The following provides a few of the causes of incorrect deferred tax assets:
John Cummings July 5th, 2011
Commercial property values in most parts of the country have seen a precipitous decline since the market peaked in 2007. The latest figures from Moody’s, released last week, show a 3.7 percent fall in actual transaction prices in April, bringing the firm’s national all-property aggregate index down to around 50 percent of its value at the peak. That’s the lowest point since the company started tracking the data in 2000. (Real estate consulting firm Real Capital Analytics offers the full Moody’s report here in pdf form.)
The news is not all bad; Moody’s sees strong signs of recovery in major markets such as San Francisco, New York, and Washington. And transaction volume nationwide is on the increase — a very good sign for a potential broad recovery.
The other silver lining in all this, of course, is the opportunity for companies to press for lower property taxes. After all, taxes steadily increased when the market was booming — why shouldn’t they go down now that property prices have declined?
A lot of businesses are thinking along those lines, according to Jim Kane, managing partner at tax and business advisory firm True Partners Consulting. But many are missing out simply because their tax departments are too disorganized to seize the opportunity. Most organizations don’t have a dedicated property tax function, so the responsibility falls on whoever in the finance or tax departments has the available time at any given moment.
“It’s common for a company to simply track property tax bills as they arrive in the mail and pay them as long as they don’t increase ‘significantly,’ Kane notes. “Bills get ignored and significant penalties and interest are paid because a proper property tax function is not in place.”
Effective software support is often lacking, he adds. While some larger corporations use property tax software programs such as PTMS (Property Tax Management System), they don’t always have the personnel to administer the system and populate it with accurate and timely information. In addition, beyond the basic features, “most companies don’t fully utilize the features of property tax software appropriately.”
So is it worth the effort to go up against the assessors? “The short answer is yes,” says Kane. “Taxpayers should always inspect property records and keep in contact with assessors. Oftentimes, an assessor is not aware of significant changes to a business or property until it’s too late. Keeping the assessor informed through informal discussions can help avoid significant effort down the road, when the cost-benefit analysis to appealing a property may discourage an appeal.”
Something to keep in mind while commercial property prices are still scrabbling around trying to find a bottom.
By Tammy Whitehouse
July 6, 2011
Deficit-laden state governments are increasingly eying unclaimed property and are putting more pressure on companies to turn over abandoned assets.
They are also taking a broader view of what constitutes unclaimed property meaning companies must assess their risks and brush-up their compliance efforts on that point.
Recent, high-profile actions by states involving corporate giants like John Hancock, McKesson, and Staples have made clear that state governments are more aggressive than ever in collecting unclaimed property, says Noel Hall, principal and leader of the abandoned and unclaimed property practice at tax firm Ryan. “These audits are unlike anything I’ve seen in 30 years of doing this,” he says. “I’ve sat in on some of the conference calls with auditors and in some cases it’s clear that it’s a fishing expedition.”
States have held authority over abandoned or unclaimed property since the 1960s, collecting it from corporations or other institutions when it is left unclaimed by its rightful owners. Unclaimed property has long included items such as abandoned bank accounts, uncashed checks, traveler’s checks, stocks, bonds, trust distributions, utility or rent deposits, insurance policies, refunds, and other orphaned assets. The National Association of Unclaimed Property Administrators says state treasurers are sitting on nearly $33 billion in unclaimed funds, waiting for the rightful owners to stake their claim. States pursue unclaimed property to prop up their general funds because they rarely reunite much of that property with the rightful owners. Technically states are the custodians of those unclaimed assets, not the owners, but the low claim rate on such funds makes them a sweet source of revenue without raising new taxes.
It’s no secret that state governments are strapped for cash and looking for revenue, especially in ways that don’t involve raising taxes, says Marc Musyl, a partner with law firm Greenberg Traurig. For fiscal 2012, the combined deficit for 42 states with budget shortfalls and the District of Columbia is expected to be $103 billion, according to the think-tank Center on Budget and Policy Priorities. “States are becoming more aggressive in looking for as broad a definition of abandoned property as they can come up with,” Musyl says. “And they’re looking for ways to recover that as efficiently as they can.”
Actions against Hancock, McKesson, and Staples illustrate the new direction, experts say. In the case of Hancock, for example, California unleashed a third-party audit firm working on a contingent-fee basis to search for unclaimed property. Ultimately, Hancock relinquished $20 million in undelivered death benefits and matured annuities owed to Hancock clients, says Cathleen Bucholtz, managing director of tax firm True Partners Consulting.
“Because they settled, a lot of the particulars will never be known,” she says. “Historically, banks and insurance companies were thought to be in substantial compliance. If a state is going to go after a company that has historically filed its unclaimed property, it will certainly go after companies that they know are non-compliant.”
The Hancock settlement has set off deeper investigations of major insurers, says Mary Jane Wilson-Bilik, a partner with law firm Sutherland Asbill & Brennan. States are sending in not just unclaimed property auditors but also insurance commissioners and other enforcement agencies to search for further market conduct problems. “I’ve never seen this before,” she says. “This is very unprecedented.”
The case against Staples, which has been working its way through the Delaware courts for a few years, boiled over recently, Hall says, when Staples fought back against the state’s assertions that it could estimate unclaimed property liability if records were missing. The company and the state’s auditor are sure to come up with different numbers when estimating such a liability, he says, especially if the state’s auditor is paid on contingency.
Outside the Boundaries
Some disputes are arising over what constitutes unclaimed property, as states attempt to broaden the definition. For example, in a case against McKesson, Delaware has asserted unclaimed property rights over mismatches between inventory received and amounts paid for inventory, prompting McKesson to fight back, says Sarah Niemiec Seedig, a lawyer with Greenberg Traurig. In this case, the state is targeting complementary drug samples. “These are items not traditionally considered unclaimed property,” she says.
In addition to traditional general ledger searches, states also are examining securities transactions, says Diane Zumoff, chief compliance officer at unclaimed property advisory firm Keane. The states’ third-party auditors are looking for any stock-related assets, including common stock, preferred stock, restricted stock, unexchanged or unredeemed proceeds resulting from mergers and acquisitions, and others, she says. “These are broad information requests,” she says. “The volume of information requested and the type of requests are falling way outside the typical boundaries of unclaimed property audits.”
The overarching messages for companies in all sectors is to broaden the view of what falls into the category of unclaimed property and shore up any gaps in compliance, experts say.
Companies need to take stock of their risk and consider entering states’ voluntary disclosure programs, Zumoff says. “There’s a lot of work to be done,” she says. “Most companies are very decentralized in terms of their unclaimed property shop. Typically the new kid on the block gets unclaimed property as his or her job, and there’s a lot of turnover, so the intellectual capital is not really maintained as well as it should be.”
What’s more, companies generally do a poor job at complying with unclaimed property regulations. Hall said industry estimates suggest about 20 to 25 percent of companies are generally compliant with unclaimed property reporting requirements. That leaves plenty of room for improvement, especially among companies that are diligent about reporting one or a few predominant areas of unclaimed property but are overlooking other areas. In Hall’s view, the most vulnerable companies are those in the Fortune 1000 and those incorporated in or doing substantial business in the most aggressive states, such as Delaware and California.
Musyl says companies need to get up to speed on the kinds of unclaimed property states are pursuing, and consider whether they might be at risk. Most companies are aware to watch for uncashed checks, abandoned deposits, dormant accounts, even unused gift cards or prepaid cards or unclaimed layaways, but the net can be much wider.
Marlys Bergstrom, also a partner with Sutherland Asbill & Brennan, says companies that are in the bad habit of writing off outstanding checks or credit balances should adopt some new procedures. “If you’re writing off outstanding checks, that’s immediately a bad sign,” she says. She is advising companies to get their arms around all possible sources of unclaimed property, assess procedures, and determine if a voluntary disclosure program might be a good option. With unclaimed property subject to no statute of limitations, and states showing interest in estimating and extrapolating, the liabilities can become daunting, she says.
Hall warns companies to tread cautiously into voluntary disclosure programs. “I wouldn’t advise anyone to just put some numbers on a form and turn it in,” he says. Staples, after all, began its present dispute with Delaware by entering a voluntary disclosure program, he says.
In one extreme case, a state auditor targeted unredeemed points earned on an Internet gaming site, Musyl says. “As you might imagine, the folks who play these games are hard to identify and find,” he says. “But if someone wins points that are redeemable for tangible property, that’s going to be a hot area of concern for states that are looking to generate additional revenue.”
As states continue to push the bounds of what constitutes unclaimed property, companies will increasingly have to decide to turn over the goods, or fight back. Another possible strategy: Do more to find the rightful owner in the first place.
–Energy companies in the U.S. would face biggest tax hit if “last-in, first- out” inventory accounting method is repealed
–Republicans criticize White House support for repealing LIFO practice
–Exxon Mobil has largest LIFO reserve of more than $25 billion
By Kristina Peterson
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Oil and gas companies in the U.S. would take the biggest hit if Congress repeals an inventory accounting method that, for decades, has helped firms show slimmer profits and pay lower taxes.
