it reported income totaling $30 billion." Apple Willing To Pay More Taxes To Get An Efficient System [Forbes] "[Apple] recognizes these and other improvements in the US corporate tax system may increase the Company’s taxes. Apple is not opposed to such a result if it occurs in the context of an overall improvement in efficiency, flexibility and competitiveness. Apple believes the changes it proposes will stimulate the creation of American jobs, increase domestic investment and promote economic growth." Ireland says not to blame for Apple's low tax rate [Reuters] Ireland said on Tuesday it was not to blame for Apple Inc's low global tax payments after the U.S. Senate said the company paid little or nothing on tens of billions of dollars in profits stashed in Irish subsidiaries. The Irish government, which has seen the luring of U.S. multinationals with low taxes as a key part of its economic policy since the 1960s, said its system was transparent and other countries were responsible if the tax rate paid by Apple was too low. "They are issues that arise from the taxation systems in other jurisdictions, and that is an issue that has to be addressed first of all in those jurisdictions," deputy prime minister Eamon Gilmore told national broadcaster RTE on Tuesday. U.S. Multinationals Paid More Than $100 Billion in Foreign Income Taxes [TF]
Hey, it's something! Senate Holds Hearing Today on The IRS Scandal [TaxProf] Don't forget to set your DVRs. The Bush Tax-Cut Failure [Economix/NYT]
Bruce Bartlett: "It is hard to find even a reputable conservative economist willing to say anything good these days about President Bush’s tax and economic policies." Big rig carrying fruit crashes on 210 Freeway, creates jam [LAT] Best headline of the day.
Footnotes: Old Men Bite Into Bad Apple; Senate Finance, House Oversight Committees Hold Next Hearings; Really, IRS!?! | 05.20.13
Apple Avoided Billions in Taxes, Congressional Panel Says “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat. “Apple sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.” John McCain, the Arizona Republican who is the ranking member on the committee, added: “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.” [NYT]Here are the details for tomorrow's Senate Finance Committee hearing. [US Senate] And here are the details for the House Oversight and Government Reform Committee's hearing on Wednesday. [US House] Carney: WH officials knew of IRS targeting but didn’t tell Obama [The Hill] Rand Paul’s Claim of "Written Policy" Seems Like GOP Overreach [Jeremy Scott/Tax Analysts, Earlier] Really, IRS!?! [SNL via TaxProf]
This week, I'm back in my old stomping grounds of Washington, DC for AICPA Spring Council and while I really wanted to come into this looking for plenty to mock, it's actually been an interesting session, including a great speech by Bob Schieffer of CBS and a panel on "Diversity & Inclusion" that didn't leave me wondering why the profession thinks it's wise to require X number of minorities just to feel good about itself. I'm working on catching up with one panelist -- Ralph Thomas of the New Jersey Society of CPAs -- when I'm in Atlantic City next month for the NJSCPA Convention & Expo.
Anyhoo, of the many notable items from this year's meeting, one in particular stood out considering how liberal we here at Going Concern have been about mocking the CGMA designation. It appears the AICPA has considered our many criticisms and is ready - at last - to make the CGMA legit. This may or may not have to do with the fact that Council also considered globalization of AICPA credentials, hard to say.
Beginning January 2015, prospective future CGMAs will have to take a 3 hour exam on top of meeting experience and continuing education requirements. As most of you know, this is a major departure from the CGMA's previous requirement of "show up and, uh, know stuff or something" or, more specifically, ANY one of the following:
- Three years of financial (including internal audit) or management accounting experience in business, industry, or government, or
- Two years of financial or management accounting experience plus one year in public accounting, or
- Three years of financial/management accounting experience on a consulting basis, or
- Three years in a management accounting role focused on the management and operation of an accounting firm.
Whether or not this is related to the AICPA's push to encourage international "credential-sharing" with similarly-minded accounting bodies that won't dilute the US CPA brand is beyond me. Thoughts?
