Finance

Conceding that a full-blown repeal of the alternative minimum tax may now be near-impossible, representatives of the nation's enrolled agents urged Congress to place new restrictions on the type of tax preparers authorized to prepare AMT returns."Repealing the full AMT would be a huge step in the simplification of the Tax Code, but one that may no longer be in the cards," EA Frank Degen told the Senate Finance Committee on behalf of the National Association of Enrolled Agents. "Practically, we admit that full repeal of the AMT may be a bridge too far for Congress to cross."

When it comes to fixing things in my home, I hail from the Woody Allen school of repair. I try something twice. After that, I start to hit. When it comes to my car, I often ignore it and hope that it goes away - sort of like many Americans when it comes to the fiscal spending crises in Washington.The budget-depleting hulks known as Medicare, Medicaid and Social Security comprise about 40 percent of a much larger fiscal contagion that threatens to literally break the national bank as the Baby Boomer generation begins the retirement process.

Members of Congress have been calling for raising taxes on the profits of private equity firms and hedge funds, along with taxing the incomes of their top managers at the same rate as managers of corporations.

The White House has lowered projections for the federal budget deficit to $205 billion, from an earlier forecast of $244 billion by the Office of Management and Budget.

A bill before the Connecticut State Senate would give its state comptroller the legal authority to establish generally accepted accounting principles for the state's financials, thereby sidestepping the Governmental Accounting Standards Board - the standard-setter for governments and municipalities.Proponents said that GASB's accounting rules make it hard to achieve a balanced budget, which Connecticut requires.

By a margin of 240-179, House lawmakers approved funding for the Internal Revenue Service for fiscal 2008 and in the process eliminated a provision that would have capped spending on the service's private debt collection program at $1 million. The program, which has divided Congress along party lines, allows the IRS to contract with private debt agencies to collect delinquent taxes. Having a $1 million limit would have ended the program. Currently the IRS has contracted with two private agencies, but is looking to expand the program this year according to reports.

In an effort to increase diversity in the financial services industry, the House Financial Services Committee has passed H. Con. Res.140, the Financial Services Diversity Initiative. The bill, sponsored by Rep. Gregory W. Meeks, D-N.Y., specifically will: * Encourage financial institutions to promote workforce diversity, including partnering with organizations that focus on developing opportunities for minorities and women; placing youth in internships, summer jobs and full-time positions within the industry; and partnering with inner-city high schools and girls' high schools to establish financial literacy programs and provide mentoring. * Encourage financial institutions and federal and state financial institutions' agencies to attract and retain a diverse workforce by recruiting at women's colleges and colleges that serve minority groups; sponsoring and recruiting at job fairs in urban communities; and placing employment ads in media outlets oriented to people of color; and, * Require that active measures should be taken by employers and educational institutions to increase the demographic diversity of the financial services industry. Meeks cited a Government Accountability Office report on diversity within the financial services industry that said that "representation for minorities in the financial services industry still lagged behind reasonable numbers on all levels and for women in upper management levels exclusively."

Ousted Fannie Mae chief executive Franklin Raines is charging regulators with withholding documents that show a deliberate attempt to drive down the stock price of the mortgage securities concern. In a filing with the U.S. District Court here, Raines, 58, who was shown the door after the company was forced into a $6.3 billion restatement, said that Fannie Mae's overseer, the Office of Federal Housing Enterprise Oversight, "continues to guard jealously against the disclosure of information." Raines wants OFHEO to hand over documents related to a 2004 report published by the Department of Housing and Urban showing that the "officers of the agency had engaged in serious misconduct by deliberately attempting to manipulate and depress Fannie Mae's stock price." To date, the government has filed more than 100 charges against Raines, former Fannie Mae chief financial officer Timothy Howard and the company's former controller, Leanne Spencer, seeking fines and the return of millions in bonus money. Following a two-year dispute over deferred compensation after his dismissal, Raines had been awarded $2.6 million under a deal disclosed in an SEC filing.

Rep. Charles Rangel, D-N.Y., chairman of the House Ways & Means Committee, said House lawmakers might consider legislation that would raise taxes on the income of private equity and hedge fund managers. Under the current tax laws, private-equity companies can go public by paying a partnership tax rate of 15 percent versus the corporate tax rate of 35 percent. Rangel's proposal follows a Senate measure introduced last week requiring private-equity partnerships that go public after June 14 to pay corporate taxes.

The Treasury is seeking nominations for its previously announced strategy to establish an Advisory Committee on the Auditing Profession -- a committee charged with studying the accounting profession and ways to keep the auditing profession vibrant and the U.S. capital markets competitive. Last month, Treasury selected former Securities and Exchange Commission Chairman Arthur Levitt and former SEC chief accountant Donald Nicholaisen to help lead the effort. The committee is expected to take about a year to study topics such as the concentration of the Big Four and their exposure to potentially crippling shareholder lawsuits. The panel is scheduled to begin its work in the fall. Nominations should be sent to ACAPmembership@do.treas.gov or Advisory Committee on the Auditing Profession Membership, Office of Financial Institutions Policy, Department of the Treasury, Main Treasury Building, Room 1418, 1500 Pennsylvania Avenue, NW., Washington, D.C. 20220. Nominations must be received on or before July 11, 2007.