As contentious negotiations over how to raise the federal government’s $14.29 trillion debt ceiling continue, Republicans lawmakers this week sharply criticized the White House for wanting to repeal the “last-in, first-out,” or LIFO, accounting method in order to raise revenue. The Joint Committee on Taxation, a nonpartisan Congressional research office, has estimated that repealing the method would generate new revenue of nearly $70 billion over 10 years, but the GOP charged that such a move could cripple struggling manufacturers.
Senate Minority Leader Mitch McConnell (R., Ky.) criticized the idea on the Senate floor Wednesday and opposition from other Republican lawmakers will likely pose a steep hurdle to repealing the accounting method as part of the deficit talks.
“Let me get this straight–our economy is fragile, millions of Americans are out of work, and this White House is actually proposing an idea that would make things worse for our manufacturers,” Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said Tuesday.
The six companies with the largest LIFO reserves are energy companies, led by Exxon Mobil Corp. (XOM) with a reserve of more than $25 billion, according to a survey of publicly traded companies published in the January 2010 issue of the Journal of Finance and Accountancy. The proposal comes as large oil and gas companies already face attacks in Congress to reduce their tax benefits, with lawmakers targeting a popular deduction for manufacturing activity and a credit for oil companies that pay taxes to foreign governments.
Under LIFO, companies can value the cost of the goods they have sold at their most-recent prices, while their inventories are valued at older prices. The method assumes that the last items bought are the first ones sold. If prices are rising, this means a company’s recorded costs will be higher and its taxable income will be smaller.
This is a particular boon for energy companies during a period when oil prices have jumped 26% over the past five years and soared over the last two decades. On Tuesday, oil closed at nearly $93 a barrel on the New York Mercantile Exchange; in June 1996, oil traded at close to $20 a barrel.
“There hasn’t been another industry where inflation has really taken over the way it has in the oil and gas industry,” said Robert M. Gordon, managing director of tax-advisory firm True Partners Consulting and a former assistant general tax counsel at BP PLC’s (BP, BP.LN) BP America unit.
Under the proposal President Barack Obama offered in his fiscal year 2012 budget, companies would have to switch to a “first-in, first-out,” or FIFO, accounting method that would generally make the cost of goods sold smaller, resulting in a higher taxable income. Companies that have been using the LIFO method would also have to pay taxes over a 10-year period on their cumulative ” LIFO reserve,” an accounting entry that reflects the difference between the two accounting methods.
Energy companies had the six biggest–and nine of the 20 largest–LIFO reserves as of October 2008, according to the study, which culled data from 9, 917 actively traded companies. After Exxon, Chevron Corp. (CVX) had the second- largest reserve at just under $7 billion, followed by ConocoPhillips (COP) at $ 6.7 billion. Heavy equipment-maker Caterpillar Inc. (CAT) had the biggest LIFO reserve of any non-energy company–and seventh-largest in size–at $2.6 billion.
Being able to keep their expenses high and income low has helped oil companies to take political shelter when prices at the pump angered the public, one of the study’s authors, Reed Roig, assistant professor of accounting at the University of North Carolina at Asheville, said in an interview.
“When gas prices go up and everybody’s yelling about windfall profits, ‘last- in, first-out’ dampens that effect,” Roig said.
Energy companies’ embrace of LIFO accounting is far from new. Congress authorized companies to use LIFO for income-tax purposes in 1939 and, by 1953, petroleum and coal products had the highest LIFO ratio–a measure of the LIFO- calculated value against the total book value–of any industry, according to the Survey of Current Business, a Commerce Department report.
Repealing the LIFO method would “generate a very substantial tax bill” for the energy industry, said Stephen Comstock, manager of tax policy at the American Petroleum Institute, the main lobbying group for the oil and gas industry. Oil refiners would see a bigger impact than exploration and production companies, he noted.
On Tuesday, Republican lawmakers cautioned that increasing taxes for oil and gas companies could result in higher gasoline prices.
-By Kristina Peterson, Dow Jones Newswires; 347-882-7215; kristina.peterson@ dowjones.com
–Jerry DiColo contributed to this article.
Amazon’s refusal to collect California sales tax won’t be official until an Oct. 1 deadline
By Marc Lifsher and Andrea Chang
July 2, 2011
Amazon.com Inc. is sticking by its vow not to collect California sales tax on Internet purchases — and state officials must decide what to do about it.
But the showdown over the new tax collection law that took effect Friday could be months away. Companies don’t send the taxes to the state until the end of each quarter, which means the California Board of Equalization won’t know officially about Amazon’s refusal to collect them until Oct. 1.
The tax-collecting agency said Amazon accounts for about half the Internet sales in California from large out-of-state firms that, prior to the new law, did not have to collect sales tax for the state. It said the new law would capture about $317 million a year in sales taxes that previously went uncollected.
Amazon, based in Seattle, has said repeatedly that it would not collect the California sales tax, calling it an unconstitutional infringement on interstate commerce.
Such defiance sets up a major legal battle by this fall, though Amazon could first challenge the law in court, as it has in New York. It has lost a trial court ruling there and has an appeal pending.
Amazon is “going to fight in every state where it can fight,” said Tracey G. Sellers, managing director of the Tampa, Fla., office of tax firm True Partners Consulting. “It’s going to be years before this whole issue is settled” in the courts.
Amazon declined to say whether it would sue to overturn the new California statute, though state officials expect a lawsuit.
Experts have mixed opinions about how possible or pending legal challenges might turn out in California and at least seven other states with tax collection laws covering online sales.
“Barring a change in federal law, California has no chance,” said Steve Gill, a professor of taxation at San Diego State University. “There’s literally nothing they can do. The tax law is and has been pretty darn clear on this issue for decades.”
Gill said that a change in sales tax rules at the federal level would need to be hammered out in order for Amazon to comply, but that Congress has “no real appetite” to tackle the issue.
“In my view, California played their hand, and Amazon called their bluff,” he said.
Before suing California, Gill said, Amazon might wait for its New York case to play out. That suit could go to the U.S. Supreme Court, he said, “and then we’ll have a definitive answer.”
John Swain, a state and local taxation law expert at the University of Arizona, argued that California has a good shot at success.
“The smart money is behind the California taxing authority,” he said, if the state’s lawyers can establish that Amazon physically does business here.
The law affects about 2,000 out-of-state Internet companies that have established some business relationships here — workers, partners, offices or other operations.
If Amazon has such connections in California, then it has a “serious problem,” Swain said.
Amazon moved quickly Wednesday to get rid of its connections to the state by axing about 10,000 California affiliates that were paid commissions for funneling business to Amazon through their websites.
The company still has separate business operations in the state, including a laboratory that develops Kindle e-readers in the Silicon Valley, but declined to disclose what, if anything, it planned to do with them.
The new law also gives the Board of Equalization the authority to develop new theories that would establish a nexus or legal connection, making Amazon liable for collecting California sales taxes.
“This swings the gate wide open to establish nexus as we see fit,” said Betty Yee, a board member who spearheaded the agency’s support for the law. But she acknowledged that any other theories the board devises would probably be tested in court.
The difficulty in enacting state laws on tax collection stems from efforts to comply with a 1992 U.S. Supreme Court ruling that a state can require out-of-state companies to collect sales taxes only if those companies have some physical presence in the state.
Internet retailers with no bricks-and-mortar presence in the state said the ability to sell without adding sales taxes helps them offer lower rates, operate on a smaller profit margin and attract and keep customers who otherwise might simply shop at the nearest store.
Gov. Jerry Brown, who signed the measure into law Wednesday, saw an extra $317million in sales taxes annually as a way to help shore up a battered state budget. Brown and local businesses also said that it’s only fair to require Internet companies to do the same thing that bricks-and-mortar shops have been doing.
Even some former Amazon affiliates, such as Tim Ware of Oakland, who owns a Web design and development firm, agreed.
“If people are going to buy books, they can either go to the bookstore in their town or they can go to Amazon. I think either way, they should pay sales tax because it’s unfair competition for local booksellers,” Ware said.
“When you boot up your computer and click on Amazon,” he said, “they are in your state; they are in your room.”
Cook County Assessor Joseph Berrios joined the Chicagoland Chamber of Commerce Taxation Committee at its June 28 meeting to discuss his plans for improving the office and other important initiatives for 2011.
To view the full article click here.
The Challenge
Has anyone asked you that question lately considering that the U.S. and global economy has suffered through what experts are calling the “Great Recession?” In 2010, we saw some improvements in our economy, but some experts believe that there is still some risk of a “doubledip” recession. Whether there is risk that we’ll dive into another recession or that our economy is back on the growth path, one constant has remained, which is all companies are still going to pay real property taxes. All 50 states in the U.S tax real property and the assessors who value your real estate are inconsistent in ensuring your property reflects the various definitions of “market value” for each state. In an uncertain environment such as the one we are living, the question becomes, “Is the
The insurance industry was shaken in recent weeks by California’s settlement with John Hancock Financial Service Inc. over the company’s non-compliance with the State’s unclaimed property laws. We believe that California’s willingness to re-examine an industry with a history of strong compliance with the unclaimed property laws may signal a renewed focus by all states on unclaimed property as a valuable source of revenue resulting in tougher scrutiny of all companies. Consequently, we strongly encourage all corporations to review their unclaimed property compliance function immediately.