More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echos reported on Saturday, citing Finance Ministry data. The newspaper said that the exceptionally high level of taxation was due to a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million). President Francois Hollande's Socialist government imposed the tax surcharge last year, shortly after taking office, to offset the impact of a rebate scheme created by its conservative predecessor to cap an individual's overall taxation at 50 percent of income. [Reuters via TaxProf]
Accounting News Roundup: Ex-Commish Shulman Testifying This Week; Jail Time for Anyone? Nah; More Resignations? Oh, Yeah. | 05.20.13
I.R.S. Inquiry Status Told to White House in April [NYT]
The chief White House lawyer, Kathryn Ruemmler, learned last month that a Treasury inspector general had concluded an audit of the Internal Revenue Service’s targeting of conservative groups, weeks before the matter became public, according to a senior White House official. The White House counsel’s briefing came about the same time that Treasury Secretary Jacob J. Lew met with the Treasury inspector general for tax administration, J. Russell George, to learn his draft audit of the controversial I.R.S. effort was complete, the official said.
Former IRS Commissioner Shulman Will Testify May 22 [Bloomberg]
Douglas Shulman, the former commissioner of the Internal Revenue Service, will testify before Congress May 22, said Ali Ahmad, spokesman for the House Oversight and Government Reform Committee. Shulman, whose term ended in November 2012, hasn’t spoken publicly since it was disclosed on May 10 that the IRS had applied tougher scrutiny to Tea Party groups seeking tax-exempt status. The former IRS commissioner told a House Ways and Means subcommittee in March 2012 that the agency didn’t engage in targeting based on ideology. The IRS has said Shulman didn’t know all the facts at the time.
“I am not aware of any statute that prohibits IRS targeting of applicants,” said Republican lawyer Jan Baran, who served as general counsel to George H.W. Bush and the RNC. Other politically inclined lawyers agree.
Former IRS Division Chief Predicts Wave of Departures [WSJ]
I think there’s going to be a significant number of departures from the agency,” said Marcus Owens, a Washington attorney who served as director of the exempt-organizations’ office from 1990 to 2000. The same post is now occupied by Lois Lerner, who has come under fire for her agency’s treatment of conservative groups. “That’s going to have an impact on tax collections and tax administration,” said Mr. Owens, who said he thinks the controversy has been overblown. Mr. Owens, who worked for the IRS for 25 years, said a number of IRS officials have talked to him about their plans to leave. He said the investigations underway have crushed morale, while some IRS officials are starting to get threatening anonymous calls at home.
Rand Paul claims revealing memo exists in IRS scandal [CNN]
While the Internal Revenue Service maintains it was not focusing on conservative groups out of political bias, Sen. Rand Paul claimed Sunday there was a "written policy" floating around the agency that said IRS officials were "targeting people who were opposed to the president." "And when that comes forward, we need to know who wrote the policy and who approved the policy," the Republican senator from Kentucky said on CNN's "State of the Union." Pressed for more precise details about the memo he was referring to, Paul said he hasn't seen such a policy statement but has heard about it.
Apple faces grilling over US tax rate [FT]
One sign of the effectiveness of Apple’s international tax planning is that the share of profits it reports in the US is lower than the share of its sales, according to Martin Sullivan, chief economist at Tax Analysts, a non-profit tax research group. Since much of its product design, marketing and other critical activities take place in the US, the share of profits booked there might be expected to be far higher, according to Mr Sullivan.
Rich men, who would benefit least from redistribution, were more likely to be opposed to it -- but only when they also had large biceps. There was a negative correlation between the two, so that rich men with less muscle strength were more open to redistribution. In men of lower socioeconomic status, the correlation was reversed: stronger men were more in favor of redistribution, while men with smaller muscles were less likely to support it.
