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What is ASC 740?

ASC 740 governs accounting for income taxes and requires businesses to analyze and disclose income tax risks.

This Financial Accounting Standards Board topic establishes standards of financial accounting and reporting for the effect of income taxes on a company’s financial results. ASC 740 provides a way to recognize a company’s income tax expense for financial reporting under U.S. generally accepted accounting principles (GAAP) by measuring the differences between the tax bases of assets and liabilities and the carrying amounts of assets and liabilities recognized for financial reporting. ASC 740 also provides standards for measuring, recognizing and reporting uncertain tax positions.

Who does ASC 740 apply to?

The accounting for income taxes principles and requirements apply to domestic, foreign, public and private entities in the preparation of financial statements in accordance with U.S. GAAP. Non-profit organizations with activities that are subject to income taxes are also subject to ASC 740.

However, the level of complexity in applying these standards significantly increases for public companies.

Why is accounting for income taxes more complex for public companies?

Public companies must comply with the rules of the Sarbanes-Oxley Act of 2002 (SOX), which require certain tax internal controls.  Controls around accounting for income taxes have been a source of material weakness in many public companies that have led to the restatement of their financial statements.

Generally, tax internal controls under SOX must meet the following three objectives:

1. Independence: Generally derived through the use of an independent tax expert.
2. Completeness: Yearly and quarterly provisions must capture all of the company’s key issues.
3. Accuracy: The company’s CFO and controller must adequately review and understand the tax calculation and this calculation must be accurate.

Why should public companies be concerned about ASC 740?

Many recent SEC comments on the disclosures in public registrant’s filings have centered on income taxes. The comments have included questions regarding vague income tax disclosures, undistributed earnings of foreign subsidiaries and, perhaps most notably, whether a company’s deferred tax assets can be realized.

How can public companies manage their ASC 740 compliance requirements?

You might be a CFO who is fortunate enough to have the resources of a sophisticated internal tax department that can produce tax accrual workpapers that can be audited by your independent outside auditors.

However, if you’re not one of the lucky ones, you may want to consider engaging a tax service provider who has the capabilities to calculate and prepare your global income tax provision; analyze uncertain tax positions; and prepare the related footnote disclosures in the company’s financial statements in accordance with ASC 740 and U.S. GAAP – that can withstand the scrutiny of your outside auditors.

Contact GlassTax, LLC to learn more about your compliance obligations under ASC 740 and how we can help.

Our recent Tax Technology Transformation survey shows that companies have a large appetite for increasingly complex analytics, even when they cannot adequately perform the basics.

• 98% of companies with global headquarters in countries with digital tax administrations (DTA) are organizing their response to DTAs in a centralized and globally consistent manner.
• 50% of companies struggle with basic analytical reporting capabilities.
• The majority of companies still spend 40%-70% of their time on data cleansing.

Tax-specific technologies may make it possible to answer the mandates of the global digital economy with changing tax data flows, data analytics and data requirements. The digital tax function is evolving at a rapid pace and has become a strategic component of enterprise transformation. Therefore, there is a need for the tax functions to undertake timely and accurate compliance and go digital to be able to undertake more value-adding functions for the business.

The path to an intelligent tax function begins with a strategic plan, one that maps a new way of working, and incorporates new skills and technology. It uses well-proven solutions to address persisting issues and leverages the potential of newer technologies to make a quantum leap in capability to be ready for tomorrow.

Our international tax professionals provide leading-edge tax consultancy services for many of the world’s largest multinational companies. Our team works to deliver tangible benefits to our clients, thereby contributing to their competitive advantage.

Our global network of international tax professionals work to promote local approaches that tie in with and contribute to the client’s optimized overall tax position. Our market-leading global tax desk network — which consists of co-located teams of highly experienced professionals from multiple countries in several locations around the world — plays an important role in bringing together tax know-how from various jurisdictions for the benefit of the client.

Global treasury and capital structure

Treasury and tax departments of multinationals face increasing challenges to manage business and market risks effectively and apply funding efficiently. They also face increasing legislative activity and scrutiny of funding activities by tax authorities around the world. In addition, the current volatility in the global markets creates further challenges and stresses for businesses in ways that reduce cash and increase effective tax rates.

Our global treasury group consists of a network of tax professionals in key markets globally who focus on treasury and investment issues from financing and capital restructuring to risk management, whether that be with respect to interest rates, commodities or foreign currency. Our people bring tax efficiency to treasury goals, whether companies are financing their domestic or cross-border activities, hedging their risks with derivatives, structuring investment vehicles, trading securities or commodities, or managing or repatriating cash.

