Cruise operators may yet avoid paying more U.S. corporate taxes despite threats from U.S. Commerce Secretary Howard Lutnick to close favorable loopholes. 

Lutnick’s comments on Fox News Wednesday that U.S.-based cruise companies should be paying taxes even on ships registered abroad sent shares lower, though analysts indicated the worry may be overblown.

“We would note this is probably the 10th time in the last 15 years we have seen a politician (or other DC bureaucrat) talk about changing the tax structure of the cruise industry,” Stifel Managing Director Steven Wieczynski wrote in a note to clients. “Each time it was presented, it didn’t get very far.”

Industry shares fell sharply Thursday. Royal Caribbean Cruises Ltd. closed 7.6% lower, the largest drop since September 2022. Peers Carnival Corp. and Norwegian Cruise Line Holdings dropped by at least 4.9%.

All three continued slumping Friday, trading lower by around 1% each.

Cruise companies often operate their ships in international waters and can register those vessels in tax haven countries to avoid some U.S. corporate levies. It’s exactly those sorts of practices with which Lutnick has taken issue. 

“You ever see a cruise ship with an American flag on the back?,” Lutnick said during the interview which aired Wednesday evening. “They have flags like Liberia or Panama. None of them pay taxes.”

“This is going to end under Donald Trump and those taxes are going to be paid.” He also called out foreign alcohol producers and the wider cargo shipping industry. 

The vessels are embedded in international laws and treaties governing the wider maritime trades, including cargo shipping. Targeting cruise ships would require significant changes to those rule books to collect dues from the pleasure crafts, analysts noted. The cruise industry represents less than 1% of the global commercial fleet, according to Cruise Lines International Association, an industry trade group.

They also pay significant port fees and could relocate abroad to avoid new additional taxes, according to Wieczynski, who sees the selloff as a buying opportunity. 

“Cruise lines pay substantial taxes and fees in the U.S. — to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters,” CLIA said in an emailed statement. 

Should increased taxes come to pass, the maximum impact to profits would be 21% on US earnings, Bernstein senior analyst Richard Clarke wrote in a note. That hit wouldn’t be enough to change their product offerings, though it may discourage future investment. Recently, U.S. cruise companies have spent billions beefing up their operations in the U.S. and Caribbean. 

Cruise lines already employ tax mitigation teams that would work to counteract attempts by the U.S. to collect taxes on revenue generated in international waters, wrote Sharon Zackfia, a partner with William Blair.

Royal Caribbean did not respond to requests to comment. Carnival and Norwegian directed Bloomberg News to CLIA’s statement. 

Ascend, a private-equity backed accounting firm, added a vice president of partnerships to its leadership team.

Maureen Churgovich Dillmore will oversee the expansion of Ascend’s growth platform for regional accounting firms into new U.S. markets, effective Feb. 17. She was previously executive director of the Americas at Prime Global. Prior, she was executive director at DFK International/USA.

“I have dedicated a large part of my career to supporting firms that want to remain independent. The dynamics of achieving success in this area are evolving rapidly, and the Ascend model was created so that firm identity would not be at odds with accessing the community and resources needed to prosper. I am genuinely impressed by Ascend’s ability to assist mid-sized firms in making the necessary strides to stay relevant, sustain growth, and provide their staff and clients with top-tier shared services—all while preserving their unique brand and culture,” Churgovich Dillmore said in a statement.

Ascend has added 14 partner firms across 11 states since the company launched in January 2023.

“So much of association work is theoretical, advising member firms on best practices, and you don’t get to see the end game. What excites me about being on the Ascend team is the opportunity to be a force behind the change, to help enact the change and see where and how it comes in,” Churgovich Dillmore added.

“Maureen’s decision to join Ascend is rooted in her desire to serve the profession in a way that maximizes her impact. We are all excited to welcome someone into our Company who has been an advisor and friend to mid-sized CPA firms for over a decade, and it is all the more rewarding when you realize that the community and resources we are bringing to life will allow Maureen to have conversations with firms that she’s never had before. Her curiosity, commitment, and deep care for others are going to stand out in this role,” Nishaad (Nish) Ruparel, president of Ascend, said in a statement.

Ascend is backed by private equity firm Alpine Investors and works with regional accounting firms with between $15 and $50 million in revenue. It ranked No. 59 on Accounting Today‘s 2024 Top 100 Firms list, with $126 million in revenue and over 600 employees. 

U.S. prosecutors and regulators are investigating a $32 million deal between CrowdStrike Holdings Inc. and a technology distributor to provide cybersecurity tools to the Internal Revenue Service, according to two people familiar with the matter and a document seen by Bloomberg News.

Investigators for the Justice Department and the Securities and Exchange Commission have been interviewing people and collecting records related to the deal, according to the document and people. They spoke on condition of anonymity because they are not authorized to discuss the matter.

