Armey: Change Tax Code to Avoid 'Corporate Inversion': Instead of penalizing companies for trying to minimize their taxes by switching their headquarters to foreign countries, Congress needs to change the tax code itself, says Congressman Dick Armey.
In a letter to lawmakers, Armey criticized recent Democratic proposals calling for legislation to penalize businesses for this practice, called corporate inversion.
Corporate inversion occurs when a U.S.-based, multinational company legally switches places with its foreign subsidiary to take advantage of a low- or zero-tax nation, in effect making the subsidiary the parent company.
"This is akin to punishing a taxpayer for choosing to itemize instead of taking the standard deduction," Armey wrote. "Companies invert to escape paying taxes on overseas earnings and to become more competitive in the global marketplace," he added.
Armey said that he believes improving the tax code to prevent inversions is a better solution, and said one place to start would be reviewing the complicated foreign business income rules.
IRS Seeks Comments On Transfer Pricing Simplification Proposal: The IRS is seeking comments on a proposed multilateral transfer pricing documentation package developed by the Pacific Association of Tax Administrators.
In recent years, transfer pricing documentation has become increasingly important under the laws of many jurisdictions. Under U.S. law, taxpayers may be subject to documentation-related penalties under Internal Revenue Code Section 6662(e). Taxpayers have commented that it has also become increasingly burdensome to understand and satisfy the differing documentation requirements in each jurisdiction. The PATA members include Australia, Canada, Japan and the United States.
The PATA members have tentatively agreed on principles under which taxpayers can prepare one set of documentation (the PATA Documentation Package) that will meet the respective transfer pricing documentation provisions of each PATA member country and thus eliminate the need to prepare different documentation for each country. The proposed PATA Documentation Package is intended to reduce taxpayer burden and to provide certainty that a penalty will not be imposed. In effect, the PATA Documentation Package creates a voluntary procedure that, if satisfied, will protect the taxpayer from otherwise applicable transfer pricing documentation penalties, if any, in each of the four jurisdictions.
Prior to adoption of this multilateral approach to transfer pricing documentation, the United States Competent Authority is soliciting comments with respect to the proposal. Taxpayers who would like to review the proposal can go to www.irs.gov and click on "Business" in the "contents" area, then choose "International Businesses." Comments on the proposal can be sent via e-mail to email@example.com Comments are due by July 31, 2002.
H&R Block Reports Record Revenues, Chairman to Retire: Bolstered by an accounting change, tax prep giant H&R Block Inc. reported a 55 percent jump in net earnings for the year, and an 11.3 percent increase in revenue.
The Kansas City, Mo.-based company also announced that its chairman, Frank L. Salizzoni, would retire effective at the close of its annual shareholder meeting in September. The board did not name a successor, and said that it would reduce its size from 10 directors to nine directors as a result of Salizzoni’s retirement.
Block reported net earnings of $434.4 million, for the fiscal year ended April 30, up from $281.2 million, bolstered, in part, by its early adoption of the Statement of Financial Accounting Standards No. 141 and No. 142, which the firm noted improved net earnings for fiscal year 2002 by $47.9 million, or 26 cents per diluted share. Net earnings per diluted share increased 52 percent to $2.31, up 79 cents per share from the prior year.
Revenue for the fiscal year rose to $3.3 billion. Fourth quarter revenue totaled $1.9 billion, an 11.7 percent increase over the prior year’s fourth quarter, while net earnings totaled $463.6 million, up 22.6 percent. Earnings per diluted share rose 21.8 percent for the quarter to $2.46. Block said that it expects earnings per diluted share for fiscal year 2003 to increase between $2.60 to $2.75. The firm’s board also approved a 12.5 percent increase in the quarterly cash dividend.
Salizzoni, who is credited with developing Block’s strategy to expand into mortgage and accounting services, became chairman in Sept. 2000, succeeding co-founder Henry W. Bloch. Prior to that, he served as Block’s president and chief executive officer. Salizzoni has served on H&R Block’s board of directors since 1988.
"Frank led this company at a very critical time in its history," said Mark A. Ernst, president and chief executive officer. "We are very grateful for his contributions toward our change from a tax preparation firm to a financial services provider."
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