Posts Tagged ‘Orascom’

Tax Roundup, 7/22/2013: More fertilizer! And how to finance your party, the tax grifter way.

Monday, July 22nd, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

More taxpayer fertilizer.  Iowa board OKs additional $25M in tax credits for Orascom.  (Quad Cities Times):

The unanimous vote by the board on Friday makes a total of $82.5 million in state tax credit benefits available to Orascom Construction, parent of the Iowa Fertilizer Company.

The $1.8 billion plant is expected to employ as many as 165 workers when completed.

In case you’re wondering, that’s about $500,000 per “permanent job.”  That assumes that the money is actually buying jobs, but the plant almost certainly was going to be built in Iowa without the subsidies.  The $82.5 million only buys politicians press conferences, ribbon cuttings and silver souvenir shovels, with our money.

 

TaxProf, Faber:  ‘Ivory Tower’ Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States:

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes,  State Tax Notes, July 8, 2013, p. 97 … ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.

That’s right, in my experience.  Taxpayers absolutely take taxes into account when they move, even if it’s hard to isolate in aggregate data.  Tax aren’t everything, but they are definitely something.

Kim Reuben, Detroit’s bankruptcy: What does it mean for other cities? (TaxVox)

Russ Fox, The Flow of AGI from One State to Another

 

Jason Dinesen, Tax Aspects of Renting Your Home for a Day or Two.  Taking in RAGRAI riders can give you some tax-free income.

Robert D. Flach, KEEPING A CONTEMPORANEOUS MILEAGE LOG.  If you want to deduct your mileage, you need to keep your log up to date.

 

Tyler Cowen, Wealth Taxes: A Future Battleground.  Just another way for politicians to cover their profligacy.  Via Arnold Kling, who has more.

TaxGrrrl, Rather Than Tackle Tough Tax Reform, Congress Focuses On The Death Tax. Again.

Kay Bell, The U.S. tax system is not very attractive

William McBride, American Corporations Losing Ground (Tax Policy Blog):

The U.S. corporate tax is the most punitive in the developed world, not just because the statutory corporate tax rate is the highest but also because the effective corporate tax rate is the highest or nearly the highest according to recent studies

TaxProf, The IRS Scandal, Day 74.

 

Tax offender of the year nominee.  I no longer choose a Taxpayer of the Year, but Russ Fox still “honors” a “tax offender of the year.”  I hope he will consider Ayawna Webster, former president of the D.C. Young Democrats and staff aide to a D.C. City Council Member, Harry Thomoas Jr.  The Washington Post reports:

The former chief of staff to one-time D.C. council member Harry Thomas Jr. pleaded guilty Friday to falsifying tax documents in connection with payments for a 2009 political ball…

 According to court documents, [non-profit chief Millicent] West worked with Thomas and Webster to send trust money intended to pay for youth programs to help cover the cost of the party.

Just when you think politicians can’t come up with ways to make you think less of them, they come through.  Looting a fund for poor kids to pay for a “political ball” is notably evil.

 

Brian Mahany, Business Owner Pleads to Hiding Offshore Account

Jack Townsend, Liechtenstein Bank In U.S. Cross-Hairs

 

A video report on Rashia Wilson’s sentencing

She had a sixth-grade education and stole millions from the taxpayers.  When that can happen — over and 0ver — there just may be a problem with IRS controls over refunds.

 

The Critical Question.  Lap Dance Tax?  (Jim Maule)

News you can use.  The Data on Bar Fights (Freakonomics Blog)

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Tax Roundup, 3/6/2013: Tax return numerology, and similar economic development science. Plus rapper tax tips!

Wednesday, March 6th, 2013 by Joe Kristan

20130306-1Tax tip: IRS doesn’t buy this numerology stuff.  A strange story out of New York:

A tailor who counted star athletes including Rickey Henderson and Wilt Chamberlain among his clients has pleaded guilty to skirting about $2 million in sales and income taxes.