Footnotes:The Unavoidable Scandal; When Is Lerner Resigning?; Small Firms, Get Some Interns | 05.17.13
Treasury Knew of I.R.S. Inquiry in 2012, Official Says Mr. Miller did concede that the I.R.S.'s apology for targeting was prompted by a question planted by the agency last Friday at an American Bar Association meeting. At that meeting, Lois Lerner, the head of the I.R.S.'s division overseeing tax-exempt organizations, was asked about an inquiry of the targeting issue, eliciting an apology that quickly leaked out of the closed-door session. The I.R.S. then scrambled to issue a formal release on the issue. [NYT]
An ‘unthinkable’ IRS scandal? More like unavoidable. [Joe Thorndike in the WaPo]
Baucus on IRS: 'I have a hunch that a lot more is going to come out' [The Hill]
Lois Lerner Must Resign And apologize, says David Cay Johnston. DCJ has it written up and everything: "I failed to do my job. I apologize for all the harm I have done. I will cooperate in every way with those who will, and should, examine every aspect of my indefensible errors in judgment." [DCJ/Tax Analysts]
VP Joe Biden Believes There’s ‘No Legal Reason’ The Government Can’t Slap A Sin Tax On ‘Violent Media’ [ATL]
Apple CEO wants lower taxes in exchange for job creation [NBC]
Summer Interns -- Hire Them Even If You Don't Need Them [AWEB]
Cat to pay less for Chinese firm mired in accounting woes [Reuters]
IRS to Refund Tax Preparers for Canceled Certification Tests [AWEB]
How To Give A Best Man Toast That Doesn't Suck It's applicable for ladies, too. [Deadspin]
Tax Panel Was a Real Snoozer Until Lois Lerner Started Talking About the Whole IRS Targeting the Tea Party Thing
I know you'll find it hard to believe that American Bar Association's annual tax meeting was a little boring, but right up to the point when Celia Roady, "a veteran tax lawyer" asked IRS tax-exempt head Lois Lerner for an update on the review of 501(c)(4) organizations, things were downright Lunesta-ish:
Paul Streckfus, the editor of EO Tax Journal, an online publication for exempt organization tax practitioners, told TPM he had been “dozing off” when Roady had asked the question, but had “jumped almost out of my seat” when he realized what Lerner was saying. [...] Once Lerner had finished, Streckfus rushed up along with another reporter to question Lerner further, but she begged off.
You made it one for the ages, Lois!
To Whom It May Going Concern: "If people can sue the firms for not working overtime, can I sue the firm for making me fat?"
Welcome to the latest edition of To Whom It May Going Concern, our infrequent feature of the best (read: worst) and worst (read: best!) tips and feedback we get from readers. Have a tip or feedback for us? Email us at email@example.com or drop something in the tips box. All tips on are on the record unless explicitly stated otherwise.If you watched the Ways & Means Committee flogging of Acting Commissioner Steven Miller and TIGTA inspector general Russell George earlier today, the dwindling resources of the IRS were mentioned by certain members a few times. Doing more with less -- or in some cases, nothing at all -- is something we all deal with, including your humble blogospondent. In fact, I've been working so much that it's really cutting into my NHL playoffs watching time, which is a shame because the NHL playoffs are the best playoffs in sports and I don't give a shit if you disagree. Yeah, the NHL is a poorly run, undervalued league dominated by a manipulative commissioner, but by God when the playoffs are on you forget about the extraordinary ineptitude of the National Hockey League and just hope that every game goes into triple-overtime. That's what I'm hoping to see tonight and all weekend long. Anyway, I'll just bring this full circle by saying that my enjoyment of one poorly run institution is disrupting my enjoyment of another and that's a shame. Doing more with less is the worst. I'd just like more of everything, please. On to this week's letters. File this under "post-busy season problems": If people can sue the firms for not working overtime, can I sue the firm for making me fat? I'm no lawyer, but you shouldn't have trouble finding an under-worked one that would listening to your case. I'd start here. A gypsy-turned accountant is having some problems with the application process: I really enjoy trying to recall every place I've lived and worked in the past 7 years for PwC's background check... Having moved many, many times in my life, I can appreciate this annoyance. Seven years ago, I was living in a small apartment in Denver. Seven apartments and two long road-trips later, I'm back in a different small apartment in Denver and there's no way I can recall every detail all those addresses. The ZIP codes are impossible. But you know has all this information?? The IRS. And your mom, probably. Here's your tax code constructionist nerd tip of the week: See below: Holder refers to the Internal Revenue Code as the IRS code. (transcript of press release) HOLDER: We’ll have to get you — we’ll have to get you that. There are a variety of statutes within the IRS code that I’m not familiar with or have the ability to, you know, give you the numbers to, but that we have looked at. Eric Holder? We're getting tips about things Eric Holder said now? And finally, someone was kind enough to tell us about some Rothstein Kass layoffs: I just heard from a buddy I interned with at Rothstein Kass in Jersey who is now a Staff 1 that they fired 10% of the firm nationwide, about 100 people. He didn't get fired though but one of the partners told a kid that this is pretty normal for accounting firms. No kidding? That's quite a story.
