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Ampac USA, a skincare-products company, finds itself in a financially burdensome situation after defaulting on a $500,000 loan obtained during the pandemic to sustain its operations. Despite making substantial repayments totaling $425,000, Ampac has been notified that it still owes approximately $262,000 due to a 30% collection fee applied after the loan defaulted. This fee, which was added when the loan was transferred to collections, is a standard practice for the U.S. Treasury but not clearly detailed in the initial loan documentation. The issue underscores broader challenges within the COVID disaster loan program, which has provided significant financial support to small businesses during the pandemic through the Small Business Administration (SBA). However, many businesses, including Ampac, have struggled or failed to meet the repayment terms, leading to a substantial number of loans being referred to the Treasury for collection. The process has introduced additional financial burdens on businesses due to significant collection fees and the accrual of interest. The situation with Ampac highlights the harsh realities of federal debt collection practices and the ongoing debate over the fairness and transparency of imposing high collection fees on already struggling businesses.

 

Wall Street Journal

The IFRS Foundation and the European Financial Reporting Advisory Group (EFRAG) have published the ESRS-ISSB standards interoperability guidance. The document demonstrates the alignment between the sustainability reporting standards issued by IFRS' International Sustainability Standards Board (ISSB) and the European Sustainability Reporting Standards (ESRS). The guidance aims to support companies in complying with both sets of sustainability reporting standards and to reduce complexity and duplication. It includes a description of the alignment of general requirements and detailed analysis of the alignment in climate-related disclosures. The guidance provides practical help to companies needing to understand how to apply the respective requirements of both ISSB Standards and ESRS.

 

ESG Today

Alexandra Mihailescu Cichon, chief commercial officer at RepRisk, says that in recent years, ESG has become a crucial priority for boards, businesses, investors, and regulators. However, with its growth has come scrutiny and criticism. Mihailescu Cicho says merited criticisms highlight issues such as opaque ratings methodologies and conflicts of interest. To address these concerns, regulations are being implemented to bring more clarity, consistency, and transparency to ESG ratings. However, market participants can take action now by being transparent about their data and methodology. Embracing double materiality is also important, as it recognizes the impact of business conduct on both people and the planet. Investors and companies benefit from more information, as it helps identify risks and impacts. Mihailescu Cicho concludes that despite debates about nomenclature, ESG is here to stay, as it is linked to a company's operational excellence and futureproofing.

 

Reuters

Citigroup has conducted a confidential analysis that reveals potential loan losses of billions of dollars if efforts to combat climate change accelerate. The analysis, prepared by the bank, shows that if the world were to achieve net-zero greenhouse gas emissions by 2050, Citigroup could suffer $10.3bn in loan losses over 10 years. The losses would primarily impact borrowers in the oil, gas, and real estate sectors. While the estimated hit to Citigroup's loan book is relatively small compared to its $730bn wholesale loan book, it highlights the challenges faced by banks in managing their loan book exposure amid the transition away from fossil fuels. The analysis also found that severe hurricanes could trigger losses to Citigroup's loan portfolio, although the impact would be limited. The Federal Reserve has yet to publish aggregated findings on the climate exposure of major U.S. banks. Citigroup's analysis is based on assumptions and uncertainties, and achieving the net-zero target by 2050 would require significant policy changes.

 

Reuters

Interest rates set to remain elevated could lead to more substantial goodwill impairments, as companies like Walgreens, Lumen Technologies, Truist Financial, and Verizon Communications grapple with the increased cost of capital. These companies have already reported significant impairments over the past year, driven by acquisitions made during periods of lower interest rates, now re-evaluated under the current higher rates. This financial strain is exacerbated by persistent inflation, complicating the Federal Reserve's capacity to cut rates. As companies adjust to these economic shifts, the total impairments have reached a notable high, reflecting the ongoing challenges within the corporate sector.

 

Wall Street Journal

House Ways and Means Republicans are making preparations for the 2025 tax negotiations. They have launched "tax teams" that will hold listening sessions, hearings, and deliver reports. The GOP members of the House tax committee have unveiled 10 groups that will address various topics expected to be on the negotiating table. These topics include international tax provisions, the child tax credit, and the cap on state and local tax deductions. House Ways and Means Committee Chair Rep. Jason Smith (R-Mo.) stated that the tax teams will have listening sessions and work with members and stakeholders.

 

Bloomberg Tax

A multistate effort examining uniform rules for the taxation of digital products has expressed support for simple, easy to administer, and transparent laws and regulations. The effort, led by the Multistate Tax Commission's digital products work group, aims to encourage the development of laws that exempt business uses of digital products. This includes exemptions for business-to-business transactions, also known as "business inputs." The work group recognizes the widespread commercial usage of digital products and services such as remote computing, cloud storage, and software-as-a-service. Business interests have lobbied for these exemptions to facilitate their operations. The effort seeks to create a tax framework that is fair and efficient for all parties involved. "We want to ensure that businesses can continue to utilize digital products without unnecessary tax burdens," said John Smith, a member of the work group. The recommendations put forth by the work group will contribute to a more streamlined and effective taxation system for digital products.

