Weinberg & Company
 
SIMPLY STATED
AUGUST 2013

Following are a few important issues our accounting professionals wanted to briefly share with you. As always, should you desire more in-depth information please feel free to contact us.

CONGRESS WEIGHS IN TO BLOCK MANDATORY AUDIT FIRM ROTATION

The Sarbanes-Oxley Act included a number of significant provisions designed to bolster the auditor’s independence from the company under audit. For example, for listed companies, the Act puts the audit committee – rather than management – in charge of hiring the auditor and overseeing the engagement. It also prohibits auditors from providing certain non-audit services to clients and imposes mandatory audit partner rotation. These and other reforms were part of Congress’s response to financial scandals at Enron, WorldCom, and elsewhere. As another major part of that response, Congress established independent oversight of the auditing profession by the Public Company Accounting Oversight Board (PCAOB) for audits of issuers.

Now under current consideration by the PCAOB includes a mandatory audit firm rotation. Proponents of such a requirement believe that setting a limit on the continuous stream of audit fees that an auditor may receive from one client would free the auditor, to a significant degree, from the effects of management pressure and offer an opportunity for a fresh look at the company’s financial reporting. Opponents have expressed concerns about costs and burden on management and already over stretched accounting departments that changing auditors could impose on issuers.

Recently the U.S. House of Representatives weighed in. In a 321-62 vote, the House approved a bipartisan bill (H.R. 1562 – The Audit Integrity and Job Protection Act) that would prohibit the PCAOB from requiring mandatory audit firm rotation for public companies. Although still requiring U.S. Senate approval and the president’s signature to become law, there is growing sentiment that the cons exceed the pros of implementing mandatory audit firm rotation. The American Institute of Certified Public Accountants is on record opposing mandatory audit firm rotation and praised action by the House.

CALIFORNIA ENTERPRISE ZONE TERMINATED

In July, California Governor Jerry Brown signed legislation that sunsets the California Enterprise Zone tax incentive program on December 31, 2013. The Enterprise Zone program had been around for more than 25 years and included hiring and sales tax credits within an enterprise zone. The Enterprise Zone program will be replaced with a new sales tax exemption for certain machinery and equipment purchased, a new hiring tax credit and a California Competes credit.

The partial sales and use tax exemption provides a statewide sales tax exemption of approximately 4.19% on certain manufacturing and R&D equipment purchases and is available to manufacturers of new products or research and development in Biotechnology, Physical Engineering and Life Sciences.

The new hiring credit allows businesses to claim credits in certain economic development areas (former Enterprise Zones and LAMBRAS, with some exceptions), as well as in designated census tracts with high unemployment and poverty rates; and is available for hiring employees who are long term unemployed; unemployed veterans; or recipients of the federal earned income credit, CalWorks, or general assistance. The credit is available only to employers that create net new jobs in California. The credit is equal to 35% of certain wages paid in the first five years of employment.

Under the new California Competes or “Go-Biz” Credit, a new fund will be created, to be administered by the Governor’s Office of Business and Economic Development, which will negotiate agreements to provide tax credits related to certain investments and employment expansion in California. About 25% of the annual credits will be designated for small businesses.
While the Enterprise Zone program ends on December 31, 2013, the credits generated this year will still be valid and available to be carried over for up to ten taxable years. In order to ensure hiring credits for 2013 will be valid, it is recommended that taxpayers obtain approved employee vouchers before the end of 2013. Companies should consider reviewing their 2013 employment hiring and obtain applicable vouchers well in advance of year end. Strategic purchases for the sales and use tax credit can still be made before December 31, 2013 as well.

FATCA IMPLEMENTATION DELAYED
Last month, the IRS issued notice (2013-43) revising the timeline for implementation of the Foreign Account Tax Compliance Act (“FATCA”).  If you are subject to FATCA, you are welcome to contact our office for more details.

HIGHER FUTA TAX RATES IN 2013
Employers in 17 states (including California) may not be eligible to claim the maximum amount of state unemployment tax credits on their 2013 federal unemployment tax return (FUTA) because their state has had an outstanding federal unemployment insurance loan for at least two years.

TAX COLLECTION INNOVATORS
New York Governor Andrew Cuomo announced an initiative to suspend the driver’s licenses of tax delinquents whose state tax liability tops $10,000. The initiative is expected to impact some 9,000 taxpayers, increase collections by $26 million this year and add $6 million to state coffers each year thereafter.   
WEINBERG & COMPANY

Simply the right choice

 

Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com

1925 Century Park East, Suite 1120  

Los Angeles, CA 90067

(310) 601-2200

6100 Glades Road, Suite 205

Boca Raton, FL 33434

(561) 487-5765 

DISCLAIMER:
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related
penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Quick Links

Corey Fischer
Firm Managing Partner
310-601-2200

CoreyF@weinbergla.com

Bruce Weinberg
Florida Managing Partner

561-487-5765
BruceW@cpaweinberg.com

Jeffrey B. Engler

Director of Tax,
Los Angeles 

310-601-2200
JeffreyE@weinbergla.com
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