ANR: George, Miller Testifying to Ways and Means Committee; Taxpayer Advocate for Commissioner?; Lease Accounting 'Will Fly' | 05.17.13
Ways and Means to Hold Hearing on Internal Revenue Service Targeting Conservative Groups [W&M]
Former Acting Commissioner Steven Miller and TIGTA head J. Russell George will be testifying. FUN!
Should 501(c)(4)’s Be Eliminated? [NYT]
There's room for debate.
Nina Olson for IRS Commissioner [WSJ]
Ms. Olson is the ombudsman for the public inside the IRS. Her office parachutes in to aid individuals and businesses when the tax men are jerking them around, as well as making recommendations to Congress about modernizing the IRS and the tax code. She has held the post since 2001. Ms. Olson seems to view the job as a moral calling, which is much-needed. The integrity of the tax system must be paramount when people are required to hand over giant chunks of their income to government. It usually falls to Ms. Olson to admonish the IRS that its chronic dysfunctions are—to borrow one of her favorite words—"unconscionable."
Tax Court Judge Slams IRS Over Whistleblower Case [WSJ]
“We do not know whether these failures were the result of bureaucratic confusion or ineptitude,” the judge wrote. “We do know, however, that the obfuscation surrounding this matter has either been caused or exacerbated by respondent.”
IRS gives details of operations on furlough dates [JofA]
All IRS operations will be closed on the furlough dates, meaning no tax returns will be processed and no tax-compliance activities will occur. Nonetheless, taxpayers should continue to comply with all return filing and tax payment due dates because none of these have been extended by the furlough. However, the IRS will not be able to acknowledge any returns that are filed electronically on a furlough date. Taxpayers who have employment and excise tax deposits due on the furlough dates should continue to deposit them through the Electronic Federal Tax Payment System, which will remain in operation. In addition, the IRS is alerting taxpayers who have filing deadlines close to the furlough dates to plan ahead if they need assistance (e.g., the June 17 deadline for taxpayers abroad to file their income tax returns and the deadline for the second quarter estimated tax payment both fall on the Monday after the June 14 furlough day).
[S]ome accountants said they thought the new rule could succeed where previous efforts had failed. “The F.A.S.B. has made an attempt to keep it as simple as possible,” said Rick Day, the national director of accounting at McGladrey, an American firm that primarily audits smaller companies. “While it will be controversial, I think it will fly.” Hacker breaks into local accounting firm [RP]
900 clients of Lyons & Lyons may have been compromised. Man Finds $4.85 Million Lotto Ticket in Cookie Jar [Gawker] For some time now, Richard Cerezo, of Geneva, Illinois, has stored 11 old Lotto tickets in a cookie jar for safe keeping. Earlier this month, on his wife's suggestion, he took the tickets to a local convenience store. "I thought I had probably won about $600," Cerezo told the Patch. It turns out it he had underestimated his winnings by just a bit. Cerezo had won the February 2 Lotto jackpot. His prize? $4.85 million.