Money on the Table?
The current economy’s “new normal” has forced companies to reassess their operations and look for untapped opportunities to continue lean, profitable practices. Many companies leave money on the table by failing to negotiate tax and business incentives with state and local governments. Negotiated Incentives increase companies’ return on investment by offsetting initial costs and lessening tax liability.
A License of Software Used to Operate Switch Hardware Was Found to be Exempt From Sales Tax as a Technology Transfer Agreement, and Possible Refund Opportunities Exist
The California Court of Appeal in Nortel Networks, Inc. v. State Board of Equalization, No B213415, (Cal. Ct. App. , Jan 18, 2011), recently held that certain software sales were not subject to California sales and use tax because they were considered a technology transfer agreement (TTA).
Summary
Recent Georgia property tax changes provide additional notice and appeal opportunities to Georgia taxpayers this year while property values are at historic lows.
Calendar year sellers and issuers of gift cards should immediately review their accounting to determine whether they should change their method of accounting to get the benefit of new, taxpayer-friendly rules. True Partners can help with the analysis and filings.
The Challenge
As we preparers enter the heart of our filing season gathering fixed asset data, preparing extensions, filing renditions, and reviewing assessment notices, the main question at hand is “Have we done everything in our power to ensure our personal property tax liability is as low as possible?”
A Culture of Advancement
The world around us is advancing at a rapid pace when it comes to technology. Does anone still have an old Blackberry smartphone? Or do you now use an iPad tablet PC? They are everywhere because of what they offer, the efficiency they bring, and all of the “apps” that an individual user can incorporate to improve their lives.
Please find attached TPC’s slides and documents for our June 9, 2011 seminar on Interim Reporting – Income Tax Compliance Issues. Our workshop provided hot topics and industry trends on forecasting, modeling annual estimated ETR, discrete events, completing form UTP and tax law changes impacting 2010 tax returns.
Download Detailed Checklist PDF
Download Interim Reporting PDF
Download Multistate Tax Update PDF
Download Uncertain Tax Position PDF
Accounting for windfall stock compensation –“ with-and-without” or “tax-law- ordering” election.
THURSDAY, JUNE 9, 2011
9:00 A.M. TO 3:30 P.M.
HYATT REGENCY SANTA CLARA
5101 Great America Parkway
Santa Clara, California
A practical workshop with examples and discussions of the following hot topics and industry trends:
- Forecasting
- Modeling annual estimated ETR
- Discrete events
- Completing Form UTP, with an example
- Tax law changes impacting 2010 tax returns
AGENDA:
9:00 a.m. – 9:30 a.m. Registration and Continental Breakfast
9:30 a.m. – 12:30 p.m. Welcome and Introduction
12:30 a.m. – 1:30 p.m. Lunch
1:30 p.m. – 3:30 p.m. Conclusion and Questions
To Register for the seminar Click here
4 CPE credits
(CPE credits will be provided by True Partners Consulting)
Cost $125 per person (make checks payable to True Partners Consulting.
Overview
The New Year ushers in a new incentive program in the state of New York. As many states continue to struggle with high unemployment, they are looking for incentives to spur capital investment and job growth. In 2011, businesses in certain targeted industries can apply to participate in New York’s Excelsior Jobs Program. Targeted industries include agriculture, back office, distribution, financial services, manufacturing, scientific research and development, software development, and other significant projects. Businesses are accepted into the Excelsior program based on new job creation or significant capital investment and may qualify for the following tax credits:
Multinational Companies (MNC’s) face increasing pressure from various tax authorities to ensure they pay their correct taxes, particularly now when governments attempt to fill their tax coffers whilst businesses face commercial pressures and incur significant losses. By Les Secular, Partner True Partners Consulting (UK) LLP.
Laurie Kulikowski
January 24, 2011
To view this article online Click Here
Location, location, location. It’s the mantra real estate agents live by, but can also be vital for small businesses.
States differ wildly on various tax and business-specific programs that can make or break a business, especially a small start-up.
Whether it’s because of the startlingly high numbers of workers out of jobs or just a tactic to bring revenue to suffering state fiscal budgets, many states are increasingly courting small businesses and start-ups. The conventional wisdom says small businesses create two-thirds all jobs.
“The climate for a start-up almost anywhere frankly is about as positive as I have ever seen it,” says Dr. Charles “Chuck” Morrissey, an associate professor at Pepperdine University’s Graziadio School of Business and Management.
In Rhode Island, for instance, state Rep. Donna Walsh (D-36), who is on the state’s House Committee on Small Business, introduced a bill Jan. 19 to eliminate the corporate tax for many small businesses.
The legislation would eliminate Rhode Island’s minimum corporate tax, now $500 for firms grossing less than $250,000 annually, and set up a graduated tax system based on gross receipts. “Besides equity, its greatest benefit is to provide tax relief for small businesses and start-ups to whom every dollar counts,” Walsh said in a statement.
Ideally for small businesses, states could compete to be known to be as welcoming to them as Delaware is to larger firms. Delaware claims to be where more than 50% of all U.S. publicly-traded companies and 60% of Fortune 500 companies are incorporated.
The state is pro-business and shareholder friendly, with modern corporation statutes and well-developed case law that facilitates business planning; a helpful state legislature; and a non-juried Court of Chancery dealing specifically with corporate issues.
“Once firms get beyond $20 million to $25 million in annual revenue, they should consider changing to a corporation,” says Mariano Sori, a state taxation expert at True Partners, “but small businesses that intend to expand can also take advantage of the environment.”
Morrissey, who led Pepperdine B-school’s entrepreneurship program, notes that many student business plan lack “location strategy,” which could be detrimental to a start-up’s success.
“In many cases the business models assumed they would be in a location that would be [start-up] friendly,” which isn’t always the case, Morrissey says.
“It’s no coincidence that the Apples and Googles just happen to come from very few areas,” he says.
TheStreet is highlighting the five best and worst states for small businesses as compiled by the Small Business & Entrepreneur Council as part of its annual Small Business Survival Index, released in December.
The index ranks states by their public policy climates for small business and entrepreneurship, measuring the costs and burdens of state government on small business and looking at policy areas that enable competitiveness and growth.
Low labor costs and a lack of corporate income tax are common denominators in the best states, while the opposite is true for some of the worst states, experts say.
“A lot of states have instituted programs for small businesses, or even large businesses, that want to relocate to the state,” Sori says, citing grants, tax credits and temporary property tax reductions. When entrepreneurs can choose where to base a business, things to look at include corporate income tax rate, property tax and the sales tax burden.
The top and bottom five, according to the council:
The fifth-best: Washington
The only state named after a president is home to a number of well-known corporations including Microsoft, Boeing, Starbucks and Costco, but it has plenty to offer small businesses.
Washingtonians and their businesses enjoy a lack of taxes for personal income, individual income, corporate income and corporate capital gains. It also boasts low electric utility costs, according to the SBE Council’s report.
That being said, Washington has high unemployment taxes, “very high” consumption-based taxes, a large number of health insurance mandates and a high state minimum wage.
Yet Washington has a renewed focus toward business, particularly small businesses. Democratic Gov. Chris Gregoire signed an executive order in October to facilitate small-business recovery in her state.
Among other things, the order directs state departments to “review current practices, tax and rate structures with the goal of reducing state imposed costs for small businesses,” as well as find ways to reduce the complexity of the state’s sales tax system.
“I want our business owners spending less time understanding what tax rate they should pay and more time ensuring their business succeeds,” Gregoire said in a statement.
Additionally, Gregoire is looking to consolidate small-business licensing, registration and certification guides into one resource and develop strategies to streamline regulatory processes.
Fourth-best: Wyoming
Home to Yellowstone National Park and Grand Teton National Park, Wyoming also boasts no tax on personal income, individual capital gains, corporate income, corporate capital gains or estates.
It also has the lowest electric utility costs, and very low gas and diesel taxes, according to the SBE Council.
On the other hand, Wyoming has high property, consumption-based and unemployment rates, as well as high workers’ compensation costs.
Wyoming’s new governor, Republican Matt Mead, owns farming and ranch operations in the state and is considered likely to make job and small-business measures a priority while in office.
Third-best: Texas
The Lone Star State has no taxes related to personal income, individual capital gains, corporate income, corporate capital gains or estates. Texas also boasts a low level of state and local government spending and low workers’ compensation costs, the SBE Council says.
The state does have high property and consumption-based taxes, as well as a large number of health insurance mandates and a very high crime rate, the council notes.
According to the website of Republican Gov. Rick Perry, Texas has brought in more jobs than any other state in the past 10 years.
Texas boasts a business-friendly atmosphere, particularly for start-up technology firms, including the Texas Enterprise Fund, which functions as a “deal closing” fund to enable the state to compete “directly with incentives offered” in other states, and the Emerging Technology Fund, which helps early stage tech firms as they get their footing, the website says.
Beginning in October, Perry’s office has hosted 14 “Small Business Forums” across the state offering business owners access to information on work force development, training grants, expanding markets and other business growth opportunities.
Second-best: Nevada
It’s understood that “what happens in Vegas, stays in Vegas,” but small-business owners will be happy to know the state also doesn’t want them leaving.
