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The New York Attorney General's Office has filed a 220-page lawsuit against former President Donald Trump and several of his family members, as well as associates and businesses, alleging "numerous acts of fraud and misrepresentation" regarding financial statements. "Mr. Trump and the Trump Organization repeatedly and persistently manipulated the value of assets to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available to the company," Attorney General Letitia James said, "to pay lower taxes, to satisfy continuing loan agreements, and to induce insurance companies to provide insurance coverage for higher limits and at lower premiums." She said that Mr. Trump’s financial statements from 2011 to 2021 included 200 false and misleading valuations across 23 properties and assets, including residential buildings, golf clubs and the family’s Mar-a-Lago resort in Florida. While the lawsuit is civil, it alleges that the defendants violated state criminal laws and possibly federal laws, including those barring bank fraud and providing false statements to financial institutions. Ms. James said her office had made a criminal referral of its findings to the U.S. attorney’s office for the Southern District of New York. Mr. Trump, in a post on his social media site, Truth Social, attacked the investigation and Ms. James, as he has throughout the inquiry. “Another Witch Hunt by a racist Attorney General, Letitia James,” Mr. Trump wrote, adding, “she is a fraud who campaigned on a “get Trump” platform.”

 

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The IRS has published updated information about the Work Opportunity Tax Credit to help employers deal with a tight labor market and after a scathing investigative report about how the longtime tax credit is being abused. The update includes information on the pre-screening and certification process. To satisfy the requirement to pre-screen a job applicant, on or before the day a job offer is made, a pre-screening notice ( Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit ) must be completed by the job applicant and the employer. After pre-screening a job applicant, the IRS said the employer must then request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Other requirements and further details can be found in the instructions PDF to Form 8850.

 

Accounting Today

Missouri senators have given first-round approval to a bill to cut state individual income taxes as called for by Republican Gov. Mike Parson. The compromise plan would immediately cut the top income tax rate from the current 5.3% down to 4.95%. Mr. Parson had asked lawmakers to take the top tax rate to 4.8%. “This is a very reasoned approach to this," said Republican Sen. Andrew Koenig, a member of the now-dissolved Conservative Caucus, during Senate debate. “We're not cutting too fast.” The legislation comes after months of behind-the-scenes negotiations. Parson proposed the special session as an alternative to lawmakers’ planned one-time tax refund, which he vetoed in June. He called on lawmakers to return to work September 6th, but they pushed back work to continue private talks in search of a consensus on the issue.

 

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The SEC's Investor Advisory Committee - a group of investors, academics and financial advisers - has recommended that the regulator tighten its oversight of the FASB, to ensure that it remains politically independent. The proposal comes in the wake of a new corporate minimum tax, which will increase levies on large businesses that pay less than 15% tax on their book or financial-statement income. Accountants and investors have expressed concerns that the tax, which is set to go into effect in January as part of the Inflation Reduction Act, risks politicizing accounting rules, encouraging companies to distort their financial results. The new group, dubbed the Advisory Committee on Accounting Modernization, would consider ways to strengthen financial reporting in areas such as intangible assets, for example internally developed software, the Investor Advisory Committee said. It would also look to improve the FASB’s grasp of companies’ internal data frameworks. “We’ve seen investors note that over the past decade FASB has focused on simplification projects that primarily benefit issuers rather than investors,” said Colleen Honigsberg, professor of law at Stanford Law School and a member of the Investor Advisory Committee. “These investors have been asking FASB to focus on significant accounting issues that would actually really improve their ability to value a company.”

 

Wall Street Journal

A U.S. appeals court in St. Louis on Wednesday appeared skeptical of a five-month-old trademark ruling for H&R Block that temporarily barred Block Inc, formerly Square, from using the Block name with its Cash App Taxes tax-preparation service. One judge at the 8th U.S. Circuit Court of Appeals said during arguments that there may not be enough evidence to justify the order against Block. San Francisco-based Block's chief executive, Twitter co-founder Jack Dorsey, announced the company would change its name from Square in December. U.S. District Judge Nanette Laughrey found consumer confusion was likely and barred Block in April from using the name and logo with Cash App Taxes or otherwise communicating that Block is associated with the service. However,  Senior U.S. Circuit Judge Michael Melloy said the evidence supporting the injunction seemed "extremely thin," citing differences between the logos, a lack of consumer surveys, and Cash App Taxes' inconspicuous use of the word "Block."

