Talking Tax

David Kautter, assistant Treasury secretary for tax policy, discussed international digital tax issues, regulations stemming from the 2017 tax law, and more in an exclusive interview at the Bloomberg Tax Leadership Forum Nov. 19.Background reading:  The Treasury Department is planning to issue regulations restricting how hedge fund managers can claim a valuable tax break by early next year. IRS Office Carrying Out 2017 Tax Law No Longer Exists: Kautter

Patricia Cummings, chief risk officer and a managing partner at accounting and consulting firm Citrin Cooperman, discusses how technology is transforming the accounting and auditing environment. Artificial intelligence, data analytics, and blockchain are changing what aspiring auditors should know—as the industry looks for “critical, strategic thinkers.”

In the U.S., religious practices have an unclear relationship to the tax code. Sam Brunson, a professor at Loyola University Chicago School of Law, has an idea to give some structure to the way policy makers deal with that relationship.Congress historically writes religious accommodations into the tax code on a case-by-case basis: A group of people appears with a specific tax problem, and lawmakers decide whether to write a fix.But what if there were a framework that would help them consider the problems consistently and fairly? Brunson proposes such a framework in his book, “God and the IRS: Accommodating Religious Practice in United States Tax Law.”Discussing it with Bloomberg Tax legal reporter Aysha Bagchi, he says the government will surely continue to grant accommodations. The question is “will they be thoughtful, or will they continue to be ad hoc?”

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 mobile device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify

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 device: Via Apple Podcasts | Via Stitcher | Via Overcast | Via Spotify