Nevada does not tax personal income, individual corporate gains, corporate income or corporate capital gains. It also has no death taxes and low workers’ compensation costs, according to the council report.
On the downside, Nevada does have high consumption-based taxes, high unemployment taxes and a high state minimum wage.
It is among states hardest-hit by the housing crisis and unemployment — topping 14.5%, according to a Friday press release from the governor’s office.
Bringing in jobs will be a high priority for the state’s new governor, Republican Brian Sandoval.
“We cannot burden struggling businesses with tax increases … We must allow sunsetting taxes to expire at the end of June and provide businesses the environment in which to begin hiring again,” he said Friday, referring to a tax package passed in 2009 that included temporary reductions to payroll taxes for small businesses, among other measures. The package is set to expire June 30.
He is expected to release his budget today.
Best: South Dakota
The top small-business-friendly state is South Dakota, which boasts, like some of the other top states, no taxes on personal income, individual capital gains, corporate income, corporate capital gains or estate transfers.
The state, home to historical Mount Rushmore, also has the lowest crime rate, a low level of state and local government spending and a low number of health insurance mandates, the SBE Council reports.
Gov. Dennis Daugaard is saddled with the task of fixing the state’s budget as he takes office this month. He has said he is opposed to raising taxes, instead preferring spending cuts.
Daugaard, a Republican, plans to spur economic growth in the state by fostering innovation and encouraging business in high-tax states to move to South Dakota and businesses already in South Dakota to “increase their production and the number of people they employ,” he said in his State of State Address two weeks ago.
He also said he plans to move money into the $10 million Revolving Economic Development Initiative Fund and revamp the state’s “bureaucratic” microloan program for small businesses, among other measures.
“We have the best business climate in the nation, and I intend to keep it that way. Our first advantage is our low tax burden,” Daugaard says.
Fifth-worst: Vermont
Vermont is among the list of states with high taxes on personal and corporate income, as well as high taxes on individual and corporate capital gains. The state also has high property taxes, high electric utility costs and high workers’ compensation costs, according to the SBE Council’s report, as well as poor private property protections.
On the flip side, the Green Mountain state has very low crime and no individual or corporate alternative minimum tax, SBE Council says.
That being said, Vermont’s new governor, Democrat Peter Shumlin, a small-business owner himself, pledged to create jobs and relieve taxpayers of the high burden of state taxes.
In his inaugural address this month, Shumlin put forth an aggressive agenda in which fostering entrepreneurship and combating the high cost of health care were priorities.
“Finally, my jobs agenda will expand the ability of emerging enterprises and businesses to access capital and credit when they need it the most,” Shumlin stated in his speech. “If our Green Mountain State can be recognized by young entrepreneurs as the innovative leader in financing and venture capital for micro-businesses when banks say ‘no,’ small businesses will thrive.”
Shumlin identified one possibility: taking advantage of the federal EB-5 Immigrant Investor program for venture capital.
Fourth-worst: California
California has high personal and corporate income taxes as well as high taxes on individual and corporate capital gains. And the list goes on. According to the SBE Council, California has the highest gas and diesel taxes, an additional tax for S-corporations, an added estate tax, poor private property protections, a large number of health insurance mandates and high workers’ compensation costs.
California is suffering a $28 billion fiscal deficit and has the worst credit rating among the 50 states, according to new Gov. Jerry Brown, a Democrat who also led the state in the 1970s and early ’80s. The Golden State has one of the highest unemployment rates in the country — 12.4% as of November, according to the Department of Labor. Thousands of Californians face foreclosure on their homes as a result of the housing bust.
Brown proposes a $12.5 billion cut to California’s state budget to close a large deficit and is reconsidering various tax credits, including the small-business-focused Enterprise Zone Hiring Credit, as he takes on a multiyear effort to shore up the state budget.
“The credit was one of the best jobs credit in the entire country, but cost the state much-needed revenue”, True Partner’s Sori says.
Still, the state prides itself on supporting venture capital and the entrepreneurial spirit, especially in technology. It’s that home to Apple of which Morrissey spoke, as well as to countless other high-tech firms packed into its Silicon Valley.
Third-worst: New York
Like California and Vermont, New York has high personal and corporate income tax rates and taxes on individual and corporate capital gains. It also has high property taxes, high consumption-based taxes, high gas and diesel taxes, an added estate tax and poor private property protections, among other things, according to the SBE Council.
“New York is a real killer because the state imposes a 7.1% [corporate tax rate] and New York City has their own tax rate of 8.85%,” Sori says. “If you’re doing business in the city of New York, it’s almost 16%.”
Among Democratic Gov. Andrew Cuomo’s agenda as he relocates to Albany is to transform New York’s economy.
“Business built New York, and we are declaring that New York is once again open for business,” Cuomo said in his State of the State Address.
Priorities include “holding the line on taxes and working to lower taxes in the future,” specifically property taxes. Cuomo is looking to foster job creation, in part by enhancing the state’s Excelsior Tax Credit Program, he says.
Cuomo also wants to expand support for minority- and women-owned small businesses, including “directing state agencies to double the current [Minority and Women-Owned Business Enterprises] participation goal from 10% to 20%; ease bonding restrictions for these business owners and expand the Owner-Controlled Insurance Program model to improve opportunities for small businesses,” according to his address.
Second-worst: New Jersey
New Jersey has a history of being unfriendly to business.
Like others on the list, New Jersey has high personal income and corporate income taxes as well as individual and corporate capital gains. It also has the second-highest property taxes in the nation, behind New Hampshire, according to the SBE Council’s report.
On the other hand, the Garden State has fairly low consumption-based taxes, a low crime rate and low gas and diesel taxes, the report notes.
Gov. Chris Christie seems dedicated to keeping businesses in New Jersey, but his plans are unclear.
The Republican governor “quietly dismantled” the state’s program for minority- and women-owned small businesses last year, according to media reports, but signed into law Senate Bill No. 2370, which calls for expanding New Jersey’s Business Retention and Relocation Assistance Grant program.
The program has helped businesses preserve jobs, expand operations and reinvest through the award of corporation business tax credits. Through the program, corporations will get a maximum tax credit of $2,250 per year for six years, per job retained in the state, versus a maximum one-time tax credit incentive of $1,500 per job retained.
In an address this month, Christie said he plans to put forth proposals to reform the state tax system.
“If New Jersey is to be a home for growth, we need to reform the taxes we place on business and individuals and begin to roll them back,” Christie said.
Worst: District of Columbia
Topping the list of worst states for small businesses is the District of Columbia. Our nation’s capital has the second-highest corporate tax rate income, behind Pennsylvania, and high personal-income, individual capital-gains rates and corporate capital-gains taxes.
The Washington, D.C., area also has high property taxes, an added tax for S-corporations, high electric utility costs, an imposed estate tax and the highest crime rate among the 50 states, according to the SBE Council.
Democratic Mayor Vincent Gray says he is looking to support small businesses in the area. One way is by increasing the opportunities for small businesses in the area to compete for government contracts.
Firms that make most of their money in Illinois will feel biggest hit
By Kathy Bergen, Tribune reporter
January 22, 2011
To view this article online Click Here
When Chicago-based investment research house Morningstar Inc. pays its state corporate income taxes for this year, the sting from the recent rate hike is expected to be negligible.
For the city’s financial exchanges, the rub is likely to be a bit more uncomfortable, with some analysts estimating it could shave 1.5 to 3.6 percent from 2011 earnings.
And for an Illinois medical-device firm, the hike and the suspension of a key deduction could bring its state tax bill from zero to as much as $95,000 — a stunning blow for a company that only became profitable in 2008. As a result, it may scrap plans to hire two research and development associates.
While the politically charged rhetoric continues to fly over the 46 percent increase in the corporate income tax, from 4.8 to 7 percent of Illinois earnings for the next four years, interviews with local companies and financial experts indicate the level of pain will vary significantly, depending on a company’s circumstances and structure.
While established companies with far-flung operations may wince briefly, those that make most of their money in-state will bear a greater burden.
And within that Illinois-centric group, those heading into the black for the first time and those returning to profitability after the deep slump will take it on the chin. That’s because for the next four years, they cannot offset their annual tax bill by taking a deduction for previous net operating losses. State lawmakers suspended that deduction at the same time they raised the tax rate.
“If you are kind of already struggling to get by year to year, even though you’ll be able to carry over net operating losses in 2015, that is a long time for a company that does not have a lot of wiggle room,” said Kathleen Thies, a state income tax analyst with CCH, a Riverwoods-based tax research firm.
The bottom line, say a number of observers, is that while some Illinois companies will threaten to leave the state to escape the tax increase (Jimmy John’s Gourmet Sandwiches is one that has voiced the threat) an exodus appears extremely unlikely. But economic recovery may be slowed and the state’s appeal as a place to expand a business or build a new one may be diminished — a possibility that has Indiana and Wisconsin sharpening their knives and corporate relocation marketing campaigns.
“I don’t think businesses are going to flock out of Illinois over this,” said Jim Kane, managing director of True Partners Consulting, a Chicago-based tax advisory firm. “The bigger effect will be on new investments a company wants to make.”