Mohanbhai Ramchandani pleaded guilty on Tuesday, state Attorney General Eric Schneiderman said. His company, Mohan’s Custom Tailors Inc., also has had local stars Patrick Ewing and Darryl Strawberry among its clients and made an appearance on Bravo’s “The Real Housewives of New York City.”

The charges say that he failed to pay $1.7 million in sales taxes starting in 2001, and he failed to pay $256,000 of income taxes from 2007 through 2009.  I didn’t know tailoring could be so lucrative.  But this is unusual:

Authorities said a whistle-blower first raised concerns over Ramchandani’s tax practices. They said one indication of fraud was the use of numbers on his tax forms that added up to multiples of 10, an outgrowth of his belief in numerology.

Once in a while you prepare a return that happens to foot to a round number somewhere.  It looks funny, but it will happen occasionally just by chance.  But when they are all round, apparently the tax people might notice.

 

As strange as Mr. Ramchandani’s approach to numbers is, Iowa gives him a run for his money.   Iowa’s lead tax credit pusher, Debi Durham, has issued a press release touting the economic wonders of enormous tax credits granted Orascom, an Egyptian company, to build a fertilizer plant in Southeast Iowa.  The release bases its conclusions on ” the Regional Economic Modeling Inc. (REMI) analysis for the Iowa Fertilizer Co. project.”  From the release:

“The  REMI analysis of the Iowa Fertilizer Co. project speaks for itself,” said Debi Durham, director of the Iowa Economic Development Authority (IEDA).  “On the front end, Iowa Fertilizer Co. will inject $1.4 billion of capital investment into our state and create at least 165 permanent jobs and thousands of construction-related jobs.  Now we know that the benefits of that project will serve Iowans for years to come.”

It speaks for itself and it says nothing.    It says nothing about whether the project would have gone ahead without the credits, but Iowa’s claims that Illinois was hot after the plant with its own incentives lack credibility.

The analysis really betrays itself by omitting two key words: “opportunity cost.”  It claims every projected benefit from the project without asking whether any benefits would be available if the money were used for something else.  It certainly doesn’t say what Iowa loses by having a complex tax system with high rates to pay big subsidies to the well-connected.

I’ve said it before: using taxpayer money to lure businesses is like a guy taking his wife’s purse to the bar to buy drinks for the girls.  It’s not impressive.  They might let the guy buy the drinks, but they realize he’ll treat them like he is treating his wife if he gets the chance.  And anybody he goes home with isn’t likely to be much of a prize.

 

Egypt taking a different approach to Orascom.   The Orascom executives do better in Iowa than back home, reports SiouxCityJournal.com:

An Egyptian billionaire behind one of the largest and most controversial projects in the state is being investigated for tax evasion and has been barred from leaving his country.

According to an article published Tuesday in Construction Week Online, Orascom Construction CEO Nassef Sawiris and his father, Onsi Sawiris, are barred from travel until a resolution is reached regarding the sale of an Orascom subsidiary and the taxes from that sale.

As hard as it is to deal with Iowa and federal tax authorities, they are probably downright reasonable compared to Egyptian revenuers.  I suspect that the “resolution” being sought is much like that sought by a kidnapper.

 

The TaxProf links to this from the New York Times Dealbook: Why Carried Interest Is a Capital Gain.  It is as good an explanation as I’ve seen of why capital gain on private equity isn’t a crime against humanity:

Typically private equity investors are paid a 2% management fee, on which they pay ordinary income tax rates, and a 20% carried interest of the partnership’s profits that is only paid after limited partners receive a preferred return of 8%.

Carried interest, therefore, is the profits share on the sale of a capital asset and not “ordinary income” as some would have it treated.  In other words, it is a capital gain within a partnership and is rightfully taxed at the long-term capital gains rate  — provided that  the asset, or company, is held for more than one year.

The underlying principle is no different than two friends who partner together to purchase a restaurant.  One might bring capital and the other brings expertise.  The restaurant could be in disrepair or a great concept that needs additional capital to expand.  The chef identifies the restaurant to buy and possesses the skills to manage the restaurant and add value to the enterprise over time.  The friend has the capital to invest, but doesn’t possess the operational or investment skills to generate a return.

