New billionaire tax could trigger questionable accounting, critics say

A new billionaire tax proposal to increase the link between what big companies report to investors and what they pay in taxes could cause companies to shy away from traditional accounting methods, critics said this week.

Sponsored by Senate Democrats Elizabeth Warren (D-MA) and Ron Wyden (D-Oreg.), The proposal known as the “billionaire tax” was passed by a margin of seven votes in the House on Friday.

Pending a Senate vote, the proposal would require those with more than $ 1 billion in assets or $ 100 million per year in income to pay a 15% tax based on pre-tax income. told investors, rather than waiting for the sale of holdings.

David Zion, director of accounting and tax firm Zion Research Group, told the Wall Street Journal that such a bill could encourage affected companies to go beyond generally accepted accounting principles (GAAP) to show how much investors they earn.

“This is just another incentive, I guess, to use even more non-GAAP,” he said.

Intended to help fund social programs like health and education, the bill would only affect about 200 of the country’s largest publicly traded companies.

But taxing accounting income, which businesses typically provide to investors, can fundamentally change the way businesses report their profits, as income deductions are usually not included in that number.

“You’re building from scratch if you go for the accounting income base as opposed to a variation of a taxable income model, which reshapes an existing structure,” Helen Carlier, global tax manager for Motorola ( (MSI) – Get the report from Motorola Solutions, Inc. (MOS)), told the WSJ.

Houston-based CenterPoint Energy ( (CNP-B) – Get Centerpoint Energy Inc. Deposit Shs Repr 1 / 20th 6% Cum Conv Red Pfd Shs Series B ReportCFO Jason Wells said some companies may delay purchasing expensive equipment in order to report higher profits to investors.

And Financial Accounting Standards Board Chairman Richard Jones argued that it could distract the organization from its mission of ensuring companies accurately inform investors, instead of forcing them to focus on increasing tax revenues.

“It would be additional pressure, without a doubt, on our mission and what we do,” he told the WSJ last week.