For Morningstar, which sells its investment research and consulting services worldwide, the tax hike “is not a significant change at the corporate level,” said Scott Cooley, chief financial officer. To get a sense of the added expense, the firm recalculated its 2009 tax burden using the new rules, and the extra cost was $266,000, less than 1 percent of an overall U.S. tax tab of more than $35 million.
Northern Trust Corp., another locally based company with global reach, last week estimated a $4 million annual hit to earnings. For a company with $669.5 million in earnings last year, this likely would amount to a reduction of less than 1 percent.
For the companies that operate two prominent Chicago financial exchanges, the potential hit is greater because much of their income is subject to Illinois taxes. While analysts have not yet altered their earnings projections for next year, they have indicated it is a possibility.
The corporate income tax hike could shave 1.5 percent from 2011 earnings for CME Group, which operates the Chicago Mercantile Exchange, according to an estimate by Sandler O’Neill & Partners. JPMorgan puts the potential hit at 3.2 percent.
The impact to the Chicago Board Options Exchange could be 2.4 percent, according to Sandler O’Neill. JPMorgan analysts estimate it could be closer to 3.6 percent.
The companies declined interview requests but issued separate written statements expressing their displeasure with the tax hikes. “These significant tax increases, which are not tied to any corresponding spending cuts, will negatively impact jobs and business opportunities for Illinois residents and stifle economic growth in our state,” the CME Group stated.
Corporations also pay a 2.5 percent tax on income, called the personal property replacement tax, which is collected by the state and flows to local government. That brings the effective rate on corporations to 9.5 percent, the third-highest in the country, according to the Tax Foundation.
That could translate into a 2011 tax bill of as much as $95,000 for a medical-device firm that launched in 2000, first became profitable eight years later and is expecting to make a $1 million profit this year, according to Jim Schultz, a partner at Effingham-based Open Prairie Ventures, an investor in the firm. He declined to identify the company, citing competitive issues.
The firm had planned to take a deduction for earlier losses, which would have canceled out its tax liability, but the state suspended such deductions for four years.
“It’s devastating to them,” said Schultz. The firm’s board now must rework its budget and scale back its hiring plans, he said.
The rule change also could cause cash-flow problems for Midwestern firms linked to the auto industry, many of which had losses in recent years and are just starting to make money again, noted Bill Danielson, a tax director at accounting firm Plante & Moran in Elgin.
“You can’t send Illinois receivables, you have to send cash,” he said.
For all the uproar over the corporate tax, only about one-third of the firms filing state income tax returns typically pay taxes. The rest either have no profits in Illinois or have sufficient deductions or tax credits to offset what they owe, though the ability to apply deductions will dwindle during the next four years due to the suspension of the net operating loss deduction.
And closely held firms and partnerships do not pay the corporate income tax, except for a reduced personal property replacement tax of 1.5 percent of Illinois income. Their company profits flow to shareholders and partners and are taxed at individual rates, which the state hiked from 3 to 5 percent until 2014.
This is still a relatively low individual rate — the Tax Foundation ranks Illinois the 14th-best state on this tax — but some local employers say it too will contribute to a weakening of the business climate.
Caterpillar Inc., of Peoria, estimates the hike in the individual rate will mean an additional $42 million will be taken from employee paychecks, making it more expensive for the manufacturer of earthmoving equipment to maintain employee pay levels in the state.
“It’s no secret that when making investments, businesses have to consider the costs,” Doug Oberhelman, chairman and CEO, stated in a recently published opinion piece.
Tax rates are a key factor weighed by businesses as they plan expansions and relocations, noted Brent Pollina, a relocation consultant based in Park Ridge. But many other issues come into play, too, among them the education level of the work force, the cost of utilities and the quality of state incentive programs, he said.
As well, “businesses don’t like to go to a state that is about to go insolvent,” said J. Fred Giertz, an economics professor at the University of Illinois at Urbana-Champaign. “If Illinois hadn’t done anything, it was on the verge of breakdown. It was a no-win situation.”
For steelmaker Evraz Inc. NA, which announced Thursday it was moving its headquarters from Portland, Ore., to Chicago, the tax hikes were not an issue, particularly because Illinois rates remain below those in Oregon, said Mike Rehwinkel, the company’s president and CEO.
The city’s key attraction was its central location and its major airports, which will allow executives to fly out to visit far-flung customers and plants more quickly and cheaply, he said.
“We truly believe being close to customers will allow us to grow our revenue base … so we’re willing to take a risk on the cost of a move,” he said.
“Higher taxes are always disappointing … and I believe it may stunt the growth of the economy,” Rehwinkel said. “Hopefully things will improve and they will reverse them in several years.”
By Laurie Kulikowski
January 13, 2011
Business owners beware: The massive tax hikes passed Wednesday in Illinois may be implemented in other states as legislators look to quash escalating budget deficits.
Illinois’ state legislature sent ripples in the tax community with this week’s passage of huge tax increases to personal and corporate income.
As part of the changes, the individual income tax rate for Illinois residents will rise this year by two-thirds, to 5% from 3%, before falling to 3.75% beginning in 2015 and to 3.25% in 2025.
The bill also calls for corporate income tax rates to rise to 7% from 4.8%. That level will fall to 5% in 2015 and back to 4.8% in 2025.
Furthermore, the bill calls for a four-year suspension of the net operating loss deduction, a commonly used tax strategy for business owners. The suspension is expected to cost $250 million annually, small-business advocates say.
The moves are significant, especially to small businesses that are not typically incorporated and instead pay individual income taxes.
“Most business owners are sole proprietors — S-corps, LLCs — so when you raise the personal income you’re hitting the bottom line of businesses,” says Ray Keating, the chief economist at the Small Business and Entrepreneurship Council.
Observers say the new rates will stifle business recovery in the state, limit start-ups and deter investors from Illinois-based businesses. But more importantly, some wonder whether other states will take a page from the Illinois state legislature and also raise taxes.
“I think every state has to look at their financial picture, and most of them are running deficits right now,” says Jim Kane, a managing director and co-founder of Chicago-based tax consultant firm True Partners Consulting.
Kane says the move by the Illinois state legislature was risky given the economic environment, in which multiple federal measures have been put together to spur economic growth, particularly for small businesses.
“If they are operating as a corporation then this will probably cause them not to operate as a corporation,” he says of entrepreneurs. “If they’re looking to start a business and there is a choice, this is a pretty high rate. They may choose another state if they have that flexibility.”
Wisconsin Gov. Scott Walker issued a statement in direct response to its neighbor’s tax hikes, saying the state is “open for business.”
“In these challenging economic times while Illinois is raising taxes, we are lowering them,” Walker said in a statement. Under Walker’s direction, the state legislature is “taking up bills to provide tax relief to small businesses, to create a job-friendly legal environment, to lessen the regulations that stifle growth and to expand tax credits for companies that relocate here and grow here.”
But if moving your company is not an option — small businesses are typically entrenched in the community they serve — owners will have to take a hard look at their expenses.
Kim Maisch, National Federation of Independent Business’ state director for Illinois, says state lawmakers will have “tremendous pressure” to help business owners reduce costs in other areas so as not to raise prices.
“One of the few highlights of Illinois economic policy was that we had a low flat income tax,” Maisch says. “We have now thrown out that tool and we’ve now gone to one of the highest corporate income tax” among all 50 states.
Maisch says business owners don’t have many options to offset higher taxes. They can either raise prices on goods and services; trim employee health care benefits, often resulting in employees being forced to pay more; or try to shop around for better workers’ compensation programs, for example.
Small-business owners should get politically involved, Keating says.
“Your voice carries more weight in the political process than does the average person because you’re a business owner. You matter greatly to the state’s economy, so it is critical for you as a business owner to voice your opinion,” he says.
SmallBusinessChicago
Small businesses brace for higher income tax rates
By Ann Meyer
January 13, 2011
The 67 percent income tax hike that Illinois lawmakers approved last night to address the state’s financial crisis will cause small businesses pain but probably won’t spur them to leave the state or do business differently, observers said.
By increasing the personal income tax rate to 5 percent from 3 percent and the corporate income tax rate to about 9 percent, the plan is expected to generate about $6.8 billion in new revenue a year, putting a large debt in the state’s $15 billion deficit over the next four years. After that period, the personal income tax rate will drop to 4 percent.
Split down party lines
Democratic lawmakers moved quickly to pass the measure before a new General Assembly was sworn in at noon today that could have changed the outcome, according to Crain’s Chicago Business. The proposal passed the House Tuesday night by a vote of 60-57, with no Republicans voting for it. Gov. Pat Quinn, who supports the measure, is expected to sign it.
While legislators scaled back the increase in the corporate income tax rate to 7 percent from a proposed 8 percent hike, when the personal property replacement tax is factored in, the corporate tax rate rises to about 9 percent, experts said.
Business groups oppose plan
The plan was strongly opposed by business groups, including the Chicagoland Chamber of Commerce, which said the increase would discourage new businesses from coming to Illinois. “We want to bring new businesses to Illinois. When you have the highest tax rate in the country, it’s really hard to do that,” James Kane, head of the Chicagoland Chamber’s taxation committee, said in a recent interview on Fox News. Kane, who is also managing director at True Partners Consulting in Chicago, could not be immediately reached for comment. When the personal property replacement tax is added to the corporate income tax, the corporate tax rises to about 9 percent.
