Bracing for Obama's Impact on Corporate Tax Changes

What cuts will be included in the economic stimulus package and compliance are the top concerns

The inauguration of President Barack Obama today presages a series of changes in tax laws and accounting standards that are weighing heavily on senior financial executives and business groups, and will require an increased focus on risk.
Slightly more than half (51%) of the 300 some accountants surveyed by Ajilon Professional Staffing expect the new administration to have a “negative impact on corporate tax policy.”

Financial Executives International (FEI) and other business groups hope to stop that from happening by encouraging Congress to include more tax cuts to the economic stimulus plan, which House leaders promise to present to President Obama by Feb.13. Already squelched by Democrats was a proposed $3,000 tax credit for every worker hired or retained.

Still on the table are bonus depreciation, a five-year extension of the net operating loss carry-back and a one-year deferral of the 3% withholding tax for government contracts, according to Charles Rangel, a New York congressman and chairman of the tax-writing House Ways and Means Committee.

FEI endorsed these proposals and remains “optimistic” they will end up in the final bill “and hopefully one or two more,” says Matt Miller, the group’s director of tax and economic policy. FEI’s taxation committee recently urged house leaders in a letter to also extend the general business credit carry-back to five years from one; temporarily change the treatment of capital losses; extend and strengthen the R&D tax credit and allow foreign subsidiaries of U.S. companies to lend or send money to the United States without adverse tax implications. “All these recommendations would help with liquidity concerns and stimulate the economy,” says Miller.

Even as the administration occupies the White House, concerns about tax risk are accelerating, according to a recent Ernst & Young global survey. Some 26% of the 581 tax managers polled say risk issues now take up more than one-fifth of their time, compared with 16 percent two years ago.

Many companies aren’t prepared; just 35% say they have documented procedures for managing tax risk that extend beyond legal requirements, though 65% contend they have comprehensive coverage.

A shortage of skilled auditors magnifies the concerns, according to 77% of tax managers in the Ernst & Young study. The accountants in the Ajilon survey back that finding up, but hold out little hope for a remedy. Just 13% say they plan to hire staff to handle the additional work expected this tax season.

Meanwhile, 37% of North American respondents in the Ernst & Young study rated changes in financial standards their main external tax risk. “Uncertain economic times combined with a new administration foretelling tax reform and proposed roadmap of new financial reporting standards have made effective tax risk management and communication across the enterprise vital to success,” says Carolyn Colias, Americas director of tax accounting and risk advisory services for Ernst & Young.

Financial Executives: Keeping Track

Daniel J. Finnegan, Michael D. Collins, Chris Froggatt, Barbara Gomez

Priceline.com Inc., the $1.41 billion Norwalk, Conn.-based online travel services provider, promoted Daniel J. Finnegan, 46, to CFO, replacing Robert J. Mylod Jr., 42, the new vice chairman and head of worldwide strategy and planning. Matthew N. Tynan, 32, formerly vice president of financial planning, strategy and analysis, becomes senior vice president of finance and investor relations. Anthony J. Cali, 36, formerly director and assistant controller, becomes vice president and controller. Finnegan joined Sears in 2004 after serving as CS Technology CFO.

Sears Holdings Corp., the $50.7 billion Hoffman Estates, Ill., retail giant, announced that Michael D. Collins, previously senior vice president of finance, has begun serving as CFO. He replaces J. Miles Reidy, who has resigned to attend to a family issue. Also, Fred Jasser is Sears’ new vice president and treasurer. Jasser most recently served as vice president of Goldman Sachs & Co.’s investment banking division. Collins was senior vice president of planning and analysis at GE's NBC Universal division.

Pinnacle West Capital Corp., the $3.5 billion Phoenix-based holding company for the state’s largest electric utility, Arizona Public Service (APS), reorganized the financial group to help maintain access to capital investment while lowering operating expenses in the face of the economic meltdown. Vice presidents Chris Froggatt and Barbara Gomez will switch positions, with Froggatt becoming treasurer and Gomez becoming controller and chief accounting officer. Denise R. Danner has been hired as APS controller from Allied Waste Industries.

Tropicana Entertainment LLC, the Las Vegas-based $1.2 billion casino and river boat gambling company, named Richard L. Baldwin, vice president, CFO and treasurer. He replaces Robert Kocienski, who is retiring to pursue other interests. Previously, Baldwin served in a similar capacity at Shuffle Master Gaming. Before that, he was director of corporate finance and an Anchor Gaming.

California Pizza Kitchen Inc., the Los Angeles-based $632.9 restaurant chain, gave Todd Slayton, who already serves as senior vice president corporate finance and controller, the additional title of chief accounting officer following Sue Collyns promotion to executive vice president and chief operating officer. Collyns will continue as CFO. 

FICAD, SAS Team on Derivatives Analysis

Treasuries can use library to consolidate pricing, risk assessment and valuation data.

FinancialCAD Corp. has expanded its reach in the derivatives analysis market through a partnership with SAS Institute Inc. A leading business intelligence software provider,  Cary, N.C.-based SAS now offers its enterprise risk management (ERM) customers entree into FINCAD's analytics library, where corporate finance treasuries can access and consolidate pricing, risk assessment and valuation data.

This is the latest vendor partnership for Surry, British Columbia-based FINCAD. Most partners embed the analysis technology into their treasury management products, says Robert Park, FINCAD CEO. SAS, however, offers its Risk Dimensions enterprise option as an add-on. “This arrangement is emblematic of the increasing need for collaboration,” says Park. “Derivative analysis has become too great for most vendors to handle on their own.”

Helping Plan Sponsors Manage Data

Northern Trust adds reporting capabilities to its Web portal

Northern Trust has enhanced reporting capabilities for its Benefit Payment Services offering, which issues more than 1.3 million pension and savings plan distributions each month. Through Passport, Northern Trust’s Web portal, sponsors can access an array of reports. The enhancements let clients choose when, how and in what format they can view their benefit payments data. 

Institutional users can now customize specific data elements that can be downloaded to a spreadsheet, making the data more manageable, according to Geordan Capes, global head of Passport product and consulting business. “This allows our clients to carve out specific data and manipulate it using the format that they are most comfortable with, whether that be a standard report or a spreadsheet,” explains Capes.