Business models and supply chain

The implementation of the outcomes of the Base Erosion and Profit Shifting (BEPS) project by the OECD is significantly affecting the supply chains of businesses around the world. Our operating model effectiveness (OME) team features the combined experience of Advisory, Assurance, Legal and Tax professionals who focus on supporting clients with business model efficiency, including adjustments to procurement operations, intangible management, permanent establishment risks assessment and risk mitigation.

Corporate structure and treaty qualification

There is increasing attention on the appropriate use of legal entities, both from tax authorities and business (for purposes of operational savings). Our professionals assist with tax efficiently, meeting these business and regulatory needs for legal entity rationalization. We also take into account the requirements under the multilateral instrument (MLI), such as the principal purpose test and other anti-avoidance measures, local country legislation and regulations such as withholding and capital gains taxes — while mitigating the impact on tax attributes in the different jurisdictions.

Tax operations focusing on cross border

The last few years have seen an ever increasing demand on tax departments to report on cross-border situations and transactions. Examples of this are many, such as master and local files in transfer pricing, country-by-country reporting, controlled foreign company reporting under EU Anti-Tax Avoidance Directives, global intangible low-taxed income in the United States and the Mandatory Disclosure Regime in the EU.

GlassTax, LLC international tax service teams help you fully comply with these requirements and analyze and remediate the impact that these reporting obligations have on your global tax footprint.

Don’t feel alone if you’re dealing with foreign account reporting obligations and audits.

Filing requirements for foreign corporations, foreign trusts, gifts, and accounts are a constant challenge. Even with the best of intentions you could find yourself out of compliance and with IRS and having issues that carry serious consequences.

Get the help you need by working with the skilled attorney at Frost Law, led by Glen Frost (Esq., CPA, CFP®, and LLM in taxation). His team of tax attorneys has helped ex-pat clients from around the world resolve their Form 8993, Notice CP15, and other international tax issues.

What Are Your IRS Form 8993 Filing Obligations?

If you’re uncertain about how to file IRS Form 8993  or have other questions about your Global Intangible Low-Taxed Income (GILTI), we can help you identify your options and make a decision on the best course of action for penalty abatement.

Get Clear Next Steps for IRS Form 8993

Protect your investments and untangle the disclosure requirements that are causing you undue confusion by letting the team of dual-licensed tax attorneys and CPAs at Frost Law help you today.

GlassTax, LLC can help you with common international tax problems such as:

• Filing requirements
• Penalties and violations
• Reporting thresholds
• Voluntary disclosures
• Investigations and other international tax issues

Protect Yourself and Your Foreign Assets

Complete the form or call +313.629.5340 today to arrange a confidential, no-cost consultation with GlassTax, LLC today!

It has been a challenging year both economically speaking and in terms of tax planning. While we have seen some federal tax legislation, the changes have been far more limited than many expected. Additionally, the continuing tight labor market, worries over a possible recession and high inflation are dominating concerns. In this vein, the Federal Reserve increased the benchmark interest rate by 300 basis points to date in 2022. Recent comments by the Fed indicated it intends to further increase rates until the funds level hits a “terminal rate,” or end point, with a current target of 4.6% in 2023. This not only raises business borrowing costs, but also the correlating interest expense tax deduction, which is more likely to be reduced due to the limitations enacted in the 2017 Tax Cuts and Jobs Act (TCJA). A challenging economy, ever-changing tax rules and rising interest rates make tax and business planning more critical than ever.

To date, 2022 has seen limited federal tax legislation in the Inflation Reduction Act (IRA) and United States Innovation and Competition Act of 2021 (USICA aka CHIPS-plus Act). The IRA contains a multitude of energy credits, an excise tax on stock repurchases and a new corporate alternative minimum tax (AMT). While the IRA is less expansive than the initial Build Back Better proposals, it does add numerous complexities to tax law requiring new guidance from the Treasury Department. Besides the IRA, taxpayers continue to wait on further guidance pertaining to the many other tax provisions enacted over the past five years. Finally, the CHIPS-plus Act includes over $52 billion for semiconductor facilities plus a 25% tax credit for semiconductor manufacturing.