Business owner Angelika Coghlan, president of Catwalk Consulting, an IT firm in Schaumburg, opposed the plan but doubts it will drive away companies who see a business opportunity in Illinois. “It won’t prevent you from doing business here,” she said.
Small business needs `overlooked’
But Coghlan also would have liked to see the state earmark some funds for small business development. “It’s still difficult to get money to run our businesses,” she said. “There’s more that could be done at the state and federal level to provide more opportunity ” for small businesses to get loans, but those needs were “overlooked,” Coghlan said.
In addition, Coghlan would have like to see the tax hiked imposed on a sliding rate. “Other states have put programs in place that raised income tax but it was based on salary level, which makes more sense,” she said.
Still, rather than complain about the new pain the tax hike creates, Coghlan said, “We deal with it. We’ll adjust.”
Looking at the big picture
Taking a long-term view, some small business owners supported the plan. “Having a state that’s solvent is the big picture,” said Susanne Hack, president of Susanne Hack & Associates, a lobbying firm in Chicago, who was at the state Capitol last night when the measure passed.
“Speaking for myself, I realize it was absolutely necessary,” Hack said. “Of course I don’t want to pay more, but I realize we have to pay our bills and move on.”
What’s more, Hack said, failing to act would have been worse. “There’s going to be some pain by individuals and corporations, but it would have been an economic and social disaster if there wasn’t some sort of revenue stream,” Hack said.
FOX Chicago News
The Illinois legislature will go back to work Monday to try to reach agreement on a state income tax hike.
They’re still trying to gauge the impact of any tax increase. James Kane, head of the Taxation Committee of the Chicagoland Chamber of Commerce, joined us.
To watch the interview Click here.
On December 17, 2010, President Obama signed “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (the “2010 Tax Act”). While most of the 2010 Tax Act provisions are directed towards individuals and estates, there are a few important provisions for business as well.
BY DANIEL FALK
The term ‘‘transfer pricing’’ has not exactly been household jargon in the United States since the U.S. Treasury Department issued updated final regulations under Section 482 of the Internal Revenue Code in 1994.
Certainly before that, one would have been hardpressed to find anyone outside the tax world who understood what the term referred to. But recently transfer pricing has appeared in articles that were published by several mainstream online business portals, such as Bloomberg, and these stories were then picked up by even more recognizable media sources, such as ABC News and Business Week magazine.
Normally such references would be regarded as positive—after all there is no such thing as bad publicity—to tax practitioners. However, the recent stories have not only misrepresented what the term transfer pricing refers to, but essentially implicate all multinational firms that engage in transfer pricing as being complicit in ‘‘nefarious’’ or ‘‘evil’’ tax avoidance schemes.
Tucci brings more than 12 years of experience in unclaimed property
CHICAGO– November 08, 2010 – True Partners Consulting LLC today announced Robert Tucci, 46, has joined as a director in the National Unclaimed Property Practice.
Tucci brings more than 12 years of experience in unclaimed property consulting, specializing in the performance of comprehensive diagnostic reviews, multi-state audit defense, and the development and implementation of policies and procedures.
“Robert is one of the nation’s preeminent experts in Unclaimed Property — an issue rising rapidly in significance in today’s economic climate,” said Cary McMillan, chief executive officer. “True Partners remains one of the fastest-growing tax and business consulting firms in the country precisely because of our ability to attract top talent like Robert and provide differentiated expertise to our clients.”
In his new role, Tucci, who will be based in Dallas, Texas, will be responsible for assisting large and mid-sized companies with their unclaimed property needs. In addition, Tucci will be counted on to be an integral part of the firm’s initiative to establish the True Partner’s National Unclaimed Group as the nation’s preeminent unclaimed property services provider.
“I’m delighted to be part of a seasoned team at True Partners featuring some of the top experts in the industry working side-by-side to address many of the most complex tax and regulatory challenges facing companies today,” said Tucci.
Tucci has provided unclaimed property consulting services to public and private clients, including the Fortune 500, in numerous industries including retail, healthcare, manufacturing, financial services and energy.
Before joining True Partners Consulting, Tucci held the position of co-leader of the National Unclaimed Property Practice at Grant Thornton LLP. He was also the central region leader of the National Unclaimed Property Services Group at Deloitte & Touche.
Tucci received a Bachelor of Science degree in Accounting from Philadelphia University and has also served as a speaker for educational seminars sponsored by the Unclaimed Property Professional Organization and other professional groups.
About True Partners Consulting LLC
True Partners Consulting is a world-class tax and business advisory firm that helps large public and private enterprises navigate complex tax and financial regulations without the Sarbanes-Oxley created conflicts inherent in offering both tax consulting and audit services. The firm provides a broad range of income, sales, use and property tax services, including maximizing the tax benefits associated with complex corporate transactions, acquisitions, dispositions, restructuring and bankruptcy; audit defense, accounting for income taxes and uncertain tax positions, refund reviews, negotiating and claiming credits and incentives, preparation or review of tax returns, unclaimed property, tax risk and process reengineering, international tax and transfer pricing.
The firm has offices in Chicago, New York, Los Angeles, Woodland Hills, San Jose, Tampa, Boston, Denver and London. The True Partners Consulting International Network includes member firms in the following countries: France, Italy, Spain, Hong Kong, China, Singapore, Germany, The Netherlands and South Korea. Find additional information at www.tpctax.com.
OVERVIEW
On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010, which, despite its name, contains important tax provisions affecting businesses of all sizes, as well as individuals. The overall purpose of the Act is to stimulate investment by providing tax incentives and revenue‐increasing loan opportunities.
OVERVIEW
In line with the American Recovery & Reinvestment Act, Alabama, Georgia and Florida have implemented state incentives aimed at creating new jobs for the unemployed.
WHAT TYPES OF BENEFITS ARE AVAILABLE?
Alabama—Up to 50% income tax deduction on eligible employee wages
Florida—Corporate tax credit of $1,000 per eligible employee
Georgia—Tax credits for up to four calendar quarters per eligible hire
In October 2008, California Governor Schwarzenegger signed tax legislation that had revenue raisers, as well as incentives designed to stimulate the California business climate, such as a single sales factor election, a two-year net operating loss carryback, a 20-year net operating loss carryforward, andthe assignment of credits between members of the same combined reporting group. Most of these provisions were to take effect for taxable years beginning on or after January 1, 2011.
The credit assignment provision allows affiliated corporations that are members of the same combined group to assign credits to each other beginning July 1, 2008. The assigned credits can be utilized against tax by the assignee beginning on or after January 1, 2010.
OVERVIEW
Is it possible to pay more tax and, as a result, generate additonal book income in the process? The answer is a resounding YES! Today, Illinois’ Tax Amnesty program went into effect and will run through November 8, 2010. The program is designed to raise much needed cash for the financially distressed state. As a result, the rules of eligibility are largely focused on cash generation. Under the program, the Department of Revenue will abate all interest and penalties due from any taxpayer owing any tax to the state for taxable periods ending after June 30, 2002 but prior to July 1, 2009. Amnesty does not appy to motor fuel tax or franchise tax. Also excluded from the program are liabilities currently subject to civil litigation. However, taxpayers can withdraw the litigation and participate in the amnesty program on the amount at issue.
Overview
Is your property tax function effective? How do you know? A client once told us that his property tax function was effective because “the attorney handling our appeals said so.” Ever since that meeting, we have pondered the question, “How do you know?”
Federal corporate income tax specialist brings more than 25 years of diversified experience to corporate clients
CHICAGO – September 27, 2010 – True Partners Consulting LLC today announced that Robert M. Gordon, 57, has joined as a managing director in its Chicago office.
Gordon possesses more than 25 years of experience in the Federal corporate income tax sector, including structuring and implementing a range of transactions such as mergers and acquisitions.
“We are pleased to have Bob join the Chicago team and be able to offer his deep expertise on all aspects of domestic and international corporate and partnership matters to our clients,” said Cary McMillan, chief executive officer of True Partners. “At True Partners, we place a high level of importance on experience and talent, and Robert will undoubtedly be a significant leader and valued consultant across a number of our practices.”
As a managing director, Gordon’s consulting responsibilities will center on domestic and international corporate and partnership matters, including corporate simplification, tax risk assessments, transfer pricing, tax planning for environmental spending, captive insurance and taxation of alternative energy, oil and gas. He also will provide guidance related to mergers and acquisitions, including post-merger integration and restructuring, and structuring complex joint venture transactions to optimize tax results.
Prior to joining True Partners, Gordon spent 20 years in various in-house tax counsel roles at BP America, formerly Amoco Corporation, ultimately holding the role of assistant general tax counsel and head of tax for the United States-based manufacturing and retail division.
“I love helping companies navigate our country’s complex tax environment. My experience allows me to add real value partnering with tax directors and CFOs,” Gordon said. “I am excited to be joining True Partners and am pleased to be able to bring additional perspective and knowledge to the company to help better serve the firm’s impressive client roster.”
