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Wednesday, October 9, 2013

The SEC Approves Apple's Overseas Tax Strategies

AppleAll Things D:  SEC Clears Apple’s Tax Disclosures:

Four months after opening its review of Apple’s finances, the Securities and Exchange Commission has closed it, having found nothing untoward about the company’s handling of its overseas cash and related tax policies.

In a September letter to Apple, released late last week, the SEC said it had completed its review of the company’s fiscal 2012 annual report, and would take no action against it at this time. Evidently, there’s no need to, as the agency has found Apple’s disclosures to be sufficient, particularly now that it has agreed to provide investors with more information about its foreign cash, tax policies and plans for reinvestment of foreign earnings. In the SEC’s eyes, Apple accounts for taxes in accordance with generally accepted accounting principles.

Wall Street Journal editorial:  Apple of Their Eye: An SEC Investigation Approves the Company's Overseas Tax Strategies:

Senate investigations kingpin Carl Levin (D., Mich.) loudly accused Apple in May of being "the Holy Grail of tax avoidance," whatever that means, and the folks at the Securities and Exchange Commission quickly followed orders. The resulting SEC investigation of the tech maker's tax strategies has now cleared Apple of wrongdoing. Could it be that there was never any evidence behind Mr. Levin's smears? ...

The real outrage in this spectacle is that U.S. profits are hit with a combined federal and state statutory tax rate of 39.1% that is the developed world's highest. A close second is federal regulators threatening a successful business to please their political masters.

http://taxprof.typepad.com/taxprof_blog/2013/10/the-sec-.html

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Comments

Reporting in compliance with GAAP does not also mean Apple is not using skanky transactions to avoid/evade US tax liabilities.

Posted by: save_the_rustbelt | Oct 9, 2013 7:43:47 AM

FIN 48, to explain it very briefly, requires a "more likely than not standard" for tax positions to be reflected on US GAAP financial statements. That is a higher standard than required under the I.R.C., "substantial authority," to avoid the accuracy-related penalties of I.R.C. sec. 6662, or the even lesser standard of "reasonable basis" if disclosed.

Posted by: TexEcon | Oct 9, 2013 11:16:32 AM

"The real outrage in this spectacle is that U.S. profits are hit with a combined federal and state statutory tax rate of 39.1% that is the developed world's highest. A close second is federal regulators threatening a successful business to please their political masters."
No, the real outrage is that the WSJ cites the 39.1% figure as if it actually means something, implying that Apple pays more tax than its non-U.S. competitors, when in reality it is the other way around. Of course, WSJ cares about numbers, because they are easily sold to readers. The definition of "profits" to which the "outrageous" rate applies? who cares?

Posted by: Guy 2 | Oct 9, 2013 11:46:24 AM

This headline is misleading. The original story includes this correction:
"This post was updated to make it clear that the SEC’s review concerned Apple’s tax disclosures, not the legality of its tax practices under U.S. tax law, which is the purview of the IRS."

Posted by: Zorka | Oct 12, 2013 11:21:57 PM