Talking Tax

Kate Barton has been navigating unprecedented change in tax systems around the planet since becoming EY’s global vice chair for tax and legal services in early 2018. Trade wars and Brexit are roiling markets and expectations, and countries are scrambling for their share of corporate revenue while trying to transform their tax regimes for the digital-commerce age. The OECD aims for consensus by 2020 in its project on tax system modernization, but as Barton points out, “these are in fact guidelines, and then 140 countries have to read these and then legislate their own country legislation.” Interesting, she says, especially “in a world right now where we seem to be a little more nationalistic.” Talking Tax host Amanda Iacone talked with Barton about all of that and more, including EY’s legal managed services business and diversity.

A new U.S. accounting standard is about to make a huge difference in what banks’ financial statements and earnings look like—and for some of them, what their future lending practices could be. The standard is known as CECL—for current expected credit losses. It’s considered accounting rulemakers’ chief response to the 2008 financial crisis. Starting in 2020 banks have to venture into new territory, factoring future economic developments into expectations for credit losses, and put aside loan loss reserves for them. That means impacts on earnings, stock prices, and capital. Some critics say it could affect banks’ appetites for anything but the safest loans. Bloomberg Tax reporter Nicola White spoke with Talking Tax host Amanda Iacone about how the standard works, what challenges banks face, and the latest developments from the Financial Accounting Standards Board.

The federal tax on a category of income called GILTI—global intangible low-taxed income—has state-level implications for multinational businesses. Congress created GILTI to stop companies from shifting profits abroad through intangible assets—royalties, patents, and the like. When a company’s total overseas income has been taxed abroad at less than a certain rate, the U.S. applies a tax. In the U.S., state governments often conform their own tax laws to the federal tax code. But with GILTI, states are all over the map. For most states it means a very modest increase in their corporate tax base, but for companies it can mean dealing with multiple approaches and calculations. And there’s talk of legal challenges. Talking Tax host Siri Bulusu talked about GILTI with Bruce Fort, counsel to the Multistate Tax Commission, who has an eagle’s-eye view of what the states are doing. They spoke at the American Bar Association tax section’s fall meeting in San Francisco.

It’s a major theme for a burgeoning number of investors: concern for sustainability and social values as drivers of financial decisions. That means boom time for ESG investing—driven by examination of businesses’ environmental, social, and governance positions. Companies are disclosing more and more about their environmental footprints, how they treat their employees, how their leadership operates, and more. The information, which is beginning to appear in mainstream financial reports like 10-Ks, can help stakeholders assess a company’s long-term resilience and value. Talking Tax host Amanda Iacone discussed the ESG disclosure landscape and the growth of ESG auditing with Kristen Sullivan, sustainability and key performance indicators services leader with Deloitte. She also chairs the Sustainability Assurance and Advisory Task Force at the American Institute of CPAs. Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

Businesses are watching India closely as the Modi government cuts taxes and takes other steps to woo investors into the enormous market. One place to watch is the Hague, where a longstanding dispute between India and Cairn Energy is playing out. Cairn Energy is fighting a big tax bill—$1.6 billion plus interest and penalties—that India delivered retroactively for a 2006 internal restructuring transaction. The company took India to binding arbitration at the International Court of Justice, under terms of the bilateral investment treaty. India's position is that the treaty doesn't govern tax issues. Whatever the outcome, India's response could signal the country's posture with respect to arbitration and, generally, to the issue of tax sovereignty. Talking Tax hosts Amanda Iacone and Siri Bulusu discuss the Cairn case, with a special insight from Mukesh Butani, managing partner at BMR Legal in New Delhi, and specialist in international tax and transfer pricing law. Listen and subscribe to Talking Tax from your m

Micro-captive insurance companies play a useful role for relatively small businesses that need to insure risks they can't buy coverage for elsewhere. The businesses self-insure, setting up companies that are captive to their owners.Because Congress allowed micro-captive owners a tax advantage, some companies have abused the structures in ways that induced the Internal Revenue Service to put them on its list for extra-close scrutiny. The IRS has won a few big cases against micro-captives, and hundreds more are docketed in the U.S. Tax Court.The IRS has offered to settle with some of these companies in an effort to deal with the issue in a comprehensive way. Host Amanda Iacone talked with Bloomberg Tax reporter Allyson Versprille about the nature of micro-captives and what the settlement offer might signal for the future of legitimate micro-captive structures.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