Gordon graduated with a Bachelor of Arts degree from the University of Illinois at Chicago and received a Juris Doctorate degree from Northwestern University School of Law. Gordon also serves as an officer of the Corporate Tax Committee and as a past-chair of the Energy and Environmental Taxes Committee at the American Bar Association Tax Section and is also a member of the Illinois State and Chicago Bar Associations.
About True Partners Consulting LLC
True Partners Consulting is a world-class tax and business advisory firm that helps large public and private enterprises navigate complex financial regulations. The firm provides a broad range of tax services, including analysis and counsel concerning the tax impact of business issues such as organic or acquisition-driven growth, filing practices, business restructuring or bankruptcy. The firm also conducts refund reviews, negotiates tax incentives, analyzes clients’ tax exposure and prepares responses to audit inquiries, in addition to helping clients address compliance issues.
The firm has offices in Chicago; New York; Los Angeles; San Jose, Calif.; Tampa, Fla.; Boston; Denver; and London. There are also member firms with headquarters in the following cities: Paris; Turin, Italy; Barcelona, Spain; Beijing and Hong Kong, China; Singapore; Munich, Germany; and The Netherlands; through the True Partners Consulting International Network. Find additional information at www.tpctax.com.
Samantha R. Petersen brings unclaimed property consulting experience to new branch
DENVER – September 23, 2010 – True Partners Consulting LLC today announced the opening of its first office in Denver, as well as the promotion of Samantha R. Petersen, 38, to managing director.
The new office, located in the Denver Tech Center, will be led by Samantha Petersen as she steps into the role of managing director. Petersen joined True Partners Consulting as a manger in 2005 and has been an integral part of the firm’s national unclaimed property practice primarily based in Los Angeles.
“We are delighted that Samantha will lead the new Denver office, as she has demonstrated strong leadership skills during her time with True Partners,” said Cary McMillan, chief executive officer of True Partners. “She will be a tremendous asset to the office and will continue to assist some of our top clients in issues related to unclaimed property.”
Petersen has nearly 15 years of experience in unclaimed property, and state and local tax, including both industry practice and public accounting consulting. Samantha has over 12 years of public accounting experience and prior to joining True Partners, held the position of Southwest Region Unclaimed Property Practice Leader for KPMG.
Before her extended stint in public accounting, Petersen worked for Federal Express Corporation in Memphis, where she played an integral role in drafting and implementing the company’s unclaimed property processes, policies and procedures.
Through her vast experience in the area of unclaimed property consulting, Petersen is a recognized authority in the use and implementation of unclaimed property systems and has extensive experience in the development of formalized policies and procedures related to unclaimed property. She has represented Fortune 500 clients in the defense of unclaimed property audits, performing comprehensive diagnostic reviews, developing process improvement techniques, and identifying planning opportunities.
“It is an amazing opportunity to be able to play a leadership role in the new office and continue to use my background to assist a broad cross-section of unique clients,” said Petersen. “As True Partners continues to expand, I look forward to contributing to the firm’s growth.”
Petersen earned her Master of Business Administration degree from Colorado Christian University in Denver, Colorado, and a Bachelor of Science degree in Accounting from Christian Brothers University in Memphis. She is a regular speaker before trade and industry groups on the subject of unclaimed property and currently co-chairs the Unclaimed Property Professionals Organization’s (UPPO) Members as Mentors committee.
About True Partners Consulting LLC
True Partners Consulting is a world-class tax and business advisory firm that helps large public and private enterprises navigate complex financial regulations without the Sarbanes-Oxley created conflicts inherent in offering both tax consulting and audit services. The firm provides a broad range of tax services, including analysis and counsel concerning the tax impact of business issues such as organic or acquisition-driven growth, filing practices, business restructuring or bankruptcy. The firm also conducts refund reviews, negotiates tax incentives, analyzes clients’ tax exposure and prepares responses to audit inquiries, in addition to helping clients address compliance issues.
The firm has offices in Chicago; New York; Los Angeles; San Jose, Calif.; Tampa, Fla.; Boston; Denver and London. There are also member firms with headquarters in the following cities: Paris; Turin, Italy; Barcelona, Spain; Beijing and Hong Kong, China; Singapore; Munich, Germany; and The Netherlands; through the True Partners Consulting International Network. Find additional information at www.tpctax.com
On November 6, 2009, Congress passed legislation allowing taxpayers to elect a greater carry back period for net operating losses (“NOLs”) generated in tax years 2008 or 2009. The original carry back period of two years was extended to allow taxpayers to recover taxes paid three, four or five years prior to the year of loss.
Overview
Have you ever tried to walk down an up escalator? Clearly a tempting challenge as a young child, but how about as a full grown adult? In many ways, property taxes in Illinois are like an up escalator. No matter what is happening in the world around us, the Assessor finds a way to increase the assessed value of all property and this, as a result, increases your real estate tax bill. Less than 2% of Illinois property owners actually appeal the value, thus attempt to walk down the up escalator. Are you one of the few? If not, would you like to embark on a journey to walk down the up escalator?
As many states are grappling with the recession and a gloomy economic outlook, state legislatures are attempting to find inventive ways to stimulate the local economy. This newsletter describes significant tax legislation passed, pending, proposed, or failed during the 2010 legislative sessions in the various states in the Southeast. The failed legislation is important due to the economic position of many states. Although certain legislation may have failed initially, it is a signal of the types of legislation that may pass in a special session or in subsequent years. The following legislative synopsis contains either direct or indirect excerpts from legislative committees or specific bill language. In addition, this newsletter is current as of the date prepared as stated above and is not intended to be a comprehensive analysis of the respective legislative sessions.
Cathleen Bucholtz Office Managing Director of True Partners’ L.A. office and the National Practice Leader for True Partners’ Unclaimed Property Management Solutions Team will be a speaker for the Unclaimed Property Info Lunch’n Learn Webinar.
Lunch’N Learn Webinar
Thursday, July 22th
12:00 noon – 1:30 EDT / 9:00 – 10:30 PDT
Thursday July 15th
12:00 noon – 1:30 PDT / 3:00 – 4:30 EDT
Whether you have never filed or have fallen behind, or even file annually, this webinar will consolidate and deliver years of valuable experience and information from Unclaimed Property Industry Experts.
- How to Protect your Company, CFO, shareholders and customers
- How Good Compliance can result in a Positive ROI!
- State Amnesty Programs – Who is offering them and Why?
- How & When to Request Amnesty or file a Voluntary Disclosure Agreement (VDA)
- Identifying the Unclaimed Property Advisory Team and the Project Plan
- Where are the different areas within the General Ledger that Unclaimed Property lurks?
Great, knowledgeable speakers kick off the first of the Summer Lunch’n Learn Webinars. Each webinar can be purchased separately, or as a complete series that will continue to build upon your existing foundation of knowledge and application of the Unclaimed Property laws.
There is a Launch Special for our Holder Business Professionals that would like to attend this event. Our already low Webinar fee of $199 will be discounted an additional $25 by using the Coupon Code “TPC-SPECIAL” when registering.
For more information and to register for this event Click Here
Since the Quality Stores decision, the IRS has been quick to deny protective refund claims filed outside of the 6th Circuit for FICA taxes dealing with severance related supplemental unemployment compensation benefits paid in the 2006 tax year. These protective refund claims were filed in response to a Michigan District Court holding that certain involuntary severance payments were not subject to FICA taxes, United States v. Quality Stores, Inc., 2010 U.S. Dist. LEXIS 15825 W.D. Mich. Feb. 23, 2010.
In addition to denying Quality Stores claims filed by employers outside the Sixth Circuit, the IRS is also examining claims filed in the Sixth Circuit more closely.
OVERVIEW
As part of the American Recovery & Reinvestment Act, states are implementing their
own subsidized employment opportunities. Each state has slightly different
requirements and benefits, but all of the programs are aimed at increasing the
number of jobs available to Americans.
Tuesday, June 1, 2010
5:30 – 8 p.m.
Join alumni, recent graduates, students, parents, and colleagues for a night of networking in the tallest building west of Chicago, Library Tower.
Reconnect with Pepperdine friends or establish new business contacts while enjoying conversations, breathtaking views, complimentary appetizers, and wine.
There is no charge to attend, but advanced registration is encouraged.
Location:
Library Tower
True Partners Consulting LLC
633 West Fifth Street, Suite 6200
Los Angeles, CA 90071
If you are a Pepperdine University Alumni and would like to register for this event Click Here
Allea Newbold teams up with other professionals to provide continuing education to Florida accountants
This May, Managing Director Allea Newbold will be participating in a two-day, continuing professional education seminar in Fort Lauderdale, Florida the week of May 24th. This TEI event, hosted at the Westin Fort Lauderdale, will cover topics ranging from Payroll & Benefit issues to State Income Tax and Legislation. Presenters include representatives from True Partners Consulting, the Big 4, Grant Thornton, and others. Mrs. Newbold will be lecturing on the issues arising from FIN-48 and the new proposed Schedule UTP, Uncertain Tax Position Statement. Allea specializes in ASC 740-10 (FIN-48) issues as well as other areas that include accounting methods and ASC 740 (FAS 109).
Managing Director extends help with educating other CPAs on recent tax issues
This summer, Tampa Managing Director, Allea Newbold, will be teaming up with KBKG, Inc. to present a course on the recent developments related to repair and maintenance expenses.