 

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The Federal Reserve has raised its benchmark interest rate by 0.75 percentage points for the third straight meeting, lifting it to a range of 3%-3.25%, a level last seen in early 2008. The Fed's rate-setting Open Market Committee is widely expected to raise rates to between 4% and 4.5% by the end of this year, even as they acknowledge that this increases the risk of recession. “We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” Fed Chairman Jerome Powell said at a news conference after the rate decision. People are suffering from high inflation, he added, and they’ll ultimately suffer more, and for longer, if the Fed flinches in its commitment to pulling prices back down. "With the new rate projections, the Fed is engineering a hard landing — a soft landing is almost out of the question," said Seema Shah, chief global strategist of Principal Global Investors. "Powell’s admission that there will be below-trend growth for a period should be translated as central bank speak for 'recession.' Times are going to get tougher from here."

 

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Sales of existing homes declined by 0.4% in August from July, and were down 19.9% an annual basis, to 4.8m, the National Association of Realtors (NAR) reported on Wednesday. They have now fallen for seven consecutive months, with higher mortgage rates continuing to undercut buyer demand. The average rate on a 30-year fixed-rate mortgage was 6.02% in the week ended September 15th, up from 2.86% a year earlier, according to housing-finance agency Freddie Mac. The drop in demand is reducing buyer competition, and home-price growth has slowed from last year’s rapid pace. But prices remain above where they stood a year ago, because the number of homes for sale is still below normal levels. The median existing-home price rose 7.7% in August from a year earlier to $389,500, NAR said. Prices fell month-over-month for the second straight month after reaching a record high of $413,800 in June. While prices typically decrease in the late summer, the monthly declines have been bigger than normal, said Lawrence Yun, NAR’s chief economist. The combination of high prices and rising interest rates has pushed home-buying affordability near its lowest level in decades. 

 

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Nicole Musicco, the new chief investment officer of the California Public Employees’ Retirement System, known as CalPERS, has given an unusually candid presentation to board members which showed returns at the retirement system lagging behind other large pensions in almost every asset class during the past 10 years, with private equity trailing the most, 1.3 percentage points. The presentation showed that in each year between 2009 and 2018, CalPERS put $5bn or less in new money into private equity, an asset class that public pension funds have relied on heavily in recent years to boost returns.  “There isn’t one magic answer” to why CalPERS underperformed, said Ms. Musicco. “The biggest impact by far was the 10 years we took a break from participating in private equity.”

 

Wall Street Journal

The shifting outlook for the economy is “continually introducing new risks” that companies should disclose in financial reports, Kevin Vaughn, the SEC's senior associate chief accountant, told the Financial Accounting Standards Advisory Council at a meeting this week. The SEC’s Office of the Chief Accountant has “been paying close attention to the various factors affecting issuers as a result of the shifting economic and geopolitical conditions” such as Russia’s invasion of Ukraine, supply chain issues, inflation, labor shortages and rising interest rates, Mr. Vaughn said. His focus on transparent disclosures bolsters efforts by the SEC initiated as early as May to press companies to provide details on how the war in Ukraine was affecting their finances. The regulator drew up a list of requests that staff sent to corporate executives asking for information on such issues such as the impacts stemming from sanctions as well as import or export bans. Separately, Mr. Vaughn also reported that Acting SEC Chief Accountant Paul Munter has recently highlighted the importance of auditor independence, as well as the importance of auditing firms prioritizing their independence when involved in restructuring transactions.

 

CFO Dive

U.S. candy shops on Oxford Street, one of London's major retail thoroughfares, are set to face stricter rules after Westminster City Council revealed plans to tackle those it believes are not paying tax. An investigation into 30 American-themed stores is already under way for alleged business rate evasion of £7.9m ($8.96m). Council leader Adam Hug said: "The people selling overpriced and often out-of-date sweets are cheating the UK taxpayer and very often swindling their customers into the bargain." Measures proposed include increasing the fee to register a company at Companies House from £12 to £50, introducing more rigorous identity checks and tightening UK procurement laws to restrict the artificial use of tax havens and low-tax jurisdictions. Councillor Hug added: "Westminster's dirty secret has been known for many years but those in power looked the other way for too long as money of questionable origin flooding into London and investors took advantage of our relatively lax laws."

 

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