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CFOs in the U.S. are scrutinizing their companies’ cash flows, spending plans and overseas operations more closely as they try to model the potential impact of the House Democrats’ tax proposals. Earlier this month, House Democrats proposed raising the corporate tax rate to 26.5%, up from 21% currently. They also suggested increasing the base erosion and anti-abuse tax, the tax on global intangible low-tax income, or Gilti, and other levies, such as the tax on foreign-derived intangible income, while taking away certain deductions. The plan keeps many of the provisions of the Republican tax overhaul in place, but increases the rates associated with them to pay for higher spending, including an expanded child tax credit, a national paid-leave program and renewable-energy tax breaks. “What tax advisers are trying to do is a lot of modeling,” said Greg Engel, vice chair for U.S. tax at KPMG. “The modeling is very complicated. Some companies have gone deep into it, while others have kept it [more] high level,” Mr. Engel said. Finance chiefs at U.S. businesses with large operations abroad also will be reviewing their interest expenses, said Remmelt Reigersman, a partner at Mayer Brown and a member of the company’s tax transactions and consulting practice. Mr. Reigersman explained that House Democrats are proposing to limit companies’ ability to offset interest costs at the U.S. corporate tax rate depending on the proportion of income that is generated in the country, which could result in CFOs moving debt to foreign subsidiaries. “Debt can become very expensive if the interest isn’t deductible anymore,” he added. 

 

Wall Street Journal

The former head of a state agency that was reviewing whether then-President Donald Trump was due a $1m property tax refund for his Chicago skyscraper violated the law by deleting computer files from his official account while facing an inspector general investigation. Mauro Glorioso, then executive director of Illinois’ Property Tax Appeal Board, was informed in late September 2020 that Illinois Gov. J.B. Pritzker planned to replace him as head of the agency, records show. At the time, Mr. Glorioso was under investigation by the Office of Executive Inspector General regarding a case before the board. The inspector general’s office determined the initial complaint was “unfounded” and redacted details from that inquiry in its report. But the office found that Mr. Glorioso violated agency policy and state law by deleting emails and other documents related to the matter while preparing to leave the $116,748-per-year job. Board employees had been instructed to retain copies of all files related to the matter, according to the inspector general’s report. In a written response and sworn affidavit released with the report, Mr. Glorioso denied any wrongdoing, saying he only deleted the files because he knew backups existed and were in the state’s possession.

 

Chicago Tribune

A senior Samsung Electronics executive has asked the Biden administration to offer more tax incentives in order to move forward with its planned massive semiconductor investments in the United States. In a Korea Society program titled, "The US-Korea Global Partnership: Supply Chain and Semiconductors," Samsung's Kim Won-kyong, who oversees both the company's global public affairs team and corporate sustainability center, said the company's planned investment of $17bn to build a new chip plant in the U.S. will make the Korean firm the largest foreign investor there. While Samsung has been near to choosing the city of Taylor, some 50 kilometers northeast of Austin, where it already operates massive foundry chip lines, for the construction of the new chip plant, Kim said that it is still engaged in talks with key U.S. partners to finalize the specific location(s). According to the executive, another reason for Samsung's request for increased tax breaks is that the world's top memory chipmaker plans to apply cutting-edge processing technology to the soon-to-be-constructed new semiconductor plant.

 

The Korea Times

The Wall Street Journal looks at how a crisis-management playbook Federal Reserve officials created years ago could guide their response this fall if the federal government can’t pay all its bills because of a political standoff over raising the federal debt limit.  According to the transcript of an October 2013 conference call, the options include the Fed buying Treasury securities in default on the open market and selling Treasurys owned by the Fed to counteract potentially severe strains in financial markets. Among the officials who said those steps shouldn’t be ruled out were Jerome Powell —the central bank’s current chairman who was then a Fed governor—and Janet Yellen —the current Treasury secretary who was then Fed vice chairwoman. “These are decisions you really, really don’t ever want to have to make,” Mr. Powell said on the call. “The institutional risk would be huge. The economics of it are right, but you’d be stepping into this difficult political world and looking like you are making the problem go away.” Ms. Yellen said, “I wouldn’t be eager to do them, but I wouldn’t say, ‘never.’” Others sharing that view included Boston Fed President Eric Rosengren and then-San Francisco Fed President John Williams, who is now president of the New York Fed.

 

Wall Street Journal

HR and payroll technology provider ADP has introduced benchmarking for diversity, equity and inclusion (DEI) for its ADP DataCloud offering. DataCloud is a data analytics tool that compares workforce data to market averages, based on real, up-to-date anonymized and aggregated HR and pay data from ADP's U.S. client base. The new DEI Benchmarks tool offers live HR and compensation data from ADP’s workforce dataset of more than 920,000 companies and 30 million-plus employees. The feature will be integrated into ADP DataCloud’s DEI Dashboard, serving up the benchmarks in-line and allowing companies to compare their DEI metrics against similar companies as well as local populations through census data.

 

Accounting Today

China’s central bank has declared that cryptocurrency-related transactions are illegal, reinforcing the country’s tough stance against digital rivals to government issued money. In a statement posted on its website on Friday afternoon, the People’s Bank of China said the latest notice was to further prevent the risks surrounding crypto trading and to maintain national security and social stability. Naming Bitcoin, Ether and Tether as examples, the central bank said cryptocurrencies are issued by nonmonetary authorities, use encryption technologies and exist in digital form and shouldn’t be circulated and used in the market as currencies. It also said it is illegal for overseas exchanges to provide services for residents in China through the internet. The clampdown comes as China’s central bank has been testing its own digital currency, the electronic Chinese yuan. The notice posted by the central bank explicitly called out Bitcoin and Ether, the two most popular cryptocurrencies, for being issued by “non-monetary authorities,” suggesting that the electronic Chinese yuan, or eCNY, would not be affected by the latest announcements.

 

CNN

New York Times

Wall Street Journal

The U.K.'s Financial Reporting Council (FRC) has fined Grant Thornton £4m ($5.5m) for failures in its audits of collapsed cake chain Patisserie Valerie. The fine was for audits carried out between 2015 and 2017, the regulator said. The FRC said that the accountancy firm had "missed red flags" and failed to "question information provided by management." In October 2018, Patisserie Holdings announced that its board had been notified of potentially fraudulent accounting irregularities. The company subsequently entered into administration, leading to the closure of 70 stores and more than 900 job losses. The collapse followed the discovery of a huge black hole in the firm's accounts, eventually valued at £94m ($129m). After it went into administration, the café chain was found to have overstated its cash position by £30m ($41m) and failed to disclose overdrafts of nearly £10m ($14m).

 

Financial Times

Evening Standard