As we head toward a post-election lame-duck congressional session, tax legislation may resurface that targets retirement plans, digital assets and the so-called tax extenders that either expired at the end of last year or will expire at the end of 2022. There are more than 40 temporary tax provisions that expired Dec. 31, 2021, including:

• Extension of research and development expensing and/or a refundable research credit
• Refundable and/or enhanced child and dependent care tax credit
• Increased child tax credit
• Credit for qualified fuel cell motor vehicles
• Credit for construction of new energy-efficient homes
• Increase in exclusion for employer-provided dependent care assistance
• Extension of favorable formula used to compute business interest expense deduction under section 163(j)
• Charitable contribution deduction by non-itemizers

Five tax extenders expiring at the end of 2022 that may be retroactively reinstated include the full deduction for business meals provided by a restaurant (otherwise limited to 50%) as well as incentives for biodiesel and renewable diesel fuel.

We expect any legislation in the lame-duck session to be centered around items with bipartisan support. While some may push for far-reaching provisions, being able to use reconciliation in the Senate and bypass the filibuster rules will still require the sign off of Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). Sinema’s reluctance to raising tax rates or rolling back certain TCJA provisions coupled with Manchin’s concern that expanding social programming will further overheat an economy struggling with inflation derailed last year’s larger Build Back Better proposals. We do not expect the end of 2022 to be any different.

With this in mind, look for potential legislation to include a continuation of fully expensing R&D expenses with certain retirement provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act rolled in. Both of these enjoy strong support on both sides of the aisle. Things could get more interesting if Democrats attempt to continue the expanded child tax credit. Absent the inclusion of a work requirement, it is doubtful Manchin or congressional Republicans will support expanding the credit.

Following the midterm elections, any tax legislation is largely dependent upon the composition of the next Congress. House Republicans have offered a broadly stated policy proposal if they control the House in January. For tax policy, their statement includes a promise to “increase take-home pay, create good-paying jobs, and bring stability to the economy through pro-growth and deregulatory policies.” Actual provisions are not outlined but their statement suggests the GOP would extend TCJA tax relief provisions for individuals currently expiring at the end of 2025 as well as continuing bonus depreciation. Key individual tax elements expiring in 2025 include the top tax rate for individual taxpayers reverting to 39.6% from 37%, an end to the 20% section 199A qualified business income deduction, removing the $10,000 cap on the state and local tax (SALT) deduction and reinstating the personal and dependent exemption deductions.

If Democrats maintain control of the House and increase their majority in the Senate, they may pursue remaining policies from the original Build Back Better bill. Many provisions of the TCJA would be subject to change, such as increasing the corporate tax rate, raising individual tax rates on those earning over $400,000, and subjecting S corporation income to self-employment tax. Earlier administration proposals would raise the individual tax rate to 39.6% from 37%. Finally, long-term capital gains and qualified dividends would be taxed at 25%, up from the current 20%.

In a turbulent political year, we cannot predict the midterm election results. However, unless Democrats retain control of both houses of Congress, we expect little in the way of legislation for the next two years. Should Republicans gain control of both the House and the Senate, the Biden administration indicated any tax-related legislation passed would likely be vetoed. If one party controls each house, it’s an understatement to say compromise will be difficult. In this event, we expect extremely modest tax legislation, if any, before 2025.

One notable exception to our expectation of a stalemate in a split Congress is the possibility of a bipartisan bill addressing the regulation and taxation of digital assets. The need for clarity in the federal oversight and tax treatment of digital assets is rapidly escalating. The Infrastructure Investment and Jobs Act, a bipartisan bill passed in late 2021, made changes to reporting requirements for digital assets, including cryptocurrencies. In the intervening 12 months, several digital asset bills have been introduced, most with bipartisan sponsorship.

Potential legislation notwithstanding, we also anticipate a multitude of regulatory guidance from the Treasury Department. For several months, we have expected the IRS and Treasury to issue additional regulations on the business interest expense deduction, cryptocurrency reporting, deferred compensation and noncompensatory options. Furthermore, we are awaiting a number of regulations dealing with partnerships taxation. Specific partnership areas we are watching include disguised sale rules, related parties, a host of basis and capital account guidelines and the fractions rule. Given the competing priorities of the IRS and Treasury, particularly considering the extent of guidance needed to implement the recently passed IRA, it remains to be seen whether any of this pending guidance will be issued in the near future. Regardless as to which regulations are published first, taxpayers can expect more compliance and documentation requirements.