When they sell the restaurant years later, both partners receive capital gains treatment on their long-term investment.  A private equity partnership works in the same way.  This is Partnership Law 101.

Exactly.  And it’s not like a salary, where somebody writes you a check.  The private equity investor is taking a risk, and on any given investment is likely to get nothing.  It’s not like, say, a tenured law school faculty paycheck that comes every two weeks.

 

 

It’s not just the rich guy?  Obamacare Tax Increases Will Impact Us All (Andrew Lundeen, Tax Policy Blog).

Howard Gleckman, Changing Government’s Inflation Measure Would Raise Taxes as Much as it Would Cut Spending (TaxVox)

Jason Dinesen,  Greatest Hits: Enrolled Agents, The Liechtenstein of the Tax World.  “When people hear ‘enrolled agent,’ they think either ‘what the hell is
that?’ or ‘he must work for the IRS, flee for your lives!'”

Anthony Nitti,  Business Owners Could Find Their Tax Deferral Backfiring.  Deferring income into higher-rate years works badly.

Russ Fox,  Did the IRS Write Law?  “I suspect the IRS has erred.”  I agree, the IRS can’t change statutory rates to deal with budget issues.

 

Jack Townsend,  Proposed New FBAR Form And Explanation

Brian Strahle,  Will Maryland Match Virginia’s Corporate Income Tax Rate?

Patrick Temple-West,  Tax-exempt bonds get scrutiny, and more

TaxGrrrl, Taxes From A To Z (2013): C Is For Carpooling

Robert Goulder, Will EITI Kill Transfer Pricing? (Tax.com).  First ask yourself: what is EITI?

 

David Brunori, Remember the Alamo, Buy a Gun (Tax.com)  On the unwisdom of sales tax holidays, even for guns.


ProTip: Don’t take your tax advice from rappers.  This from Going Concern:

As you might expect, TMZ has the scoop and it quotes a number of artists who are currently considering tips for strippers as a legit deduction and therefore a serious tax strategy. And who doesn’t love creative tax planning? But how might they rationalize this idea? 

Well, Bizzy Bone considers these young ladies to be like his family:

Bizzy Bone tells TMZ, “I’m giving charity to females who need their light bills paid.  So, of course, that’s a write-off.  You write off your kids, don’t you?”

Um, no.  Mr. Bone might want to ponder the stories of Ja Rule, Fat Joe, and Beanie Sigel, to name a few, before he gets too smug about his tax deductions.

 

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Tax Roundup, 11/2/2012: Iowa’s new approach to filmmakers affirmed. And more fertilizer!

Friday, November 2nd, 2012 by Joe Kristan

Promotional image for “The Scientist,” one of the projects of convicted film tax credit recipient Wendy Weiner Runge.

Jailing them instead of bribing them.  Iowa has drastically altered its approach to the film industry in the last few years.  Where it once lured them with lavish film credits, meaning free cars and cash, it now merely provides lodging.  From WHOtv.com:

The Iowa Court of Appeals has affirmed the sentencing of a Minnesota filmmaker who pleaded guilty to fraudulent practices.

Wendy Weiner Runge was sentenced to 10 years in prison after pleading guilty in connection with Iowa’s film tax credit scandal. She was the owner and operator of a film company that applied for tax credits from the Iowa Film Office in 2008.

Ms. Runge said the sentencing judge improperly considered her combative blog posts as evidence of lack of remorse.  The appeals court held otherwise:

Similarly, here, the court properly considered Runge’s statements criticizing the court’s process and disparaging the prosecutors and the judge personally in considering her lack of remorse.

You don’t need to go to law school to figure out that if you plead guilty to something, it’s unwise to publicly rip the judge before sentencing.

Iowa spent over $30 million on the film industry via transferable film credits — another way of saying “subsidies.”  A state auditor report said that 80% of the credits were improperly granted.  It might have been cheaper to just imprison the filmmakers in the first place.

Link: Appeals court opinion.

