Accounting
Charles Rangel, a voice for the poor in tax debates, dies at 94
Charles Rangel, the dapper, voluble U.S. congressman from New York’s Harlem district who for four decades used his perch on the House tax-writing committee to advocate for inner cities and the people who live there, has died. He was 94.
The former congressman died on Monday, according to a
From 1974, when he became the first Black member of the House Ways and Means Committee, Rangel championed tax legislation to foster low-income housing and urban development, encourage trade with Caribbean nations and discourage U.S. business with South Africa’s apartheid government. He said the poor, the elderly and the infirm deserved and needed his protection.
“I don’t believe there’s any compassion in capitalism at all,” he said in 2013. “I believe it’s survival of the fittest.”
In 2007, he achieved his goal of becoming Ways and Means chairman. However, after just three years in the powerful post, he was pressured to step down during an investigation by the House ethics committee.
The panel found him guilty of 11 counts of violating House rules, including using his office to solicit donations for an academic center named after him at City College of New York and — particularly embarrassing for a member of the tax-writing committee — failing to pay taxes on rental income from his villa in the Dominican Republic. On Dec. 2, 2010, he became the first lawmaker
Admitted mistakes
Rangel admitted making mistakes but insisted he had never sought to enrich himself.
“I’m not going to be judged by this Congress,” he told lawmakers after the censure vote, “but I’m going to be judged by my life, my activities, my contributions to society, and I just apologize for the awkward position that some of you are in.”
Even as the ethics case was proceeding, voters in New York City’s 15th congressional district awarded
Rangel was the second congressman to represent his district since its creation during World War II. The first, Adam Clayton Powell Jr., pastor of the Abyssinian Baptist Church, served from 1945 to 1970 but spent part of the late 1960s in exile in the Bahamas, avoiding both a congressional investigation of his use of public funds and a contempt-of-court warrant in New York, where he had been found guilty of defamation. Rangel, a member of the New York legislature at the time, challenged and defeated the absent Powell in the 1970 primary.
O’Neill ally
In the House, Rangel allied himself with Massachusetts Representative Thomas “Tip” O’Neill, who would rise to Speaker in 1977. An original member of the Congressional Black Caucus from its founding in 1971, Rangel was elected its president in 1974 and led a push to get more Black congressmen onto key committees.
As part of a shakeup that placed 16 members of both parties onto Ways and Means, O’Neill created an opening for Rangel, who remarked that with the influx of new faces, the committee had “swung away from its conservative, rural orientation for the first time since the days of the 13 colonies.”
For the next four decades, no debate on tax or trade policy, Social Security or Medicare could be considered over until Rangel’s distinctive gravelly voice had been heard.
“There’s not a tax bill that poor and working people don’t come out ahead on because of my efforts,” he told the New Yorker for a 2000 profile. “It’s not because I’m that good. It’s just because other people want so many other things that I can say, ‘Hey, hold it. Stop the parade!'”
Reagan years
In no small part due to Rangel’s pressure, President Ronald Reagan approved factoring inflation into the earned income tax credit, which helps the working poor. In 1987, Rangel won passage of a measure — the so-called
He worked with Republicans on proposals to create so-called urban enterprise zones, where tax incentives would lure development. The idea was implemented in 1993 under President Bill Clinton, a Democrat, as empowerment zones, with one, the Upper Manhattan Empowerment Zone, located in Harlem.
In 1996, Rangel condemned as a “cruel monstrosity” Republican-drafted legislation that ended welfare as an entitlement. When Clinton agreed to sign the bill into law, Rangel lamented, “My president will boldly throw one million into poverty.”
Rangel also proposed reinstating a military draft of all men and women from 18 to 42, on the grounds that U.S. wars in Afghanistan and Iraq were being fought “predominantly by tough, loyal and patriotic young men and women from the barren hills and towns of rural and underprivileged neighborhoods in urban America where unemployment is high and opportunities are few.”
132nd and Lenox
Charles Bernard Rangel was born on June 11, 1930, in New York City, where he was raised in the home of his maternal grandfather, Charles Wharton — “by the tough corner of 132nd Street and Lenox Avenue in the heart of Harlem,” as he wrote in his 2007 memoir, authored with Leon Wynter.
His father, Ralph, who left the family when Rangel was six, was “absolutely no good,” Rangel said. He grew up around the apron strings of his working mother, Blanche, and was raised in part by his grandfather and his older brother, Ralph. He also had a younger sister, Frances.
One of Rangel’s early jobs was delivering copies of a newspaper published by Powell from his headquarters at Abyssinian Baptist Church. Rangel himself was Catholic.
As Rangel told it, he was an exceptional student until reaching DeWitt Clinton High School in the Bronx, where he felt “not able to compete” in the Jewish-dominated student body. He dropped out and signed up for the U.S. Army in 1948, an experience that left him with a sour taste for military recruiters — “no more than salesmen,” he said.
Purple Heart
In Korea in 1950, part of an artillery unit, Rangel was wounded by a mortar shell during a battle with advancing Chinese troops. He was awarded a Purple Heart and a Bronze Star for continuing to lead his heavily outnumbered men to safety.
Turning to the Veterans Administration for help in what to do next, Rangel said, he was given two options: electrician or mortician. But one counselor urged him to finish his education. Rangel took one year to complete his last two years of high school, then went on to graduate from New York University in 1957.
At St. John’s University, studying law on a full scholarship, he got involved with student government and displayed an ease with the ethnic politicking that dominates New York City elections.
“A group of us actually started our own national fraternity — mainly to stick it to the dean, because we thought he catered to one Irish fraternity,” Rangel wrote in his memoir. “And who was in our fraternity? Everybody except the preferred Irish majority.”
Enters politics
Following his graduation in 1960, Rangel worked as an attorney in private practice and a federal prosecutor while testing the waters in local Democratic politics. In 1966, he won election to the New York State Assembly to succeed Percy Sutton, who had been appointed Manhattan borough president. They became longtime allies.
Initially seen as reformers, Sutton and Rangel, along with Basil Paterson and future New York City Mayor David Dinkins, became known as the “Gang of Four” for their control of Harlem politics.
Rangel decided to challenge Powell for Congress after traveling to the Bahamian island of Bimini to try to persuade him to come home and serve. Rangel surpassed Powell by 150 votes out of 25,000 in the Democratic primary that September, then breezed to victory in the general election.
Drug trade
His initial priority was the illegal drug trade, and he urged more spending for rehabilitation programs. He was a member of the House Judiciary Committee when it approved articles of impeachment against President Richard Nixon.
While rising in seniority on Ways and Means, Rangel also sought a role in House Democratic leadership but was derailed in 1986, when Representative Tony Coelho of California defeated him for the role of House majority whip.
With his wife, the former Alma Carter, he had two children, Alicia and Steven.
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
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The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
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