Is there hope for true tax reform? And what would tax reform look like? It would take the President, a Republican Party leader and a Democratic Party leader working together to pass legislation. It would enact a simplified rate system for individuals and a simplified tax code that broadens the tax base and closes loopholes and special interest tax shelters. But is that really possible? Veterans of the tax accounting profession can remember the Tax Reform Act of 1986. President Reagan along with House Ways and Means Committee Chairman Dan Rostenkowski (D-IL) and Senate Finance Committee Chair Bob Packwood (R-OR) worked to get bipartisan support for the 1986 Act. The Act was highly debated and a controversial topic back then. It was a significant victory for the power of political compromise with both parties giving concessions to get the Act passed. The Act passed by a vote of 292-136 in the House and by a vote of 74-23 in the Senate.

The result was a tax code with fewer tax loopholes and a simplified rate structure (15% and 28%). The Act did leave in popular provisions such as the deduction for mortgage interest, charitable contributions, and deductions for state and local taxes. For some tax reform purists, these deductions are not economically sound but are either too popular with the general public or too politically sensitive to consider cutting. The Act also raised corporate and capital gain tax rates. The problem is that while the Act changed the tax code, it did not change the system by which our tax laws are enacted. By 1993, the top individual tax rate was back to 39.6% spread among 5 tax brackets. Since 1986, there have been an estimated 15,000 changes to the tax code. The tax code now is more complex than it has ever been and contains many or more of the special interest provisions that the 1986 Act tried to remove.    

 

A directive has been issued by the Large Business & International Division (LB&I) simplifying the approach in determining who bears the benefits and burdens of ownership in a contract manufacturing arrangement to claim a deduction under section 199 (DPAD).

 

The taxpayer that has the benefits and burdens of ownership of the property in a contract manufacturing arrangement is entitled to the DPAD deduction. Examiners were previously instructed in a prior directive to evaluate as many as nine factors in a three-part test to determine who had the benefits and burdens of ownership.

 

According to the recent guidance from LB&I, examiners should not challenge a taxpayer claiming DPAD as long as the taxpayer provides three statements:

 

1. Basis for determining that it had the benefits and burdens of ownership
2. Certification signed by the taxpayer
3. Certification signed by the other party to the contract manufacturing arrangement

Determining who bears the benefits and burdens of ownership is factually intensive and the recent guidance is an effort to reduce some of the controversy faced by taxpayers. The issued directive is effectively permitting the contracting corporation and the contractor to agree as to which of them will take the deduction granted the allocation is properly certified.

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040 or visit us on the web at www.uhy-us.com.

UHY Hosts Cross-Border M&A Conference in Shanghai

 

A forum pertaining to cross-border mergers and acquisitions in the United States was held on October 16, 2013, one day prior to the UHY Annual Members Meeting in Shanghai, China. Discussions included M&A opportunities in the US market, what business owners should know from both a China and US perspective including laws, financing, due diligence and tax planning, and post- m&a success stories.

 

Bill Kingsley, a partner with UHY LLP and Melanie Chen, a managing director of UHY Advisors NY, Inc., co-presented on financial due diligence and tax planning. Michael Mahoney, Chief Executive Officer of UHY Advisors NY, Inc. gave the closing remarks. In addition, UHY collaborated with several Chinese and US commercial banks and law firms who also participated.

 

The conference was a great success with over 100 attendees and covered numerous transaction topics from knowledgeable presenters. The local Michigan offices are planning to host similar forums here in the States.

 

As the US remains a primary destination for Chinese companies to access capital, technology and matured markets, UHY LLP's China Group helps clients navigate complex cross-border challenges. The firm's China Group consists of professionals with cultural, educational, and business backgrounds in both the US and Greater China Region. Many of the members have received advanced degrees in multiple countries, and regularly travel to the Greater China Region. As one of the nation's largest professional services firms, we provide customized accounting, tax and business advisory services for entities seeking to originate, pursue, or expand business opportunities in the US, China and beyond. 

 

Experienced Recruiting Update

 

UHY Michigan is actively looking for experienced candidates to fill key positions in our Farmington Hills and Sterling Heights Offices. Please review the openings below and if you know someone who may be interested in any of these roles please reach out to Amanda Sheets by email asheets@uhy-us.com or phone 586 843 2560. Job descriptions can be found on our careers page.

 

Sterling Heights

Seasonal Tax Consultant (5 years Public Acct. Experience)

Senior Tax Accountant

Senior Audit Accountant

Corporate Finance Analyst and Associate

 

Sterling Heights or Farmington Hills

Forensic Accountant

Director of Litigation

 

Farmington Hills

Senior Tax Accountant

 

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