 

From films to fertilizer.  The Iowa corporate welfare machine now is focused on a less glamorous industry.  On the heels of a huge tax credit grant to build a new fertilizer plant in Eastern Iowa, Iowa announced yesterday an award of up to $70 million of tax credits for a new Sioux City fertilizer plant for a different fertilizer company.

Between the two plants, the state has awarded up to around $180 million in tax credits.  This compares to budgeted net receipts for Iowa’s corporate income tax of under $400 million.

The state claims the project will bring 2,000 construction jobs and 100 full-time jobs at the plant.  If they max out their tax credits, that works out to about $33,300 per job, or $700,000 per “permanent” job.  Heck of a deal.  Meanwhile every other business has to cope with a horrendously complex state tax system with high rates to support these big credit grants.

The politicians love these press conferences when they can brag about bribing new jobs to the state.  Too bad they don’t have to call press conferences every time the state’s dysfunctional tax system costs a job.  But they wouldn’t have time for a press conference every day.

 

TaxProf,  WSJ: Owners Race to Sell Their Businesses by Year-End to Avoid 67% Capital Gains Tax Increase.  If you are going to sell anyway, I understand.  If you don’t already have a buyer, though, it’s probably too late to beat the rush.

 

Brutal Assault on Reason Watch: 

Tax stakes for entrepreneurs next TuesdayMy latest post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Going Concern, Grover Norquist: No Matter What, Taxes Aren’t Going Up

Howard Gleckman, A Disappointing Presidential Campaign Comes to an End (TaxVox).

Kay Bell,  Making Obama, Romney tax plans add up

Linda Beale,  What natural disasters like Sandy teach us about taxes and government, and why NY City Mayor Bloomberg endorse Obama

Anthony Nitti, The Top Ten Tax Cases of 2012: #9 -The Mortgage Interest Limitation Is More Complicated Than You Realize

Jack Townsend,  Relevant Conduct in Tax Cases

Robert D. Flach starts the weekend early with WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – SPECIAL FRIDAY EDITION

News you can use: 10 (er, 11) Uses For Leftover Halloween Candy (TaxGrrrl).  I heartily endorse the first two suggestions.

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Tax Roundup, 10/16/2012: A rate-cutting tax reform for Iowa? Also: tax season is now really over.

Tuesday, October 16th, 2012 by Joe Kristan

Iowa’s Governor Branstad seems to be serious about this tax reform thing.  From WCFCourier.com:

Gov. Terry Branstad cautioned lawmakers against finding ways to spend the state’s projected budget surplus, while calling Monday for across-the-board tax changes.

Speaking at a Statehouse news conference, Branstad said he’s working on a tax reform proposal to “dramatically” cut personal, corporate and property taxes in the state.

Specifics would be announced later, he said, possibly when he delivers the Condition of the State speech next year.

An automotive representation of Iowa’s income tax.

Iowa’s basic tax system is little changed structurally from the one we had when the Governor took office the first time in 1983.  Substituting rate schedules, you could almost prepare a 2011 Iowa 1040 on 1984 forms.   You wouldn’t even have to substitute the rate schedule to prepare a corporate return; Iowa’s highest-in-the-nation corporation rate is unchanged since 1981.

While the basic structure is unchanged, the system has become infested with special interest deductions and credits over the years — a process that started under Governor Branstad and that got out of control during the 12-year interregnum between his fourth and fifth terms.

In some ways tax reform would be a reversal of course for the Governor.  He has continued the process of complicating the Iowa tax law with special breaks since his return, enacting new carve-outs for ESOPs and proposing special rules for “anchor manufacturers” while making a massive tax credit allocation to the new Southeast Iowa fertilizer plant.

But Governor Branstad also has some history as a tax cutter.   He signed a big rate cut that took effect in 1987, reducing Iowa’s highest individual tax rate from an insane 13% to a still painful 9.98%.  Yet that cut left the basic Iowa structure — including the individual deduction for federal income taxes — untouched.  When he made the huge allocation to the Orascom plant, he was at least embarrassed enough to say that it was an argument for corporate tax reform.

