U.S. States, Cities Seek Voter Approval for $17 Billion of Debt

States and municipalities across the country are asking voters to approve $16.8 billion in bonds this upcoming election on November 2nd. According to Business Week.com, this represents the lowest amount during a congressional year general election since 1996. Check out a snippet of their story below.

U.S. states and municipalities from Maryland to Alaska will ask voters to approve $16.8 billion in bonds Nov. 2, the lowest general-election amount in a congressional year since 1996, Ipreo Holdings LLC data show.

Lawmakers in Alaska seek to issue $997 million of bonds, the most of any ballot question this year, to fund mortgages for veterans, while voters in Washington state will consider $505 million for energy projects at schools, according to New York- based Ipreo, a market-research company. Issuers asked for authority to borrow almost $67 billion in the general election two years ago and $79 billion in 2006, the largest amounts since 1946, according to data compiled by Thomson Reuters.

In 1996, voters considered $16.6 billion in bonding authorizations, Thomson Reuters data show. General-election ballots typically contain more debt in even years, when congressional elections are held, than in odd-numbered ones. In 2009, governments sought approval for $9.8 billion.

“The public is getting nervous about all the debt being accumulated in this country,” said John Matsusaka, president of the Initiative & Referendum Institute at the University of Southern California in Los Angeles. “The appetite has been diminished.”

The $67 billion sought two years ago was driven by California, which isn’t putting any statewide bond questions before voters on Nov. 2.

Continue reading at Business Week.com…

Tax Court Denies Prof's Claimed Deductions for Research

Recently the U.S. Tax Court denied a math professor from The City University of New York an education related tax deduction. The professor attempted to write off $15,397 in expenses related to research and writing activities. However, the judge felt he failed to adequately substantiate his deductions. Check out the following snippet of the ruling courtesy of the Tax Prof Blog, or click here for a PDF of the court’s ruling.

Petitioner has, potentially, two trades or businesses. He is employed as a professor of mathematics, and he is engaged in research and writing on mathematical issues. He "wears two hats" but the "hats" are so similar in appearance that it is difficult to tell the difference between them. Because of this circumstance, it is particularly important that petitioner distinguish his research and writing activity from his activity as college professor as well as from his personal activities. ...

Petitioner's testimony is reasonable; however, he has failed to provide the Court with any adequate records or sufficient evidence to corroborate his own testimony. ... Petitioner has failed to show that he is entitled to Schedule C deductions in excess of those respondent allowed. Because petitioner has failed to adequately substantiate his deductions, the Court need not address the profit objective, trade or business, and startup issues respondent raised in his pretrial memorandum.

Shpilrain v. Commissioner, T.C. Summ. Op. 2010-133 (Sept. 9, 2010).

U.S. Could Lose $37 Billion a Year to Tax Havens: Levin

From ABCNews.com:

The U.S. government loses $37 billion per year in tax revenues because multinational corporations stash money in overseas tax havens, Democratic Senator Carl Levin and a group of small businesses said in a report on Tuesday.

Levin, who for years has pushed for a tough law to fight tax evasion among corporations, has enlisted some small businesses to back his so-far unsuccessful proposal to close loopholes letting companies legally avoid taxes by keeping income abroad.

"There are too many small businesses now paying more than their fair share," Levin told reporters on a conference call. "It creates a very unfair competitive situation."

Levin wants to attach some of his proposals to help fund a bill that sets up a $30 billion fund for small business. Levin has tried to attach his initiative to other bills in the past without success.

The coalition of small companies favors banning the use of overseas tax havens, which are generally unavailable to smaller firms.

More Americans Are Forfeiting Citizenship to Escape U.S. Taxes

According to the Financial Times, a significant number of Americans living outside the country are renouncing their US citizenship to avoid paying taxes on their worldwide income and gains.

As many as 743 American expatriates made the irreversible decision to discard their passports last year, according to the US government – three times as many as in 2008.