Democratic members of Congress have introduced a plan that would close a tax loophole that allows tens of thousands of dollars in tax write-offs for only the largest luxury SUVs. The bill introduced by Reps. Allyson Schwartz, D-Pa., Rahm Emanuel, D-Ill., and Earl Blumenauer, D-Ore., who all serve on the Ways and Means Committee, as well as Rep. Ed Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming, would fix a provision in the Tax Code that provides an additional tax incentive for the luxury market of SUVs weighing over 6,000 lbs. Originally intended to help businesses buy necessary heavy-duty work vehicles, the "Hummer Tax Loophole" has for years allowed write-offs of anywhere from $100,000 to the current figure of $25,000 for the purchase of the largest, most gas-guzzling luxury SUVs, even as concerns over gas prices and dependence on oil have grown. The change would not affect legitimate business investments in trucks or vans, such as plumber and contractor trucks, farm vehicles, construction vehicles, flatbed trucks, cement mixers, and a variety of other vehicles as designated by the IRS. "This bill fixes a perverse, unintended incentive to buy the biggest and most polluting vehicle on the market," said Blumenauer.

As an extension to the current financial and technical assistance programs the Small Business Administration provides to the military, the SBA has introduced the Patriot Express Pilot Loan, an offshoot of its SBA Express Program. Loans are available up to $500,000 and qualify for the SBA's maximum guarantee of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral. The Patriot Express Loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases. Patriot Express Loans feature the SBA's interest rates, which are generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan. Local SBA district offices will have a listing of Patriot Express lenders in their areas. The SBA Patriot Express is available to military community members including veterans, service-disabled veterans, active-duty service members participating in the military's Transition Assistance Program, reservists and National Guard members. Details on the initiative can be found at www.sba.gov/patriotexpress

The Senate Finance Committee has released an energy tax package addressing advanced electricity infrastructure, domestic fuel security, advanced technology vehicles, and conservation and energy efficiency. The committee is scheduled to consider the bill on Tuesday, June 19.Among its provisions, the bill authorizes $750 million in each of calendar years 2008 and 2009 for clean renewable energy bonds; creates a new category of tax credit bonds for advanced coal facilities; and extends the 30 percent investment tax credit for solar and fuel cells, and the 10 percent credit for microturbines for two years. It expands the investment tax credit for clean coal facilities. The bill also extends for two years and modifies the personal tax credit for residential solar electric, solar water heating, and fuel cell property. The modification raises the cap on the credit for solar electric property to $4,000. "This bill reflects energy needs in the 21st Century," said Sen. Chuck Grassley, R-Iowa, and ranking member of the Finance Committee. "People need tax certainty to invest in infrastructure and keep production moving. Production has to meet demand, and alternative energy has never been in such demand."

The Treasury Department has created a committee to study problems in the accounting profession - and in something of an unexpected move, former Securities and Exchange Commission chair Arthur Levitt was selected to lead the effort, along with former SEC chief accountant Donald Nicolaisen.

While conceding that the Internal Revenue Service has made significant progress in improving internal controls and financial management since its initial financial audit in 1992, it still needs to close some 75 recommendations from prior audits according to the Government Accountability Office. The auditor general said the IRS has resolved myriad internal controls weaknesses by closing over 200 of the GAO's recommendations over the past seven years, but since its 2006 audit, the GAO has identified 28 more, bringing the total to 75. The categories cited by the GAO for recommendations include: Safeguarding of assets and security activities; proper recording and documenting of transactions; and effective management review and oversight. The report can be accessed at www.gao.gov.

The multi-billion-dollar-gap between what publicly traded companies book as expenses for executive stock options and what they report cost the U.S. Treasury roughly $43 billion between 2004 and 2005, charged Sen. Carl Levin, D-Mich. Levin, who chairs the Homeland Security and Governmental Affairs Committee said at a hearing earlier this week that companies are reporting higher deductions for stock options to the Internal Revenue Service than what they are reporting to their shareholders. Levin said when company directors who approve executive compensation learn that the options, while an expense, also produce a huge tax break, it "becomes a tempting proposition for them to pay their executives with stock options instead of cash." Levin proposed that the massive gap be closed via legislation that requires a uniform reporting standards for options.

Republican presidential candidates Rudy Giuliani and Sen. John McCain, R-Ariz., have each refused to sign a pledge not to raise taxes if either is elected as the nation’s chief executive.

Tax practitioners looking to Congress, the Treasury or the Patent Office for a solution to the perceived problem of tax strategy patents may instead have found some assistance from an expected source - the Supreme Court.A unanimous Supreme Court, in the case of KSR v. Teleflex, decided on April 30, 2007, overturned a decision of the U.S. Court of Appeals for the Federal Circuit and found a patent claim invalid. In doing so, the high court also criticized the Federal Circuit for applying the wrong standard on patent claims and being too liberal in upholding patent claims for obvious improvements.

Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Finance Committee, has sent a letter to his chamber colleagues in an attempt to blunt what he termed "inaccurate claims" about the private collectors employed by the Internal Revenue Service.In a "Dear Colleague" letter, Grassley pointed out that the agency's own collection infrastructure is better set up for placing liens and garnishing wages than it is for making initial phone calls to delinquent taxpayers to set up a payment plan.

Feeble audit procedures are allowing tax cheats to evade billions of dollars in U.S. tax liabilities each year by hiding funds in offshore accounts, government investigators told Congress.