So will the Governor go big?  Will he embrace important elements of the Tax Update’s Quick and Dirty Iowa Tax Teform Plan, which would eliminate Iowa’s corporation tax and cut individual rates to around 4%, while sweeping away the federal income tax deduction and all special carve-outs?  Stay tuned.

Related: Tax Foundation 2013 State Business Tax Climate Index

 

Brutal Assault on Reason Watch: 

CRFB:  Repealing Deductions Could Lead to 30% Tax Rate Cut (Not Merely 20% Claimed by Romney) and Obama’s $49 Billion Tax Increase on Small Business in 2013 (TaxProf)

What the Joint Tax Committee Really Said About Tax Reform (Howard Gleckman, TaxVox)

Because Doug Shulman’s IRS would rather spend its resources licensing preparers than giving tax refunds to struggling businesses: DELAYS IN PROCESSING NET OPERATING LOSS CASES RESULTED IN MILLIONS OF DOLLARS IN UNNECESSARY INTEREST PAYMENTS (TIGTA report)

Anthony Nitti,  Can A Shareholder Own Corporate Goodwill?

Jana Luttenegger,  Basics of Estate Tax and Gift Tax (Davis Brown Tax Law Blog)

Peter ReillyDon’t Freak Out If You Hear Your Trust Is Defective

Trish McIntire,  98 Days and Counting.  98 days for 2012 tax planning.

News you can use:  I GIVE UP!  (Robert D. Flach) “The members of Congress are idiots.  More so now than ever before in our history.”

The Critical Question:  When it comes to auditing, just what does familiarity breed? (Nanette Byrnes)

Paul Neiffer,  Another Tax Season Bites The Dust

Mothers, hide your children.   Tax Professionals To Be Released Into the Wild Later Today (Going Concern). Oops, too late, that happened yesterday.

Oh, and happy Bosses Day.

 

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Tax Roundup, September 17, 2012: non-1040 extension deadline day! Also: Iowa bluffed?

Monday, September 17th, 2012 by Joe Kristan

20080410-1ibiz.jpgToday is the extended due date for 2011 calendar year 1041, 1065, 1120 and 1120-S returns.

For pass-throughs, the penalty for late filing is $195 per K-1, per day.  E-file if you can; otherwise go with Certified Mail, Return Receipt Requested or an approved private delivery service.

 

 

Was Iowa bidding against itself for fertilizer plant?  From the Quad City Times:

When Iowa Gov. Terry Branstad pulled the trigger on the biggest incentive package in state history, he said he did so, in part, because of competition from neighboring Illinois.

But economic development officials with Illinois Gov. Pat Quinn’s administration say they wanted no part of the project after they got wind of Iowa’s “excessive” bid for the $1.4 billion fertilizer plant for which the Branstad administration offered up to $240 million in state and local tax breaks.

“To be clear — the state never put an offer on the table. We recognized early on that Iowa’s bid was excessive, and we were not going to engage in a bidding war,” Marcelyn Love, communications manager for the Illinois Department of Commerce and Economic Opportunity, wrote in an email.

True, the word of Illinois politicians isn’t the most reliable thing in the world.  Then again, neither is the word of people telling you why you should give them money:

Tina Hoffman, spokeswoman for the Iowa Economic Development Authority, said the authority relied on the word of Orascom corporate officials and news reports to determine that Illinois was making a play for the fertilizer plant.

“Company officials indicated the tax savings would be in excess of $130 million. That information was validated when an Illinois senator was quoted in several news outlets about the bill he was sponsoring to assist a project like the one Orascom was proposing,” she wrote in an email.

All right, then!   If you say so, here’s your $107 million!

Subsidizing the fertilizer plant would be unwise even if there were a bidding war  with Illinois.  It’s never wise to take money from your taxpayers to lure and subsidize people.  As I’ve pointed out, it’s like taking your wife’s purse to the bar to buy drinks for the girls.  It’s neither effective or impressive.   But apparently there was no real bidding war, and Orascom was going to come to Iowa anyway;  if so, they just bluffed Iowa into helping pay for it — and maybe also into indirectly helping finance their purchase of The Weitz Company, Iowa’s oldest and largest construction contractor.   Not exactly a shining moment for Iowa tax policy.