The trend was particularly noticeable in the UK, where 190,000 Americans live and work. There is a waiting list at the embassy in London for people looking to give up citizenship, with the earliest appointments in February, lawyers and accountants say.

U.S. Lost Most Jobs Among Rich Countries

From ABCNews.com:

Unemployment in rich countries may have peaked — but there are still 17 million more people out of work than at the start of the crisis, the OECD said Wednesday.

They are "the human cost of the crisis," OECD chief Angel Gurria said, urging governments not to neglect them as they seek to repair wrecked balance sheets.

The longer a person is unemployed, the harder it typically becomes for them to gain paid employment.

"This threatens to mark whole generations," Gurria said in a news conference to mark the publication by the Organization for Economic Co-operation and Development of the report 'Employment Outlook 2010.'

There are 47 million unemployed in the OECD's 31 member countries — the world's most developed economies, the report says.

That's a rate of 8.6 percent, according to May 2010 figures, and compares with 5.8 percent in 2007.

Rating Cut by Fitch on Wealthiest U.S. State

According to EconomicPolicyJournal.com, the state of Connecticut is expected to borrow nearly a billion dollars to close a budget gap in the fiscal year beginning July 1^st. This move comes after boring money last fiscal year to cover their $947.6 million deficit. As a result, Fitch – a well-regarded international credit rating agency – has downgraded the states credit rating AA+ to AA.

“The downgrade reflects the state’s reduced financial flexibility, illustrated by its reliance on sizable debt issuances during the current biennium to close operating gaps in the context of already high liabilities,” Fitch said.

Connecticut is the wealthiest state on a per capita basis with personal income of $54,397 in 2009, according to Department of Commerce.

US to Probe Thousands More Offshore Tax Evaders

From Reuters.com:

The U.S. government expects to probe thousands more cases of wealthy individuals dodging taxes through offshore bank accounts, on top of the high profile case against UBS AG (UBS.N) (UBSN.VX), a U.S. tax attorney said on Monday.

"We expect over the next couple of years, in addition to the UBS cases, to have somewhere between 4,000 and 7,000 more cases coming to us with. These are from banks and governments cooperating," said Kevin Downing, a senior tax attorney of the U.S. Department of Justice, in a lecture in Singapore.

Some private banking clients are choosing to take cash from Swiss accounts and carry it by hand back to the United States, to avoid an electronic trail, only to be caught by U.S. law enforcement officers and penalized for tax evasion and illegal smuggling of money into the country, Downing said.

"When they go in and close their accounts, they are picking up brand new $100 bills ... that are coming in $100,000 shrink-wrapped bundles. Guess what? We can trace that money," he said, adding such cash would be forfeited.

Singapore was one stop in a tour of Asian cities also including Hong Kong, Beijing and Shanghai by Downing and his U.S. Justice Department team. The tour featured meetings with financial and tax regulatory bodies and bankers discussing cross-border tax prosecutions.

Mortgage Rates on 30-Year U.S. Loans Rise to 5.05

According to Bloomberg.com, US mortgage rates climbed for the first time in nearly a month; this increased the cost of borrowing and caused home sales to be the lowest levels on record. The 30-year fixed rate rose to 5.05%, up from 4.93%.

“This is potentially a preview of the data we’ll have to watch over the next few months,” Donald Rissmiller, Chief Economist at Strategas Research Partners in New York, said in a telephone interview. “Big changes are on the horizon that are going to be critical for the economy.”

Mortgage rates may rise further when a Federal Reserve program to purchase as much as $1.25 trillion in mortgage-backed securities ends next month. The program is credited with helping reduce mortgage rates, which fell to a record low of 4.71 percent in December.

Bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, which buy home loans from lenders and package them into securities, brought down yields and allowed lenders to reduce mortgage rates while still selling the bonds at a profit.

IRS Silent So Far On New US Tax Rules For Inherited Wealth

From TradeSignalOnline.com:

The U.S. Internal Revenue Service is taking a wait-and-see approach on issuing guidance dealing with taxes on inherited wealth, unsure whether Congress will act in the next several months to change the rules again.

