IRS OFFERS GUIDANCE ON ECONOMIC SUBSTANCE
Washington, D.C. - The Internal Revenue Service has released its first guidance on the newly codified economic substance doctrine, which was only recently made part of the Tax Code.
Notice 2010-62 provides interim guidance regarding the codification of the doctrine under Sec. 7701(o) and the related amendments to penalties in the Tax Code by the health care reform act.
Under the doctrine, tax benefits with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. A transaction's potential for profit shall be taken into account in determining whether the requirements of Sec. 7701(o)(1) are met only if the present value of the reasonably expected pre-tax profit is substantial in relation to the present value of the claimed net tax benefits. For purposes of computing pre-tax profit, the Treasury Secretary will issue regulations treating foreign taxes as a pre-tax expense in appropriate cases.
Comments on the guidance can be directed to notice.comments@irscounsel.treas.gov, with Notice 2010-62 in the subject line. The notice is effective for transactions entered into on or after March 31, 2010.
SENATE FAILS TO REPEAL 1099 REQUIREMENTS
Washington, D.C. - The Senate was unable to produce enough votes to end debate on two amendments that would have repealed or scaled back the expanded 1099 reporting requirements for businesses in the health care reform bill.
The controversial requirements, which were included in the Patient Protection and Affordable Care Act, would require businesses to report to the IRS any purchase from a vendor of goods or services worth $600 or more during the calendar year. The new requirements would be effective for purchases made in 2012 that will be reported on 1099 forms in 2013.
As of presstime, two separate amendments introduced by Senate Democrats and Republicans to the Small Business Jobs Act had been unable to reach the 60-vote threshold needed to cut off debate and be included in the final bill. The Senate may next try to pass repeal as a separate piece of legislation.
DTT REPORTS GROWTH, MAJOR HIRING PLANS
New York - Deloitte Touche Tohmatsu said that it plans to hire a quarter of a million new employees around the world over the next five years, after the firm saw its revenue grow in the past year.
The firm reported that its current revenues grew 1.8 percent to $26.6 billion in fiscal year 2010. Revenues in China and India have doubled and tripled, respectively, in fiscal 2010, with significant headcount increases in both regions. Deloitte's current headcount worldwide is approximately 170,000 professionals.
Deloitte experienced a 15 percent increase in consulting revenues over last year, led by 19 percent growth in the strategy and operations service line and 33 percent growth in technology integration. Those increases helped to offset small declines in other businesses whose results were primarily affected by modest reductions in the firm's rate per hour.
Audit revenue declined 1 percent, while market share of the Fortune Global 500 grew by 1 percentage point. Financial advisory revenue declined 2 percent. Tax revenue declined 5 percent.
The Deloitte U.S. member firm's recent integration of BearingPoint's North American public sector practice contributed meaningfully to the consulting group's performance. The firm saw a 38 percent increase in revenues from the public sector compared to the prior year. Revenues from the financial services and manufacturing industries were essentially flat, but that represented a significant rebound from last year's double-digit declines.
GRANT COO JOINS SEC
Washington, D.C. - The Securities and Exchange Commission has appointed J.W. "Mike" Starr as deputy chief accountant for policy support and market monitoring in the agency's Office of the Chief Accountant. He will serve as the chief accountant's liaison on projects and activities to improve the quality of accounting and auditing policy decisions and to identify and address potential financial reporting weaknesses and risks. Starr also will advise the chief accountant and his office on highly complex topics. Starr, 63, previously served as the chief operating officer for Grant Thornton International, and was a member of the senior leadership of Grant Thornton LLP.