 

Holman Jenkins of the Wall Street Journal rips wealthy whistleblower Birkenfeld, Grassley:

[Birkenfeld] told Bloomberg: “I’m the most famous whistleblower in the history of the world. It’s a question of doing the right thing, and that’s what I did.”

What would have been right was not participating in tax evasion in the first place.

The author of the whistleblower law that so benefited Mr. Birkenfeld was none other than prairie populist Sen. Charles Grassley, who issued a statement this week: “An award of $104 million is obviously a great deal of money, but billions of dollars in taxes owed will be collected that otherwise would not have been paid.”

This is the same Mr. Grassley last heard calling for AIG workers “to resign or commit suicide” during the 2009 retention bonus furor, which also saw the New York Attorney General implicitly threatening to publish the names of innocent AIG employees who didn’t “voluntarily” relinquish money they were legally entitled to.

This is the same Mr. Grassley whom Wikipedia baldly states “repeatedly introduced measures that increase the level of double taxation on American citizens living abroad, including retroactive tax hikes.”

Need we add that Mr. Grassley’s longtime aide, who actually drafted the whistleblower law, now represents Mr. Birkenfeld and stands to collect an interesting percentage of the award Mr. Grassley so obligingly applauds?

Senator Grassley has been a major play in tax policy for nearly three decades.   The state of the tax law today isn’t exactly a tribute to the senator.

 

I’m Barack Obama, and I approve this press release.  From a Department of Justice Press Release:

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.

OK, if it’s President Obama’s task force, it’s also President Obama’s IRS that is letting $5 billion annually go out the door to identity  thieves.  It’s President Obama’s IRS that is tormenting innocent Americans for paperwork foot-faults so that President Obama’s Justice Department can slap internationa tax criminals on the wrist.  Glad that’s cleared up.


Mike Ralston,  Iowa View: Time to stop a tax hike on all Americans’ dividends:

The current federal tax rates on investment income — dividends and long-term capital gains — expire at the end of this year. Today, the top tax rates for both dividends and capital gains are capped at 15 percent. But if Congress and the president don’t act to extend them, the top tax rate on capital gains will rise to 20 percent and the top tax rate on dividends will rise to 39.6 percent.

It’s worse than that.   With the Obamacare tax hikes set to kick in, the actual top rate for dividends will hit 43.4% — nearly tripling the old top rate of 15%.

 

Kay Bell,  Sequestration’s blunt and indiscriminate budget cuts.  Also, tiny.  From Veronique de Rugy:

 

Jim Maule,  When Tax Ignorance Meets Political Ignorance.  Yet while the good professor (rightly) bemoans voter ignorance, he insists that it is wise to put more decisions in the hands of the polticians elected by the same ignorant voters.

Paul Neiffer,  Mistakes to Avoid in Lifetime Giving – Part 2

Jack Townsend,  Whistleblowers for Swiss Banks Appear to be Live and Well

Jason Dinesen,  RTRPs, CPAs, Attorneys and Grandfathering

True:   1099s From Insurance Companies – Don’t Ignore But Don’t Take At Face Value Either (Peter Reilly)

Patrick Temple-West,  Financially troubled parts of Europe consider taxing church properties, and more

TaxGrrrl,  Are Federal Taxes Driving Smokers to Stop Lighting Up?

Will Freeland,  NYC Ban on Large Sodas Plagued by Same Problems as Soda Excise Taxes (Tax Policy Blog)

Howard Gleckman,  What Mitt Romney Didn’t Learn from Ronald Reagan (TaxVox)

Anthony Nitti: For A Rich Guy Who’s Only Been Divorced Once, R Kelly Certainly Doesn’t Seem to Have A Lot of Cash

Good question:  WHAT TO DO?  (Robert D. Flach)

News you can use:  If You Get a Tax Refund That’s Someone Else’s, Don’t Spend the Money  (Russ Fox)

 

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