We remind you that tax planning should be addressed throughout the year as an integral part of overall financial health. To assist you in this endeavor, our year-end tax information also includes articles on the evolving world of digital assets, happenings at the IRS, information reporting, new international tax issues and reporting as well as the latest in state and local taxation.

As always, we encourage you to contact GlassTax, LLC at +313.629.5340 or click here to discuss how these issues impact your tax position.

GlassTax offers a full range of acquisition and disposition services. Our financial and economic experts serve as independent verification or as additional support for internal due diligence teams. We have specialized staff to ensure full-service due diligence.

Our experts provide the following services:

• Market and Economic Research
• Thorough financial analysis
• Lease Abstraction
• Partnership Agreements and Transaction Documents
• Cash Flow Modeling
• Portfolio Diagnostics with Customized Reporting
• Sophisticated Information Technology Services
• Electronic Database Mining

IRS Appeals

Taxpayers can resolve disputes with the IRS without going to Tax Court through the IRS independent Office of Appeals, which offers an impartial forum wherein the Appeals Officer is precluded from siding with the auditor or collection agent in any dispute.

Understanding the Appeals Process – IRS Tax Audit

The 30-Day Letter

If your tax return was selected by the IRS for examination, within a few weeks after your closing conference with the auditor and/or supervisor, you will receive a package that includes:

• A letter (known as the 30-day letter) notifying you of your right to appeal the proposed changes within 30 days.
• A copy of the examination report explaining the examiner’s proposed changes.
• An agreement or waiver form.

You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. The letter will explain what steps you should take, depending on which action you choose.

If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Office, the IRS will send you a 90-day letter, which is known as a Notice of Deficiency.

The Protest Letter
Many taxpayers are unsatisfied with the results of an audit where they don’t have adequate representation or any representation at all. If you do not agree with your auditor’s findings, you do not have to accept the results of the examination.

If you disagree with the proposed changes outlined in the 30-day letter, your tax attorney can advise you as to whether a formal written protest is necessary and what information to include in that letter. Your attorney will prepare a formal written protest, if necessary, to advocate for reconsideration of the proposed examination changes based on your specific circumstances and underlying documentation.

The formal written protest must include:

• The proposals with which you disagree.
• The reasons why you disagree with the proposals.
• The facts which support your reasoning.
• The relevant law or laws which support your reasoning.

Appealing an IRS Collection
In addition to appealing the findings of an IRS audit, you may also appeal an IRS collection decision through the Office of Appeals. Depending on your circumstances, it may be possible to appeal tax liens, levies, and property seizures.

There are two procedures a taxpayer can initiated to appeal collection actions:

• Collection Due Process (CDP)
• Collection Appeals Program (CAP)

Collection Due Process

CDP is available for taxpayers who have received any of the following:

• Final Notice of intent to Levy and Your Right to Hearing
• Notice of Levy

Collection Appeals Program
CAP is available to taxpayers subject to:

• Levies and property seizures
• Notice of Federal Tax Liens
• Rejection, termination or proposed termination or modification of an installment agreement.

Settlement on Appeal

An Appeals Officer has the discretion and authority to determine whether to accept a taxpayer’s position, whether challenging an IRS audit or an IRS collection action. Working with an experienced tax attorney can increase your chances of successfully appealing IRS determinations and resolving your tax liabilities effectively. The attorney-client privilege protects all client communication from disclosure and moreover, precludes attorneys from being called to act as witness where they were not involved in the preparation of your original tax return. Few attorneys are competent to handle the complexities of taxation within the context of an audit or an appeal. The tax attorneys in GlassTax’s network has extensive experience in handling IRS appeals and has been successful in resolving clients’ IRS problems for years.

Need Help with IRS Appeals?
Please feel free to contact us regarding your IRS Appeals. Every tax matter is unique because every person’s situation is unique. We can quickly and efficiently analyze your circumstances and propose various options of resolution.

There are three types of examinations: correspondence examinations are done through the mail; field examinations involve face-to-face interaction, typically conducted in a taxpayer’s home or business, while office examinations are conducted in IRS offices.

GlassTax, LLC has the resources to help assist you with the IRS Examination requirements

Making Sure You’re Audit Ready When It Counts

Whether they’re required by regulatory agencies, financial institutions, or your stakeholders — audits are an unavoidable part of doing business. However, audit preparation requires a lot of extra effort on top of regular operations. The process can overwhelm your team and quickly go awry without a strategic plan.

