Recently in Corporate Accounting & Tax Category

Occasionally, I stop for a bagel on my way into work. On Fridays, however, my office offers a carbohydrate smörgåsbord: bagels and donuts and donut holes. Oh, and fruit.

So Friday, instead of scrambling eggs at home (about 90 cents) or buying a bagel (about $2), I load up on carbs for free at the office.

Should I be taxed on that amount? The answer turns on whether the IRS considers my bagel a fringe benefit.

"Double Irish with a Dutch Sandwich." Sounds like two Guinnesses and something made out of chicken, doesn't it? It's making us hungry.

It's not food and drink, however. It's a complicated corporate tax loophole, exploited by tech companies and others with intellectual property, pioneered by Apple, and used by many to save billions of dollars in taxes.

It all begins with the licensing of patents and IP to an Irish subsidiary. When products are sold in the U.S., taxes are reduced by paying royalties to that subsidiary. Under Irish law, if the subsidiary is managed by foreigners, profits skip along, Irish tax-free, usually to a Caribbean tax haven.

Do Sarbanes-Oxley and startups make for terrible bedfellows?

Most corporate and in-house attorneys are familiar with the requirements of the Sarbanes-Oxley Act, which was passed in 2002.

Sarbanes-Oxley regulations came down at a time when Americans were outraged at the massive Enron scandal that cost shareholders and innocent employees millions.

The regulations were created partially to reduce the likelihood that similar financial catastrophes would ever surface again. And, one of the safeguards to prevent similar financial mishaps was Section 404 of the Sarbanes-Oxley Act.

Former GlaxoSmithKline general counsel Lauren Stevens has been re-indicted for obstructing a probe into Wellbutrin off-label marketing as part of her duties for the company.

Stevens' case has deep ramifications and has been closely watched. The question of just how much a GC can rely upon (and/or hide behind) outside counsel's advice will play out.

The prosecution may prove to be the first wave of a sea change in how federal prosecutors pursue not just companies, but company executives for wrongdoing.

Yesterday, June 28, the Supreme Court issued a 5-4 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board. As is frequently the case, the Justices issued a narrow ruling. In fact, the 5-4 was actually affirmed in part, reversed in part, and remanded.

The case involved the Public Company Accounting Oversight Board, the board appointed as part of the 2002 Sarbanes-Oxley Act, which was passed after the accounting scandals of the early 2000s. The opinion was written by Chief Justice Roberts. Justice Breyer dissented, joined by Justices Stevens, Ginsburg, and Sotomayor. The Justices ruled that it was unconstitutional for the President to be unable to fire the members of the Public Company Accounting Oversight Board, but the Court otherwise left intact the board and the Sarbanes-Oxley Act.

The Public Company Accounting Oversight Board was designed to oversee accounting firms after the disaster and fallout from Enron and WorldCom's accounting scandals. The Court found that because the board is overseen by the SEC (whose members can only be removed for cause), the Sarbanes-Oxley Act interfered with Presidential authority.

The Supreme Court has agreed to hear a challenge to the Sarbanes-Oxley Act (SOX), the 2002 act that established the Public Company Accounting Oversight Board.   Congress passed SOX in response to several high-profile instances of accounting fraud earlier this decade, most notably the Enron collapse.

The board monitors the accounting industry, especially the four largest accounting firms that handle the books for many of the most prominent corporations.  The Securities and Exchange Commission chooses the board's members, with consultation by the Fed and the Treasury Department. 

The technology industry is up in arms over President Barack Obama's plans to roll back some of the tax protections for companies that enjoy the benefit of lower tax rates on profits earned outside the United States.

Tech giants Hewlett-Packard Co., IBM Corp., Cisco Systems Inc., Microsoft Corp. and Google Inc. each saved more than $1 billion through lower foreign tax rates last year, for a total tax benefit of $7.4 billion.

In a move that may help steady the collapsing economy (or hasten its eventual topple into the abyss), the Financial Accounting Standards Board (FASB), an independent body in charge of setting US accounting standards, is in discussions to ease so-called "mark-to-market" rules for financial institutions. 

As Reuters reports, the FASB's proposed changes will allow financial institutions to determine the value of the assets on their books during inactive markets based on what the company could get for the asset in an "orderly" transaction between market participants.  Companies previously had to value the asset according to its value on the current market (hence "mark-to-market), even if the demand for the asset was so low that it had only a minuscule market value.

The FASB is not considering this move entirely willingly.  A congressional panel told the FASB in mid-March to take action on the mark-to-market rules, or else Congress would step in and change the rules itself.  This new action by the FASB appears to be a calculated move to retain its independence and avoid more extensive changes at the hands of Congress.