Wads of cash. That’s how owners of recreational marijuana businesses haul in their taxes, because big banks are reluctant to work with the industry while marijuana is still illegal under federal law.U.S. states may pull in as much as $1.6 billion in taxes from recreational marijuana sales this year—that’s not including medical marijuana—so that’s a lot of wrinkled bills from the register. A number of states and cities have stepped up with ideas to make payment safer and more efficient.Nevada is developing a pilot digital currency system for paying taxes. Ohio already allows bitcoin tax payments by businesses. Washington state tax payments can be made through state-chartered banks and credit unions. An Arizona startup is testing an approach involving armored cars and blockchain-based tokens. And there’s more.Bloomberg Tax reporter Brenna Goth looked into these and other ways states are tackling the problem. She spoke with Talking Tax host Amanda Iacone.Listen and subscribe to Talking Tax from your mobile devic

“Relax a bit,” Pascal Saint-Amans advised countries that may fear losing a lot of revenue under a new global approach being developed to tax cross-border business—especially digital business.The OECD-led project toward agreement on a plan aims not to create big revenue winners or losers, Saint-Amans said in a Sept. 11 interview at the International Fiscal Association meeting in London. He’s the OECD’s top tax official, heading work on the plan that would give more taxing rights to countries where companies’ consumers are.Saint-Amans brought Bloomberg Tax’s Siri Bulusu up to date on the latest expectations for the project, which gained even more political urgency this summer when France enacted a 3% tax on some digital business revenue of big companies, including U.S. giants like Facebook Inc. and Alphabet Inc.'s Google. Other countries are eyeing such taxes of their own.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

Many states and cities offer tax breaks and other incentives to lure businesses and jobs—often raising questions about the actual benefit of the expensive measures. California communities have a unique version, one that Bloomberg Tax’s Laura Mahoney shed light on this year.In extensive data research and reporting, Mahoney uncovered Cupertino’s payment of nearly $70 million to Apple through the years. It started when the company was in trouble in 1997, and it continues with monthly payments to the now-giant global enterprise. Defenders say agreements like this help the economy of job-hungry cities; critics call them an unwarranted tax giveaways. Other companies have similar arrangements—Best Buy, for example, has one with the city of Dinuba.The money comes from a special California mechanism that shares sales tax revenue with communities where companies are located or that are designated as points of sale. Bloomberg Tax team leader Jeff Harrington spoke with Mahoney about the issue and her reporting.Listen and

U.S. Tax Court Judge Mark Holmes is one of those judges who can make a person glad to be reading a legal opinion. His judgments are often marked by wit, clarity, and pointed references to literature that illuminate a plaintiff’s plight or a point of law.He once explored Buffalo wings and other cuisine in a decision about a tax dispute involving “material participation.”In this episode, Holmes reveals that he will write an “interesting and very long opinion” in probably his biggest pending case: the Michael Jackson estate’s battle with the Internal Revenue Service.Bloomberg Tax’s Siri Bulusu talked with Holmes about his writing, his serendipitous landing in the tax law arena, procedural challenges the IRS is facing, and the “parade of humanity” he enjoys dealing with at the court.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast| Via Spotify

Some complicated tax issues face Congress when lawmakers return after Labor Day.Extenders—those expired or about-to-expire temporary tax breaks for specific groups—remain in play big-time in both House and Senate. The House Ways and Means Committee has passed an extenders package, and Sen. Chuck Grassley (R-Iowa) says he will make the issue a Finance Committee priority in September.Meanwhile, the outlook for passage of technical corrections to the 2017 tax law remains unclear. There’s the so-called retail glitch—an inadvertent blow to stores and restaurants that make renovations—and what’s known as the church parking tax problem.Amanda Iacone talked about the Capitol Hill tax picture with Bloomberg Tax reporters Stu Basu and Colin Wilhelm.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

The National Philanthropic Trust calls donor-advised funds the most popular method of charitable giving—nearly a half-million accounts hold $110 billion in assets. Now a court fight between a wealthy family and a fund to which they donated stock may offer a look into how these funds work. Universities and community foundations run their own charitable funds, but big-name investment managers like JP Morgan, Vanguard, and Fidelity operate them, too. They often convert complex donations—art, stock, or cryptocurrency, for example—into cash that can be given to charities over a period of years, often with tax advantages. The Fairbairns sued Fidelity Charitable, saying the fund violated contract law by promising a sophisticated liquidation and then selling their donated stock too quickly. That caused the value of the stock to plunge, lowering the value of their $100 million donation and the tax deduction they had hoped to receive along with it. Ohio State University professor Brian Mittendorf has been researching d

Countries around the world are talking about taxing the revenue of giant digital-business companies. In July, France became the first European country to enact a digital services tax—immediately drawing the ire of U.S. officials.The U.S., home of digital giants like Amazon.com Inc., wants France and other countries to wait for a global agreement on digital taxation, which could rewrite the rules that determine where and how multinationals in many industries are taxed. In the meantime, Washington has opened a trade investigation.President Donald Trump tweeted that taxing French wine might be a way to retaliate. But he has another option, buried in the tax code. The provision—Section 891, which has never been used—stems from another tax dispute between the U.S. and France, more than 80 years ago.Bloomberg Tax’s Isabel Gottlieb spoke with Itai Grinberg, professor of international tax at Georgetown University. Previously an attorney in the Treasury Department’s Office of International Tax Counsel and in private p