This course, which qualifies each participant for one hour of CPE credit, focuses on the opportunities to expense these repair and maintenance costs currently instead of capitalizing them. As a result of companies following the financial statement treatment of these expenses, and they are often overcapitalizing these costs.
Mrs. Newbold will help cover the fundamentals of the repair and maintenance tax issues, while also hitting on the most important aspects of maximizing the benefits provided in this area. The course will also cover proposed regulations relating to these repair and maintenance issues. The lecture will include information that is vital to the tax reporting of these items. There will be updates on how to file an accounting method change for the 2009 tax year (for returns not yet filed), so companies can benefit currently from the repair and maintenance expenses.
This course will be held three times over the summer as a free CPE webinar. It is scheduled for June 4, July 9, and August 10.
For more information on this event please Click Here
New COO will lead U.S. market and focus on continued growth for True Partners
CHICAGO – May 19, 2010 – True Partners Consulting LLC today announced that Susan Gallagher, 51, has joined the firm as chief operating officer.
True Partners recruited Gallagher for this position as part of its broader efforts to double its business organically over the next four years, according to the firm’s chief executive officer, Cary McMillan.
“Susan fits very well into our unique culture at True Partners, which is built around having senior-level counselors work closely with our clients on complex tax advisory engagements,” said McMillan. “Susan has the enthusiasm and leadership skills to help us continue to attract and grow the best professionals and keep our teams working together to solve complex client problems for years to come.”
Gallagher brings extensive experience in strategic development through the design and implementation of marketing and sales programs to drive growth. In her new role with True Partners, she will lead the U.S. region, work closely with each market to drive growth, maintain client satisfaction and help set the firm’s overall business strategy.
“With the tax environment becoming more complex – both for public, as well as private, companies – corporations have a real opportunity to re-examine and improve their tax strategies. True Partners is ideally positioned to meet this need,” said Gallagher. “I’m truly delighted to be joining this dynamic firm with such talented leadership and staff, especially at this vital point in the firm’s evolution.”
Gallagher has more than 26 years of experience in professional services and is recognized nationally in the consulting market, with a diverse range of clients heavily focused on Fortune 500 companies. She has provided analysis on international and inter-company pricing disputes, calculated potential damages in trade secret cases and identified the features and impact of intricate fraud schemes.
“We are very pleased with the success of our portfolio company, True Partners, and are excited about the addition of a new chief operating officer,” said Reeve Waud, founder and managing partner, Waud Capital Partners. “We are confident that the senior leadership in place will help drive True Partners’ continued success and growth.”
Before joining True Partners Consulting, Gallagher worked at Huron Consulting Group, where she was one of the 25 founding managing directors of the company. She was responsible for driving growth nationally in the legal business and played a key role in developing the strategies to initiate and sustain relationships with clients and legal counsel.
Gallagher also served as the head of client relationship development for Arthur Andersen’s Chicago office, where she restructured the marketing function to align it with the various business units.
Gallagher received a Bachelor of Business Administration from St. Mary’s College in Notre Dame, Indiana. She is also a certified public accountant in Illinois.
About True Partners Consulting LLC
True Partners Consulting is a world-class tax and business advisory firm that helps large public and private enterprises navigate complex financial regulations. The firm provides a broad range of tax services, including analysis and counsel concerning the tax impact of business issues such as organic or acquisition-driven growth, filing practices, business restructuring or bankruptcy. The firm also conducts refund reviews, negotiates tax incentives, analyzes clients’ tax exposure and prepares responses to audit inquiries, in addition to helping clients address compliance issues.
The firm has offices in Chicago; New York; Los Angeles; San Jose, Calif.; Tampa, Fla.; Boston; and London. There are also member firms with headquarters in the following cities: Paris; Turin, Italy; Barcelona, Spain; Beijing and Hong Kong, China; Singapore; Munich, Germany; and The Netherlands; through the True Partners Consulting International Network. Find additional information at www.tpctax.com.
Overview
Poison pills, also commonly referred to as Shareholder Rights plans, were first
introduced in the early 1980s, in an environment of hostile takeovers. As a
defense against hostile bidders and leveraged buyouts, target companies would
implement poison pill plans to deter acquisitions by competitors and corporate
raiders. Rights plans achieved this by distributing rights to purchase additional
shares to the non‐offensive shareholders at a discount, effectively diluting the
hostile investor’s ownership percentage. These purchase rights would be
distributed once a triggering event had occurred, typically when an unwanted
investor had acquired a 15% to 20% ownership stake.
2009 will likely go down as one of the worst financial slumps in history. The economic
downturn has resulted in companies realizing losses at every level of their supply chains.
This in turn has far‐reaching implications on the transfer pricing methods applied by many
taxpayers. At the same time, tax authorities, facing increased pressure to collect additional
tax revenues, will look to impose transfer pricing adjustments.
Most taxpayers have adopted a profit‐based approach in setting their “arm’s‐length”
transfer pricing policies. During normal economic times, such an approach allows taxpayers
with mature businesses to earn acceptable profits in the tax jurisdictions in which they
operate. During an economic downturn, however, a multinational enterprise (“MNE”) may
incur significant losses and the same transfer pricing policies may cause distortions in the
operating results of individual entities. Such distortions include “limited risk” distributors
with significant losses, or contract manufacturers not able to cover fixed costs.
By: Emilie Le Beau April 26, 2010
Living abroad in Canada and Mexico, Ford Motor Co. engineer Brian Swem could switch company cars every three months, from a convertible Mustang in the summer to a four-wheel-drive Escape in the winter, among other perks. But after six years, Mr. Swem, 30, says, “I left it all behind. Bought an old car, moved into a small apartment” and pursued a dual MBA and master’s of engineering management at Northwestern University.
Two years later, he’s preparing to re-enter the workforce this spring, recruited into a management position with Nissan North American Inc.
Like Mr. Swem, many students are pursuing dual post-graduate programs that allow them to earn a traditional master’s in business administration while solidifying expertise in another area — law, medicine or engineering, for example.
The Liautaud Graduate School of Business at the University of Illinois at Chicago offers six dual MBA degrees ranging from economics to nursing. The Kellstadt School of Business at DePaul University has a dual MBA-MS degree in which students can pursue specialized fields of study such as behavioral finance and brand management.
Graduating with a dual degree can impress employers. Ray Russ, a vice-president in Chicago at Neoris, a Miami-based consulting firm specializing in Latin American markets, frequently sees applicants and employees with degrees combining MBAs with master’s in law or information sciences.
“Doing an MBA takes a lot of time and effort, so if the dual degree is in the right field, it’s impressive, especially if the person has thought a lot about what they want to do,” Mr. Russ says.
The dual degrees may attract employers’ attention, but there is a catch: Students need to be highly motivated — the process is all-consuming and exhausting, current students and recent grads say.
For Caralynn Nowinski Chenoweth, 32, a dual degree led to a new career. She began as a medical student at UIC and planned on a medical research career until she enrolled in the MBA program.
“Before business school, I had never read an income statement,” Ms. Chenoweth says. “Cash-flow sheets were completely new to me.”
Ms. Chenoweth graduated with an MD-MBA in 2007 and went into investment banking. She’s a vice-president at Sikich Investment Banking in Chicago, focusing on life-science companies.
“I absolutely use my medical knowledge every day,” she says. “It’s not that another banker couldn’t understand the intricacies of the medical technology, but I can understand it through a unique perspective.”
Brian Jessen, a tax consultant at True Partners Consulting in Chicago, graduated in 2009 with a dual MBA-JD from Loyola University. He attended law school during the day and business school at night. The workload was so intense, he says, he thinks it may be unwise for anyone other than young students.
“You’re doing twice as much as the average graduate student,” says Mr. Jessen, 25.
©2010 by Crain Communications Inc.
To see this article on Crain’s Chicago Click Here
TRUE PARTNERS CONSULTING INTERNATIONAL NETWORK (TPCI) CORDIALLY INVITES YOU to an International Tax seminar to be held in Munich, Germany on June 17th and June 18th, 2010. This seminar will focus on the challenges of managing your tax exposure and risk in an ever changing global marketplace. The topics will be presented both in panel discussions and comprehensive case studies.
New England Chapter
Tax Executives Institute, Inc.
When:
Friday: May 14th, 2010
Location:
Sheraton Needham Hotel
100 Cabot Street
Needham, MA 02494
Price:
$125.00 members; $150.00 non-members; No charge for Retired Members.
Nancy Barret and Andrea Gronenthal present on ”Call to Action – Taking the Lead in Building the Tax Function of the Future”.
For a full schedule of the TEI conference Click Here
The changing composition of state and local tax warrants more attention. As the
economy constricted in 2009, state and local tax receipts declined from 9.25% of
Gross Domestic Product in 2008 to 8.8% in 2009. According to the U.S. Government
Accountability Offices (GAO) report to Congress on State and Local Governments’
Fiscal Outlook (GAO-10-358, FY 2009), while most sources of state and local tax
receipts decreased, property tax receipts increased. In 2009, corporate state income
tax accounted for approximately 10% of all state and local tax receipts while property
tax accounted for more than a third of all state and local receipts totaling
approximately 34%.