Connect with us

Accounting

The $10B battle for Congress: Races to watch

Published

on

The battle for control of Congress has topped $10 billion as the two parties vie for outsized influence over taxes, spending and the implementation of the next president’s agenda.

It’s a staggering and potentially historic sum, based on OpenSecrets data, considering that only about a 10th of congressional races are actually competitive. Yet, it outpaces spending on the hard-fought presidential election. 

The whopping figure reflects the colossal stakes. Control of Congress is pivotal to economic policy. The expiration next year of the 2017 tax law puts trillions of dollars in tax provisions in play. The Senate can block the appointment of key financial-industry regulators. Legislative battles are shaping up over prescription drug prices and regulation of the crypto industry, energy, artificial intelligence and social media.

capitol-runner.jpg
A runner stands near the U.S. Capitol in Washington.

Oliver Contreras/Bloomberg

Republicans are currently favored to gain the Senate majority based on a favorable map, while minority Democrats have at least an even chance to take control of the House, potentially reversing both chambers and continuing a divided government. Many races remain tight and the outcome may not be known for days after the Nov. 5 election. 

Here are some key races to watch:

The Senate: Montana

Democrats’ hopes in the Senate largely hinge on Montana, where three-term incumbent Jon Tester has trailed Republican Tim Sheehy, a political newcomer, businessman and former Navy Seal. That race is set to break records with about $250 expected to be spent per resident of the sparsely populated state on advertising alone, according to AdImpact data.

Tester, a third-generation farmer, has long relied on his folksy charm and a reputation for delivering resources to his state to overcome its Republican tilt. This year, Democrats hope Tester’s support for abortion rights will help him and other vulnerable candidates hold on.

But former President Donald Trump is expected to win in Montana by double digits, so Tester will need many Montanans to split their ticket between the parties, a practice that has become less common as the electorate has become more polarized. 

Ohio

Even if Tester pulls out a win, Democrats would likely need to win every other tossup race, including Ohio, where Sherrod Brown is trying to defend his seat against car dealer Bernie Moreno. Advertising alone has cost more than $530 million in that race, according to AdImpact.

As in Montana, Trump is expected to win Ohio easily, which could give Moreno a boost despite Brown’s popularity with many White working-class voters who form the former president’s base.

Democrats also need to keep seats in the presidential “Blue Wall” battlegrounds of Pennsylvania, Wisconsin and Michigan — all states where races have tightened — as well as in Arizona and Nevada, where the party’s Senate candidates have held larger leads in polls.

Wild cards

If Tester loses, Democrats would need an upset win somewhere else. That would likely require Colin Allred to defeat Senator Ted Cruz in Texas or Debbie Mucarsel-Powell to beat Senator Rick Scott in Florida. A wild card race in Nebraska, where independent union leader Dan Osborn has been running neck-and-neck with incumbent Republican Deb Fischer, could also scramble the outcome on election night.

Democrats’ best-case scenario is likely a 50-50 Senate, with control of the chamber depending on the outcome of the presidential race, because the vice president breaks ties.

Republicans, however, could win as many as 55 seats if they sweep the tossup races. A larger majority would widen the aperture for GOP tax cuts and other legislation if they control both chambers of Congress and the White House. In 2017, the party’s thin majority led to the defeat of efforts to repeal the Affordable Care Act via a thumb down from then-Senator John McCain. 

The GOP has hoped that popular former Governor Larry Hogan would pull off an against-the-grain win in heavily Democratic Maryland, but Prince George’s County Executive Angela Alsobrooks has had double-digit leads in recent polls despite significant super political action committee spending on Hogan’s behalf, including $10 million from billionaire Ken Griffin.

The House: New York and California

Democrats’ chances are significantly better in the House, where Republicans now hold only a slim majority and must defend many areas won by President Joe Biden in 2020, including in heavily Democratic states like New York and California. The party needs a net gain of just four seats to hand the speaker’s gavel to Hakeem Jeffries of New York, and with it the power over the federal purse and House investigative subpoenas.

In addition to 10 New York and California seats in play, Democrats have targeted Heartland districts in Nebraska and Iowa now held by Republicans, as well as battlegrounds in New Jersey and Arizona.A Des Moines Register poll published Sunday showed Democratic challengers in Iowa leading incumbent Republican Representative Mariannette Miller-Meeks by 16 percentage points and incumbent Republican Representative Zach Nunn by 7 points among likely voters. The poll showed a surge for Democrats among women and disproportionate enthusiasm among them for voting in a state that imposed a ban on abortions after about six weeks with limited exceptions.In Louisiana, a newly reconfigured, majority-Black district favors a Democrat succeeding GOP Representative Garret Graves, who decided not to seek reelection. In Alabama, another redrawn district, similarly designed to give Black voters more voting representation, could bring another seat shift toward Democrats.

Meanwhile, Speaker Mike Johnson of Louisiana — who unexpectedly ascended to the job late last year after the tumultuous ouster of his predecessor — is scrambling to save his gavel. He has aggressively stumped and raised money nationwide, including a string of events in key New York districts that helped the GOP flip the House two years ago.

