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Treasury Secretary Janet Yellen is in talks with other countries to include the U.S. R&D tax credit in the 15% global minimum tax deal. Yellen expressed hope for successful negotiations during a hearing before lawmakers in the House of Representatives. She assured members of the House Ways and Means Committee that she will keep them informed about the progress of negotiations on this and another pillar of the OECD tax deal. Yellen dismissed claims from Republican Congress members that the global minimum tax would disadvantage American companies, stating that the adoption of both pillars of the OECD deal would likely be slightly revenue positive in the long term. She emphasized that the 15% global minimum tax is in support of the country's goals. Yellen also reiterated President Joe Biden's commitment not to raise taxes on households earning less than $400,000 per year. "We are negotiating with other countries right now to try to get favorable treatment for the R&D tax credit and I am hopeful these negotiations will be successful," said Yellen.

 

Reuters

Global banking regulators have proposed stricter standards for banks to assess risks from customers in order to avoid mismanagement. The Basel Committee, consisting of banking regulators from the G20 economies and beyond, has called for improved management of counterparty credit risks (CCR) presented by clients. The committee highlighted weaknesses in due diligence, credit risk mitigation practices, risk measurement practices, and governance and senior management oversight of CCR. The proposed guidance emphasizes comprehensive due diligence during the onboarding process of new customers and on an ongoing basis. Banks are urged to use robust contractual terms, risk-sensitive margining, and a wide range of metrics to mitigate risks. The proposal comes in response to recent cases of significant mismanagement of CCR, including the collapse of Archegos Capital Management and episodes of volatility in commodities and the UK government bond market. The revised draft guidance is open for public consultation until August.

 

Futures & Options World

Reuters

Top Treasury officials have signaled that the U.S. should implement Pillar Two rules, which aim to enforce a global minimum tax of 15% for multinational enterprise groups. Many jurisdictions have already enacted these provisions, making Pillar Two a reality. Even if the U.S. doesn't join, U.S. MNEs operating in Pillar Two jurisdictions should pay attention to the interaction between Pillar Two rules and transfer pricing. The impact of Pillar Two on MNEs' financial operating models is significant, and adjustments to taxable income must be closely monitored. MNEs should have a robust transfer pricing policy, focus on operational and accounting readiness, and assess risk. The International Compliance Assurance Program can also be a valuable tool. MNEs should ensure compliance with Pillar Two rules while not overlooking traditional transfer pricing considerations.

 

Bloomberg Tax

The Treasury and the IRS have released Notice 2024-36, announcing the second round of credit allocations for clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects, and critical material projects. The program aims to allocate the remaining $6bn in credits. Taxpayers interested in Round 2 credits must submit concept papers through the Qualified Advanced Energy Project Credit Program Applicant Portal. The Department of Treasury, IRS, and Department of Energy are partnering to recommend projects. 

 

Accounting Today

CPA Practice Advisor

Tax Notes

A Texas billionaire, Kelcy Warren, has filed a lawsuit against Booz Allen Hamilton Inc. over the leak of his tax information. The leak was carried out by a former employee, Charles Littlejohn, who admitted to stealing and leaking tax return data for thousands of wealthy taxpayers, including Warren, President Donald Trump, Jeff Bezos, and Elon Musk. Warren's complaint was filed in the District Court of Maryland. Booz Allen Hamilton, a management consulting services company, is now facing legal action for the breach of high-profile taxpayer data.

 

Bloomberg Tax

Jeff Casale, CEO of Board International, addresses the pressing challenges faced by CFOs in today's economically volatile environment, emphasizing the need for strategic adaptation to maintain profitability. With the backdrop of fluctuating inflation and rising interest rates, Casale argues that CFOs must pivot away from traditional dependencies like low rates and cheap labor, focusing instead on leveraging technology to enhance financial planning and operations. He highlights the importance of transitioning from outdated tools such as spreadsheets to more advanced finance applications that support fast, automated planning. This move is critical as a significant proportion of FP&A professionals are actively seeking to advance their technological and data skills. Casale also stresses the adoption of cutting-edge technologies like AI, which can automate key finance functions including planning, reporting, cost analysis, and budgeting. Casale concludes that the introduction of new regulations like the SEC’s climate disclosures and the EU’s Corporate Sustainability Reporting Directive (CSRD) necessitates a reevaluation of finance operating models. CFOs must integrate enhanced data-driven planning and automation to meet these new compliance demands while enabling efficient and flexible business operations.