Advisers to the wealthy say they are left without a roadmap on a number of issues related to the disposition of assets left behind by those who have died since Jan. 1. In particular, they are looking to IRS for rules on how a new capital gains-tax regime that took effect this year will apply to estates.

"There are no forms that give us any idea how or what we are supposed to report," said Stephen Litman, an estate planner at the Minneapolis law firm of Leonard, Street and Deinard. "This leads to significant administrative challenges for families."

Congress is weighing whether to set permanent rules for taxing estates, and whether to make those rules retroactive to the beginning of this year, but such action is weeks, and maybe even months, away.

The 2001 tax-cut law was aimed at gradually eliminating estate taxes, but repeal proponents at the time lacked the congressional majorities needed to do so permanently.

Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising

From Bloomberg.com:

An exodus of discouraged workers from the job market kept the U.S. unemployment rate from climbing above 10 percent in December, economists said.

Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4 percent, according to economists including David Rosenberg at Gluskin Sheff & Associates in Toronto and Harm Bandholz at UniCredit Research in New York.

“The actual unemployment rate is higher than shown by the official numbers,” Bandholz said yesterday after a Labor Department report released in Washington showed the economy unexpectedly lost 85,000 jobs in December while the jobless rate was unchanged.

About 1.7 million Americans opted out of the workforce from July through December, representing a 1.1 percent drop that marks the biggest six-month decrease since 1961, the Labor Department report showed. The share of the population in the labor force last month fell to the lowest level in 24 years.

December’s 10 percent unemployment rate matched the median forecast of economists surveyed by Bloomberg News. It was shy of the 26-year high of 10.1 percent reached two months earlier.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- rose to 17.3 percent in December from 17.2 percent.

The number of discouraged workers, those not looking for work because they believe none is available, climbed to 929,000 last month, the most since records began in 1994.

Mortgage Activity Fell in U.S. Last Week

According to UPI.com, the amount of mortgage applications fell by around 12% in the United States last week. The Mortgage Bankers Association made the announcement at the end of last week, and also reported that the Refinance Index fell by over 16%.

The average interest rate for 30-year, fixed-rate mortgages decreased from 5.07 percent to 5.04 percent with points rising from 1.13 to 1.25, the organization said.

Rates for the average 15-year, fixed-rate mortgage increased slightly from 4.51 percent to 4.53 percent. Points in 15-year, fixed-rate mortgages fell from 0.96 to 0.78.

The average interest rate for one-year adjustable rate mortgages fell from 6.86 percent with an average 0.31 points to 6.79 percent with 0.29 points, the report said.

Swiss Sell UBS AG Stocks, Tax Settlement Already Rewarding

As a result of the yesterday’s announcement that the names of over 4,500 Americans using bank accounts to avoid taxes would get turned over to the US government, Switzerland decided to let go of their UBS AG investments this morning. The sale earned the Swiss government an estimated $1.2 billion Francs – or about $1.1 billion in US currency.

The Swiss state sold 332.2 million shares to institutional investors at 16.50 francs each, the government said in a statement today. Including a 1.8 billion-franc cash payment the state is getting from UBS, the proceeds amount to about 7.2 billion francs.

The government bought 6 billion francs of UBS mandatory convertible notes last year to help the Zurich-based bank split off toxic assets amid the worst economic crisis since the Great Depression. The settlement of a U.S. lawsuit that sought data on 52,000 UBS clients and a 3.8 billion-franc capital increase in June strengthened confidence in the bank, the government said.

“The exit is a positive signal, as it shows the confidence of the Swiss government regarding the situation of UBS,” Stefan Schuermann, an analyst at Vontobel with a “hold” rating on the stock, said in a note. “The placement increases UBS’s flexibility in rebuilding its franchise and will help to keep or hire key employees.”

UBS rose 76 centimes, or 4.5 percent, to 17.50 francs in Swiss trading. UBS shares have risen 17 percent since the U.S. and Switzerland said they had reached an agreement in principle on the tax lawsuit on July 31.