The Supreme Court in June threw out North Carolina’s taxation of a family trust’s income because the trust didn’t have enough of a connection to the state.The decision, in the case of the Kimberley Rice Kaestner 1992 Family Trust, didn’t give trust and estate attorneys as much instruction as many wanted with respect to state taxation of trusts. Justice Sonia Sotomayor’s opinion was narrowly drawn.But lawyers still can draw some guidance from it as they advise wealthy clients how, and where, to structure trusts that will minimize tax burdens.Bloomberg Tax’s Aysha Bagchi spoke with attorney Bob Kleinknecht of Oakstone Law in Florida about how trusts work and what the Kaestner ruling may mean for estate planning. Kleinknecht has experience not only with Florida estate and trust practice but with New York and Massachusetts as well.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

Effective auditing of companies' financial statements is important for investor confidence, but Chinese companies traded in the U.S. don't get U.S. oversight of their audits as other companies do. And that could be a risk for investors.The Public Company Accounting Oversight Board, the U.S. audit regulator created to restore confidence in financial reporting after accounting scandals of the early 2000s, isn't allowed to inspect the work of China-based accountants.That lack of access is a concern to the PCAOB, the Securities and Exchange Commission. and some members of Congress. They have introduced legislation to crack down on China if it doesn't let audit inspectors in.Bloomberg Tax's Amanda Iacone spoke with Paul Gillis, who teaches at Peking University’s school of management in Beijing, about the significance of the problem and what may lie ahead.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

When Congress put a $10,000 cap on the amount of state and local taxes individuals can deduct from their federal income taxes, high-tax states tried to fight for their residents in a couple of different ways.One way—charitable funds that earned people state tax credits for donations—got shot down by the IRS.But states have tried another kind of workaround. Because the deduction cap applies only to individuals, not to businesses, some states have instituted new taxes on pass-through businesses, like LLCs and partnerships. These entities normally don’t pay taxes. Instead, their individual owners pay tax on the business income.Bloomberg Tax team lead Jeff Harrington explored the state workarounds with Cannon-Marie Green, the managing editor overseeing Bloomberg Tax’s editorial coverage of state corporate income tax and pass-throughs.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

Michael Desmond became the Internal Revenue Service’s chief counsel earlier this year as the agency was well into implementing the complex 2017 tax code overhaul.In a wide-ranging conversation with senior editor Colleen Murphy June 27 at the Bloomberg Tax Leadership Forum in New York, Desmond expressed encouragement at the hiring of “energized attorneys” to implement the law.He recommended that companies pay attention to interrelationships among various provisions, especially in the international arena. He talked about non-tax overhaul priorities, too—including strengthening partnership audits and figuring out long-term streamlining of controversies over syndicated conservation easements.Listen to their conversation—plus a bit of Q&A with the forum audience—on a special episode of Talking Tax.

The U.S. Supreme Court’s 2018 South Dakota v. Wayfair decision upended a 26-year precedent that limited a state’s authority to tax goods being sold across state lines. A year later, states have amended their laws to target remote sellers and online sales platforms like Amazon.com Inc. Bloomberg Tax reporter Ryan Prete spoke with Diane Yetter, founder of the Sales Tax Institute and president of consulting firm Yetter Tax, to discuss the ruling’s legacy so far and possible future legal issues. She said legal challenges could begin with differing interpretations of the laws, and go as far as class-action lawsuits against sellers for not collecting the taxes appropriately.  Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

The 2017 tax law lowered the corporate tax rate to 21%. That has some companies taking a look at their corporate structure and asking: Is a C corp better? "We have the conversation a lot," said Elizabeth Stieff, a tax attorney with Venable LLC in Baltimore. Stieff said clients see this great 21% tax rate and they want to take advantage of it. But, as she explained to Bloomberg Tax's Amanda Iacone, it's only a great opportunity for specific businesses in specific circumstances.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast| Via Spotify

The OECD released a blueprint for how to rewrite global tax rules. The group hopes to get international consensus around proposals to set a global minimum tax and reallocate more of companies’ taxable profits to countries where their consumers are located. The Organization for Economic Cooperation and Development wants to get 129 countries to agree to the plan by 2020.Martin Kreienbaum, director general of international taxation at Germany’s finance ministry, spoke with Bloomberg Tax reporter Siri Bulusu about the outlook for the OECD’s effort.Listen and subscribe to Talking Tax from your mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast| Via Spotify