 

CFO.com

Sovos has launched the Indirect Tax Suite, a solution designed to modernize how companies meet global indirect tax obligations. The suite helps enterprises manage all their indirect tax obligations with governments, buyers, suppliers, and consumers. It can be embedded into existing workflows of more than 70 widely used enterprise resource planning (ERP) and transaction management systems and can be connected to government tax authorities across the globe. The suite provides automated tax rates and rule updates, adds transaction compliance to accounts receivable and accounts payable processes, and offers filing, reporting, and insights. It is designed for companies operating across multiple markets or looking to enter new ones, helping them meet the challenges of variations in tax rates and rules. Sovos CEO, said that compliance has traditionally been a cost center, but now it can be a force for growth.

 

PYMNTS

Defaults in the U.S. office market are at historic levels, with over $38bn of office buildings facing defaults, foreclosures, or other forms of distress. This is the highest amount since the aftermath of the 2008-2009 financial crisis. Office owners are struggling to pay back loans due to high interest rates and weak demand. The pandemic has caused a decline in demand as businesses allow employees to work from home and reconsider their workspace needs. Tenants are now closely scrutinizing landlords' financial health before signing new leases. The Federal Reserve's decision not to cut interest rates has further worsened the situation. The office vacancy rate is currently at a record 13.8%, compared to 9.4% in 2019.

 

Wall Street Journal

Domenick Nardone, the CFO of Raymond of New Jersey, an industrial equipment manufacturer, appeared in federal court in Oakland, California, facing serious charges including conspiracy, wire fraud, and money laundering. The allegations involve Nardone and Eric Marsiglia, a former executive at Williams Sonoma, orchestrating a fraudulent scheme where Nardone allegedly directed millions to a shell company owned by Marsiglia, REM Group LLC, in exchange for lucrative contracts. This case unfolds with Marsiglia, previously responsible for commercial real estate opportunities at Williams Sonoma, using his position to divert broker fees and kickbacks from contracts to REM Group, totaling nearly $20m between 2018 and 2022.

 

CFO

Wells Fargo shareholders have approved the bank's plans for executive compensation, including increasing CEO Charlie Scharf's 2023 package to $29m. Scharf addressed the bank's investment in risk and control infrastructure, which has become a top priority after the 2016 scandal involving fraudulent accounts. The bank is currently under an asset cap and has eight open consent orders. Scharf mentioned that the U.S. economy remains strong, but consumer delinquencies are rising. Wells Fargo CFO Jane Fraser also noted that U.S. consumers are becoming more cautious with their spending.

 

Reuters

International companies are being urged to leave Xinjiang amid concerns over forced labor. The U.S. government accuses Chinese officials of committing crimes against humanity against Uyghurs and other Muslim minorities in the region. Thea Lee, deputy undersecretary for International Affairs at the U.S. Labor Department, stated that Beijing has made it "essentially illegal" to conduct independent human rights audits in Xinjiang. Lee emphasized that if it is impossible to conduct audits, companies should not operate in such an atmosphere. China's government denies allegations of abuses. German chemicals giant BASF and Volkswagen have already taken steps to address forced labor concerns in Xinjiang. Lee highlighted the challenges of monitoring the labor transfer program and the lack of access to workplaces to assess workers' origins.

 

Reuters

Federal Reserve officials are likely to maintain the current interest rate of 5.25% to 5.5% during their upcoming policy meeting, continuing their strategy amidst higher-than-expected inflation rates. This decision reflects a cautious approach towards economic recovery, with an emphasis on ensuring inflation trends towards the Fed's 2% target before considering rate reductions. Recent data showing persistent inflation underscores the possibility that high rates could persist longer than initially anticipated. Despite previous projections for rate cuts in 2024, indications now suggest that the Federal Reserve will adopt a "wait-and-see" approach. This stance, likely emphasized by Fed Chair Jerome Powell in his upcoming press conference, suggests that rates will remain steady until inflation shows clear signs of diminishing to desired levels. Moreover, the Federal Reserve might announce adjustments to its balance sheet reduction program, possibly slowing down the pace to manage economic impact more prudently. This move aligns with broader efforts to stabilize the economy without precipitating unforeseen financial pressures.

 

Bloomberg