Republicans have sought to capitalize on voter discontent on issues like inflation and immigration, targeting open-race seats of retiring Democrats in Michigan, and incumbents in states including New Mexico and Pennsylvania as well as those in districts won by Trump in 2020, like Jared Golden in Maine and Mary Peltola in Alaska.

The first results on election night could come from Virginia, where polls close at 7 p.m. New York time, with each party having a pickup opportunity. Republicans hope to take the central Virginia seat being vacated by Democrat Abigail Spanberger, who is running for governor next year, while Democrats try to defeat incumbent Republican Jen Kiggans in a coastal district.

The nonpartisan Cook Political Report rates 208 seats as leaning, likely or solidly Republican compared to 205 for the Democrats, with 22 tossup seats; 218 are needed to ensure a majority.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Accounting

Tax Fraud Blotter: Partners in crime

Published

on

Captive audience; some disagreement; game of 21; and other highlights of recent tax cases.

Barrington, Illinois: Tax preparer Gary Sandiego has been sentenced to 16 months in prison for preparing and filing false returns for clients. 

He owned and operated the tax prep business G. Sandiego and Associates and for 2014 through 2017 prepared and filed false income tax returns for clients. Instead of relying on information provided by the clients, Sandiego either inflated or entirely fabricated expenses to falsely claim residential energy credits and employment-related expense deductions.

Sandiego, who previously pleaded guilty, caused a tax loss to the IRS of some $4,586,154. 

He was also ordered to serve a year of supervised release and pay $2,910,442 in restitution to the IRS.

Ft. Worth, Texas: A federal district court has entered permanent injunctions against CPA Charles Dombek and The Optimal Financial Group LLC, barring them from promoting any tax plan that involves creating or using sham management companies, deducting personal non-deductible expenses as business expenses or assisting in the creation of “captive” insurance companies.

The injunctions also prohibit Dombek from preparing any federal returns for anyone other than himself and Optimal from preparing certain federal returns reflecting such tax plans. Dombek and Optimal consented to entry of the injunctions.

According to the complaint, Dombek is a licensed CPA and served as Optimal’s manager and president. Allegedly, Dombek and Optimal promoted a scheme throughout the U.S. to illegally reduce clients’ income tax liabilities by using sham management companies to improperly shift income to be taxed at lower tax rates, improperly defer taxable income or improperly claim personal expenses as business deductions. As alleged by the government, Dombek also promoted himself as the “premier dental CPA” in America.

The complaint further alleges that in promoting the schemes, Dombek and Optimal made false statements about the tax benefits of the scheme that they knew or had reason to know were false, then prepared and signed clients’ returns reflecting the sham transactions, expenses and deductions.

The government contended that the total harm to the Treasury could be $10 million or more.

Kansas City, Missouri: Former IRS employee Sandra D. Mondaine, of Grandview, Missouri, has pleaded guilty to preparing returns that illegally claimed more than $200,000 in refunds for clients.

Mondaine previously worked for the IRS as a contact representative before retiring. She admitted that she prepared federal income tax returns for clients that contained false and fraudulent claims; the indictment charged her with helping at least 11 individuals file at least 39 false and fraudulent income tax returns for 2019 through 2021. Mondaine was able to manufacture substantial refunds for her clients that they would not have been entitled to if the returns had been accurately prepared. She charged clients either a fixed dollar amount or a percentage of the refund or both.

The tax loss associated with those false returns is some $237,329, though the parties disagree on the total.

Mondaine must pay restitution to the IRS and consents to a permanent injunction in a separate civil action, under which she will be permanently enjoined from preparing, assisting in, directing or supervising the preparation or filing of federal returns for any person or entity other than herself. She is also subject to up to three years in prison.

jail2-fotolia.jpg

Los Angeles: Long-time lawyer Milton C. Grimes has pleaded guilty to evading more than $4 million in federal taxes over 21 years.

Grimes pleaded guilty to one count of tax evasion relating to his 2014 taxes, admitting that he failed to pay $1,690,922 to the IRS. He did not pay federal income taxes for 23 years — 2002 through 2005, 2007, 2009 through 2011, and 2014 through 2023 — a total of $4,071,215 owed to the IRS. Grimes also admitted he did not file a 2013 federal return.

From at least September 2011, the IRS issued more than 30 levies on his personal bank accounts. From at least May 2014 to April 2020, Grimes evaded payment of the outstanding income tax by not depositing income he earned from his clients into those accounts. Instead, he bought some 238 cashier’s checks totaling $16 million to keep the money out of the reach of the IRS, withdrawing cash from his client trust account, his interest on lawyers’ trust accounts and his law firm’s bank account.

Sentencing is Feb. 11. Grimes faces up to five years in federal prison, though prosecutors have agreed to seek no more than 22 months.

Sacramento, California: Residents Dominic Davis and Sharitia Wright have pleaded guilty to conspiracy to file false claims with the IRS.

Between March 2019 and April 2022, they caused at least nine fraudulent income tax returns to be filed with the IRS claiming more than $2 million in refunds. The returns were filed in the names of Davis, Wright and family members and listed wages that the taxpayers had not earned and often listed the taxpayers’ employer as one of the various LLCs created by Davis, Wright and their family members. Many of the returns also falsely claimed charitable contributions.