Continued at Bloomberg.com…

Swiss to Reveal UBS Accounts to Settle U.S. Tax Fight

The legal battle between the U.S. and the Swiss looks like it may finally be coming to an end, according to a new Reuters.com story. As part of the deal, Switzerland has agreed to hand over 4,450 UBS AG bank accounts to U.S. authorities. This historic deal represents a new direction for IRS enforcement, and will likely result in millions of dollars in federal revenue.

With Switzerland's famed banking secrecy under fire, the Swiss have also agreed to process requests by the United States seeking information from its banks besides UBS about account holders who may have tried to evade U.S. taxes.

"This announcement today should send a signal - no matter what institution you're with, the IRS is willing to pursue both the institution and the individual," Internal Revenue Service Commissioner Doug Shulman told reporters on Wednesday.

The accounts were at one time worth $18 billion, Shulman said, though he could not provide a current figure.

U.S. authorities would not name any other foreign banks under probe but the IRS is expected to use the Swiss deal as a template to pursue further prosecutions.

"The IRS is now gaining institutional skill and knowledge in how to pursue these types of cases and they're going to use that. This is, I believe, the beginning and not the end," said Peter Hardy, a former federal prosecutor and specialist in white-collar crime at Post & Schell in Philadelphia.

Settlement Near in UBS Tax Evasion Case

According to the Associated Press the U.S. and Swiss government are close to reaching a deal over recent allegations that American taxpayers were using accounts to avoid paying taxes on the funds. The Federal government had planned to take UBS (the largest Swiss bank) to trial, but a Florida judge has canceled the trial after word broke that negotiations between the governments had been fruitful.

Justice Department attorney Stuart Gibson said Friday in a conference call with the judge that major issues have been resolved. He did not disclose details.

U.S. District Judge Alan S. Gold agreed to cancel a trial that was supposed to begin Monday.

The dispute involves about 52,000 Americans the U.S. believes are hiding billions of dollars of assets in UBS accounts. The bank and Swiss government say the names cannot be disclosed without violating long-standing Swiss bank secrecy laws.

U.S. Secretary of State Hillary Clinton and Swiss Foreign Minister Micheline Calmy-Rey are scheduled to discuss the issue Friday in Washington.

Swiss, U.S. Seen Needing Time to Ink UBS Tax Deal

The August 3^rd deadline for a settlement between Switzerland and the U.S. on the UBS case seems unlikely, according to several sources close to the case. Alibaba.com recently published a great article on the topic, explaining why a settlement is so hard to reach, and what the outcome is likely to be. You can read a segment of the story below.

Talks between Switzerland and the United States to end a tax row targeting UBS could stretch beyond an Aug. 3 deadline to allow more time for a detailed settlement, a source familiar with the situation said on Friday.

U.S. tax authorities are seeking to force Swiss wealth management giant UBS to disclose the identity of an estimated 52,000 U.S. holders of secret Swiss accounts suspected of dodging taxes even though this breaches Swiss bank secrecy laws.

A trial against UBS was scheduled to start in Miami on July 13 but presiding judge Alan Gold agreed to delay it until Aug. 3 to allow time for a settlement.

A status call between Gold and lawyers from UBS and the U.S. Internal Revenue Service on July 29 could be an opportunity for an announcement of a delay. A meeting between Swiss Finance Minister Micheline Calmy-Rey and U.S. Secretary of State Hillary Clinton is also scheduled on July 31.

"I would not be surprised if during the July 29 call or at the weekend there may be another request for a delay," a source familiar with the situation told Reuters.

Many investors believe the judge will again postpone the trial as the tax talks are complex and working out a deal that without further weakening bank secrecy requires time.

"Nothing will happen on Wednesday. The parties will agree to postpone the deadline until September to reach an agreement," a Swiss-based trader told Reuters.

Two Swiss-based sources familiar with the situation said a deal was unlikely to come before July 29.