Carahsoft Technology Corp. paid CrowdStrike for the deal that the cybersecurity firm closed on the last day of a fiscal quarter in 2023, but the IRS never purchased the products, Bloomberg first reported in October. The transaction under investigation was big enough that it could have made the difference between CrowdStrike beating or missing Wall Street projections for the period, although the Austin, Texas-based company has declined to detail how it accounted for the deal. The day after CrowdStrike reported results for the record quarter, its shares rose 10%.

The parallel probes, which haven’t been previously reported, also represent additional scrutiny of Carahsoft, a dominant reseller of technology to the U.S. government. The FBI searched the firm’s headquarters last year, and federal prosecutors are conducting a separate civil investigation of whether the company conspired with another technology firm to overcharge the government.

CrowdStrike spokesperson Brian Merrill said in an email, “we stand by the accounting of the transaction.” A lawyer for Carahsoft, Samarth Barot, declined to comment.

A spokesperson for the U.S. Attorney’s Office for the Southern District of New York, Nicholas Biase, declined to comment. An SEC spokesperson, Cory Jarvis, said the agency doesn’t comment on “the existence or nonexistence of a possible investigation.”

As early as last fall, SEC and DOJ investigators were questioning former CrowdStrike employees involved in the deal, as well as IRS staff, and they’ve continued to pursue interviews in recent weeks, according to the people and documents. They’ve also collected records related to the deal, including written communications from employees of the IRS, CrowdStrike and Carahsoft.

The investigators asked witnesses detailed questions about the interactions between CrowdStrike sales staff and IRS officials in the lead-up to the deal’s closure, one of the people said. They’ve inquired repeatedly whether the agency purchased the CrowdStrike software and were told no, the person said.

IRS officials did not respond to calls and emails seeking comment.

Prosecutors from the U.S. Attorney’s Office for the Southern District of New York are among those working on the investigation, according to the person.

The deal under scrutiny is complex and some specifics of it remain unclear. Documents from Carahsoft and CrowdStrike show that it was for identity threat protection software to be used by the IRS. The agency, however, never bought it.

CrowdStrike closed the deal on the last day of its third fiscal quarter in 2023. In a subsequent earnings call, Chief Executive Officer George Kurtz highlighted it by saying, “identity threat protection wins in the quarter included an eight-figure total deal value win in the federal government.”

Carahsoft has been making on-time payments to CrowdStrike, the cybersecurity firm told Bloomberg last fall. Both companies explained then that they had a “non-cancellable order” between them, but declined to say why they struck the deal without a purchase in place from the IRS, or what became of the millions of dollars worth of software subscriptions that were at stake.

In an earnings report in November 2024, CrowdStrike excluded roughly $26 million from its annual recurring revenue for the quarter. The company’s chief financial officer, Burt Podbere, said the unusual move followed the company determining the transaction wouldn’t be repeated “after a distributor in the federal space provided notice of its intention to exercise transferability rights with respect to a transaction.”

CrowdStrike representatives have declined to elaborate or say whether the comments were related to the deal involving the IRS and Carahsoft.

At the time of the deal, some CrowdStrike staff raised internal concerns that the company was “pre-booking” the transaction, which they viewed as incomplete because it was unclear whether the IRS would ever make the large purchase, Bloomberg previously reported. U.S. regulators have in some cases sued and fined companies over alleged pre-booking, also known as channel stuffing, claiming they misled investors by improperly recognizing revenue to inflate their financial figures.

A CrowdStrike spokesperson previously said it was “demonstrably false” that there was any pre-booking and that the deal was reviewed and “given a clean bill of health.”

U.S. investigators have already spent years examining Carahsoft, a leading player among resellers and distributors that help technology companies navigate the complexities of selling to government agencies. In September, agents from the FBI and the U.S. Department of Defense searched the company’s Reston, Virginia, headquarters.

A Carahsoft spokesperson said at the time that it was cooperating with the FBI probe, which involved “an investigation into a company with which Carahsoft has done business in the past.” The Justice Department is also conducting a separate civil investigation of Carahsoft and SAP SE for potential price fixing on government contracts, as Bloomberg previously reported. The German firm is cooperating with the civil probe, according to a spokesperson.

There’s no known link between CrowdStrike and the civil investigation nor the search of Carahsoft’s office. A representative of the cybersecurity company previously said it’s not connected to either.

Federal investigations, especially of complex cases, often run for years and many end without any formal accusations of wrongdoing.

Adam Pritchard, a professor at the University of Michigan Law School and former SEC lawyer, said that regardless of what investigators find, the probes will cost CrowdStrike and Carahsoft in legal fees and managers’ time, and draw scrutiny from their boards of directors. He said investigators will likely be interested in whether the companies had any “additional understandings” about the deal beyond their contract and, if so, whether they were disclosed to auditors.

“If I were investigating, I would want to know if there were implicit understandings that if the deal didn’t go through with the IRS that they could work out the money over the course of their ongoing relationship,” said Pritchard.