But with the help of GlassTax’s audit support experts, you can find preparation services tailored to fit your specific needs. We’ll help get you audit ready, so you can focus on what you do best — running a successful business.

The Stages of Audit Planning: Where to Start

The purpose of audit planning is to ensure your audit is a seamless process. Here are the key steps of audit readiness you can take to set yours up for success:

1. Assess the internal capabilities of your team to handle the audit on top of their regular duties.
2. Communicate openly with your auditor in regard to the timeline and any concerns, related requests, and questions about the process.
3. Bring together or prepare documentation showing the performance of your company’s internal controls.
4. Create a record of your accounting policies, and formalize details surrounding complex accounting scenarios. (This is where an audit consultant can help you strategize the right structure.)
5. Review your accounts and internal financials to ensure everything is in place with the help of an audit consultant. This includes checking that balance sheet reconciliations, analysis, and reports are correct and ready in addition to any other files auditors typically request.

What You Can Expect From GlassTax’s Audit Readiness Help

Our team works as a liaison between your management and auditors to facilitate a smooth execution. That help includes:

• Working with auditors regarding requirements for testing & documentation
• Meeting with external auditors about complex technical accounting matters
• Compilation of whitepapers and detailed memos on technical issues
• Preparing financial statements and schedules in an audit-ready format
• Support with new/existing applicable authoritative pronouncements
• Coordinating and managing your PBC list response to auditors
• Completing the SEC/ US GAAP disclosure checklists required from auditors
• Prepping and maintaining your trial balance bridge for the audit

Why Choose Us?

We understand what auditors are looking for, which means less time spent on requests and faster responses to auditor questions. Plus, our team can provide full support in-house if you have other needs tied to your audit, like post-acquisition integration, M&A services, or valuation help.

You’ll work with one point of contact, but with GlassTax, we bring a full firm to the table. And as you continue scaling up, we are here to help manage the growing needs of your business.

National perspective. Local insight.

For multinationals establishing footholds in the U.S., and U.S. companies expanding, relocating or consolidating operations, site selection can present significant opportunities. Tax credits/incentives vary significantly from state to state, and minimizing state and local tax liabilities is an important consideration in selecting sites for production, distribution, sales, back-office functions, customer assistance and more.

We have strong working relationships with state and local economic development agencies that partner with us during the site selection and tax incentives process. Tax and business incentives can be awarded in numerous forms, including:

• Income/franchise tax credits
• Tax rebates
• Discretionary cash grants and infrastructure assistance
• Tax exemptions for state and local taxes including income/franchise, sales and use taxes, payroll taxes, and real and personal property taxes

GlassTax, LLC has decades of experience assisting clients with state and local tax credits and incentives. To help our clients maximize these benefits, we offer a wide variety of specialized services, including:

• Identifying, quantifying, and securing state and local negotiated tax and financial incentive packages
• Preparing economic impact analyses measuring indirect/induced fiscal and economic impact of investment/expansion projects
• Drafting comparative tax and financial operating cost analysis by location
• Implementing processes and systems to comply with annual incentive reporting requirements as well as maximizing the value of the benefits over the term of the incentives package
• Performing statutory income tax credit refund reviews for overlooked or underutilized credits
• Providing Work Opportunity Tax Credit (WOTC) as well as state and local employment tax credit services for hiring targeted individuals
• Supporting green energy and energy efficiency efforts through the use of sustainability credits and incentives

Enhancing the public-private partnerships for businesses within their community
In addition to state and local tax incentives, BDO’s multidisciplinary team takes a holistic approach to help you identify, calculate and claim a wide range of business incentives and tax credits awarded by federal, state, local and non-U.S. governments.

Determining the most tax-efficient accounting methods to enhance your company’s cash flow

As companies respond to dynamic environments, accounting methods can get outdated, losing key timing for income, deductions and cost capitalization or recovery. The wrong method costs money while the right accounting methods offer real benefits for deferring income and offering significantly better cash flow.

The skilled tax professionals at GlassTax, LLC can help execute your business decision in a tax efficient manner to maximize tax savings. Following a detailed analysis of your records, we can reveal more tax-efficient methods for improving cash flow, managing effective tax rates, mitigating past noncompliance, or even managing expiring net operating losses. Method changes are both strategic and tactical. Our accounting methods specialists can prepare the required forms, including Form 3115, implement the new methods and file documents.