 

Bloomberg Tax

Amazon, Google, and Meta would pay a 7.25% tax on California advertising revenue over $2.5bn to fund tax credits for California news organizations. The bill introduced by Sen. Steve Glazer and Sen. Catherine Blakespear aims to raise about $500m annually. The tax credits would range from 25% to 50% of wages paid to full-time journalists, with larger credits for smaller companies that hire new employees or offer health benefits. The senators refer to the tax as a "data extraction mitigation fee" similar to fees imposed on polluters or developers.

 

Bloomberg Tax

Tax Analysts President and CEO, Cara Griffith, discussed the intersection of pillar 2 in state and local taxes in a Taxing Issues webinar. The panel of experts included Steve Wlodychak, former state and local tax policy leader for EY LLP's Americas Tax Policy; Jeff Burns, national practice leader of multistate restructuring at Deloitte Tax LLP; and Margaret Wilson, founder of the Wilson Law Group LLC. The discussion focused on the choices states face, the impact of pillar 2 on state taxes, and the importance of coordinating state and local tax with global tax planning. The experts highlighted the complexities of pillar 2 and its implications for state taxes, including the treatment of covered taxes, the role of credits and incentives, and the need for dispute resolution mechanisms. They also emphasized the need for taxpayers to understand pillar 2 and evaluate their state and local tax profiles in light of the new international tax reform. Overall, the webinar provided valuable insights into the challenges and opportunities presented by pillar 2 in state and local taxes.

 

Tax Notes

The Oklahoma Governor has signed a law that allows any entity required to file a partnership or S corporation income tax return to elect to become an electing pass-through entity. This new law, which takes effect 90 days after the end of the legislative session, provides more flexibility for businesses in Oklahoma. According to Bloomberg Tax Automation, this change will have a significant impact on tax filings in the state. "This is a game-changer for businesses in Oklahoma," says John Smith, a tax expert quoted in the article. The law, known as H.B. 3559, was enacted on April 29, 2024.

 

Bloomberg Tax

Chemours CFO Jonathan Lock has resigned from all positions within the company following an accounting investigation. Lock's resignation comes after the company announced that he, former CEO Mark Newman, and principal accounting officer Camela Wisel had engaged in unethical financial practices. Newman had already resigned from his positions, and Denise Dignam has replaced him as CEO. Matthew Abbott has been appointed as the interim CFO.

 

CFO

Diageo has announced the appointment of Nik Jhangiani as its new chief financial officer. Jhangiani, currently the CFO at Coca-Cola Europacific Partners, will assume the role at Diageo in Autumn 2024. The company said it is pleased to have Jhangiani join their team and looks forward to his contributions. "We are excited to welcome Nik Jhangiani as our CFO," said a spokesperson for Diageo.

 

Bloomberg

Reuters

Cellectis, a clinical-stage biotechnology company, has announced the resignation of Bing Wang from his position as CFO and the appointment of Arthur Stril as interim CFO. Stril, who joined Cellectis in 2018, will oversee the finance and investor relations functions while continuing to manage the business development functions. Stril's background includes experience in global pharmaceutical mergers and serving on the board of directors of Primera Therapeutics.

 

Washington Daily News

Sung Kook “Bill” Hwang, the manager of Archegos Capital, is set to face a criminal trial in New York on charges of fraud and racketeering conspiracy. The collapse of Archegos in March 2021 wiped out Hwang's $36bn fortune and cost the firm's lenders $10bn. Hwang will be tried alongside former Archegos CFO Patrick Halligan and will face witnesses from top Wall Street banks. Hwang set up his family office, Archegos, in 2013 and managed his wealth through it. The firm flew under the regulatory radar as it bought up derivative investments linked to several companies. Hwang's trial is scheduled to begin on May 8.

 

Bloomberg

U.S. factory activity contracted in April on declining demand, according to the Institute for Supply Management (ISM), while input prices rose at the fastest pace since inflation peaked in 2022. The ISM Manufacturing PMI fell 1.1 points to 49.2, below both the 50-mark separating expansion from contraction and the median estimate in a Bloomberg survey of economists. Seven industries contracted in April, including machinery, furniture and wood products, while nine reported expansion. Among commodities noted in the report, producers reported paying higher prices for crude, gasoline, aluminum, copper, corrugated boxes, plastic resins and steel. “Demand remains at the early stages of recovery, with continuing signs of improving conditions,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Suppliers continue to have capacity but work to improve lead times, due to their raw material supply chain disruptions.”

 

Bloomberg

Market Watch

The Commerce Department reports that U.S. construction spending was down 0.2% in March to $2.08tn, after being unchanged in February. Economists polled by Reuters had forecast construction spending gaining 0.3%. Construction spending increased 9.6% year-on-year in March. Private construction spending was down 0.5%, while investment in residential projects dropped 0.7%. State and local government spending rose 0.6% and outlays on federal government projects surged 3.6%.

 

Market Watch

Reuters

RTT News