Davis prepared and filed the false returns; Wright provided him information and contacted the IRS to check on the status of the refunds claimed.

Davis and Wright agreed to pay restitution. Sentencing is Feb. 3, when each faces up to 10 years in prison and a $250,000 fine.

St. Louis: Tax attorneys Michael Elliott Kohn and Catherine Elizabeth Chollet and insurance agent David Shane Simmons have been sentenced to prison for conspiring to defraud the U.S. and helping clients file false returns based on their promotion and operation of a fraudulent tax shelter.

Kohn was sentenced to seven years in prison and Chollet to four years. Simmons was sentenced to five years in prison.

From 2011 to November 2022, Kohn and Chollet, both of St. Louis, and Simmons, who is based out of Jefferson, North Carolina, promoted, marketed and sold to clients the Gain Elimination Plan, a fraudulent tax scheme. They designed the plan to conceal clients’ income from the IRS by inflating business expenses through fictitious royalties and management fees. These fictitious fees were paid, on paper, to a limited partnership largely owned by a charity. Kohn and Chollet fabricated the fees.

Kohn and Chollet advised clients that the plan’s limited partnership was required to obtain insurance on the life of the clients to cover the income allocated to the charitable organization. The death benefit was directly tied to the anticipated profitability of the clients’ businesses and how much of the clients’ taxable income was intended to be sheltered.

Simmons earned more than $2.3 million in commissions for selling the insurance policies, splitting the commissions with Kohn and Chollet. Kohn and Chollet received more than $1 million from Simmons.

Simmons also filed false personal returns that underreported his business income and inflated his business expenses, resulting in a tax loss of more than $480,000.

In total, the defendants caused a tax loss to the IRS of more than $22 million.

Each was also ordered to serve three years’ supervised release and to pay $22,515,615 in restitution to the United States.

Continue Reading

Accounting

On the move: KSM hired director of IT operations

Published

on


Hannis T. Bourgeois celebrates 100 years with charitable initiative; KPMG and Moss Adams release surveys; and more news from across the profession.

Continue Reading

Accounting

AICPA wary of new PCAOB firm metrics standard

Published

on

The American Institute of CPAs is still concerned about the Public Company Accounting Oversight Board’s new firm and engagement metrics standard, despite some modifications from the original proposal. 

During a board meeting Thursday, the PCAOB approved two new standards, on firm and engagement metrics, and firm reporting. Both would have significant implications for firms. 

Under the new rules, PCAOB-registered public accounting firms that audit one or more issuers that qualify as an accelerated filer or large accelerated filer will be required to publicly report specified metrics relating to such audits and their audit practices. The metrics cover the following eight areas:

  • Partner and manager involvement;
  • Workload;
  • Training hours for audit personnel;
  • Experience of audit personnel;
  • Industry experience;
  • Retention of audit personnel (firm-level only);
  • Allocation of audit hours; and,
  • Restatement history (firm-level only).

The AICPA reacted cautiously to the announcement. “We’re still studying the components of the final firm metrics requirements but, as we stated in our comment letter to the PCAOB this past summer, these rules will place a significant burden on small and midsized audit firms and could lead some to exit public company auditing altogether,” said the AICPA in a statement emailed Friday to Accounting Today. “This is not just conjecture: a majority of respondents (51%) to a recent survey we did of Top 500 firms with audit practices said they would rethink engaging in public company audits if the requirements were approved.”

AICPA building in Durham, N.C.

The PCAOB it made some modifications to the original proposal in  response to the comments had received since April:

  • Reduced the metric areas to eight (from 11);
  • Refined the metrics to simplify and clarify the calculations;
  • Increased the ability to provide optional narrative disclosure (from 500 to 1,000 characters); and,
  • Updated the effective date. (If approved by the SEC, the earliest effective date of the firm-level metrics will be Oct. 1, 2027, with the first reporting as of September 30, 2028, and engagement-level metrics for the audits of companies with fiscal years beginning on or after Oct. 1, 2027.)

The AICPA welcomed those changes but doesn’t think they go far enough. “We’re glad the PCAOB took some comments to heart by extending implementation dates, particularly for smaller firms, and lowering the number of required metrics,” said the AICPA. “But the potential consequences of the remaining requirements — reduced competition and market diversity in the public audit space — are a significant risk. We hope the SEC will give these unintended outcomes the weight they deserve before giving final approval to the requirements.”

The Securities and Exchange Commission would still need to give final approval to the standard, as well as the new firm reporting standard. Last week, the PCAOB decided to pause work on its controversial NOCLAR standard, on noncompliance with laws and regulations, until next year. On Thursday, SEC chairman Gary Gensler announced he would be stepping down in January, which may affect the timing of its approval or disapproval by the SEC. With the incoming Trump administration, the SEC is expected to take a far less aggressive stance on enforcement and regulation. On Friday, the SEC announced that it filed 583 total enforcement actions in fiscal year 2024 while obtaining orders for $8.2 billion in financial remedies, the highest amount in SEC history.

Continue Reading

Trending