Ddang Kim

The best audits don’t just follow the rules. The best audits protect investors. The PCAOB has made big changes. Here’s what you need to know: 1) Lowering the Liability Threshold • The PCAOB voted to change the liability threshold for individuals involved in firm violations from recklessness to negligence. • This means auditors can now be penalized for failing to exercise reasonable care, not just for extreme departures from standard care. 2) Impact on Auditors • Partners in charge of an audit, or other firms assisting in the work, could face fines or penalties for negligence. • Negligence covers a wider range of behaviors compared to recklessness, making it easier to hold auditors accountable. 3) Concerns from the Audit Community • The Center for Audit Quality criticized the proposal, saying it could deter new entrants and lead to excessive monitoring. • Smaller firms may feel the impact more acutely, potentially leading to inefficiencies and self-protective behavior. 4) Support from Investors • The Council of Institutional Investors generally supported the proposal, stating it aligns with other requirements for auditors. • Lowering the threshold to negligence is seen as a move to improve audit quality and protect investors. 5) New Rules on Analytical Procedures • The PCAOB also proposed strengthening rules around substantive analytical procedures. • Auditors will need to form their own expectations and investigate discrepancies to detect potential misstatements. 6) Technology-Assisted Analysis • The PCAOB revised rules to clarify auditors’ responsibilities when using technology-assisted analysis. • This aims to improve audit quality and address new technological developments. These changes are designed to enhance audit quality and protect investors. The new requirements will go into effect 60 days after SEC approval. Make sure your firm is prepared to comply with these new standards.

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On Aug. 28, 2024, the San Francisco Office of Treasurer and Tax Collector held a virtual meeting to discuss three proposed programs: (1) Voluntary Disclosure Agreements, (2) Advance Written Determinations, and (3) promulgation of sourcing regulations for certain San Francisco business taxes. 📖 Read more in this #GTAlert written by G. Michelle Ferreira, Brad Marsh, Shail Shah, and Katy Stone: https://buff.ly/3TjvxP3. #SALT #TaxLaw #Tax #CaliforniaTax #GTSanFrancisco #SanFrancisco

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The IRS and Treasury just released final regulations addressing the 1% excise tax applicable to certain repurchases of stock under Section 4501. This is the second set of guidance in roughly two and half months; proposed regulations addressing certain computational issues with respect to Section 4501 were published April 12, 2024 (the proposed regulations from April are not finalized in this newest package). Here's the address for a link to the final regulations issued today: https://lnkd.in/g-rdRjBt

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In early September, the SEC approved the PCAOB's new quality control standard and related amendments. The new rules will be effective on December 15, 2025. "QC 1000, A Firm’s System of Quality Control, establishes an integrated, risk-based quality control standard that will require all registered public accounting firms to identify specific risks to their practice and design a quality control system that includes appropriate responses to guard against those risks. Registered firms that perform engagements under PCAOB standards will be required to implement and operate the QC system. The new quality control standard focuses on an audit firm’s accountability and continuous improvement of its audit practice and will require an annual evaluation of the firm’s QC system and related reporting to the PCAOB, certified by key firm personnel. In addition, firms that annually issue audit reports for more than 100 issuers will be required to establish an external quality control function (EQCF) composed of one or more persons who can exercise independent judgment related to the firm’s QC system." The SEC's press release: https://lnkd.in/ds8tUQzq

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On Sept. 12, 2024, the IRS and Treasury released a notice of proposed rulemaking, REG-112129-23 (the Proposed Regulations), which proposes rules addressing the application of the corporate alternative minimum tax (CAMT). The Proposed Regulations largely incorporate and expand on the interim guidance released by the government in prior notices (see below), albeit with some changes based on discussions with and comments from taxpayers. https://lnkd.in/e9QepZmi

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GT Shareholder Nikki E. Dobay was quoted in a recent Tax Notes article commenting on California Governor Gavin Newsom’s proposed tax increases in the revised budget. 🔗 Read more here: https://buff.ly/3yvlKO7 #GTInTheNews #TaxLaw #SALT #GTLawWomen

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A new Delaware Court of Chancery decision signals continued close scrutiny of potential conflicts of interest in M&A transactions involving controlling stockholders and financial advisors, and in particular of certain disclosures. Faiz Ahmad | Art Bookout | Steve Daniels | Allison Land | Joseph Larkin | Paul Lockwood | Edward Micheletti | Jenness Parker | Rick West #mergersandacquisitions #corporategovernance #privateequity

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Wondering when financial statements go stale in 2025? Latham & Watkins and KPMG have released the updated 2025 Desktop Staleness Calendar for issuers with a fiscal year-end of December 31, 2024. https://lw.link/1aYojs Issuers with a different fiscal year-end can get the answers by using our SEC staleness calculator. https://lw.link/JCWsZQ

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"The blockbuster Moore opinion turned out to be only a dull roar and will be reviewed separately; for now, the income tax is safe. "The outright repeal of the Chevron doctrine is more important than Moore and will have profound application to Treasury regulations because the federal revenue laws are the first and most interpreted of all federal statutes. "Every law firm representing taxpayers in litigation will be advising on those possibilities. A forthcoming article of mine will address that. "On a more mundane level, the Court decided one pure legal issue in an estate tax case in a way that will upset many corporate-shareholder redemption agreements and require rethinking the use of corporate-owned life insurance on shareholders by closely held corporations. "The Court also issued several nontax opinions that either referred to tax cases or applied principles that could be applied to tax cases." Perspective: Jasper L. Cummings, Jr., presents his 13th annual review of the Supreme Court’s term in tax rulings, which this year shows a blasé attitude about tax cases, continued progress toward complete reliance on seemingly neutral interpretive methods that can be selectively applied, and supernova rulings outside tax that could affect tax issues.

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In this month’s installment of U.S. Tax Review in Tax Notes, we analyze the extensive proposed corporate AMT regs, discuss the Tax Court’s implementation of Loper Bright, review comments on stock buyback regs, and provide updates on TIGTA’s report discussing the economic substance doctrine, taxpayers’ compliance assurance process eligibility, and IRS advice on foreign-derived intangible income and 245A dividends received deductions. #internationaltax https://lnkd.in/dHidwnAN

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New IRS guidance addresses “basis-shifting” transactions regarding related-party partnerships. If finalized, aspects of the guidance could apply to disallow deductions this year, even if related-party partnership transactions occurred in prior years. Trevor Allen | Kat Saunders Gregor | Sarah Beth Rizzo | Jeff Romero | Paul Schockett | Matthew Dinger #tax #investmentmanagement #privateequity

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Here's the #TaxCreditTransfer checklist that I co-authored with Bryen Alperin and Gary Blitz with contributions from Amber Peterson. We hope it is a useful resource for buyers and sellers of #TaxCredits. #6418

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More on Sec. 751(b). Hopefully I'm not boring you folks. A and B are equal partners, P/S has unrealized receivables worth $50 with $0 common basis, in which B has a $25 Sec. 743(b) adjustment. P/S does a current distribution of the U/R to A. What happens? This example would create more ordinary income in the system for A as A would take a zero basis in the $50 of U/R, (A can't use B's Sec. 743(b) adjustment), so instead of a P/S with $25 of ordinary income allocable to A now Partner A has $50 of ordinary income property (value $50 basis zero). Yikes! In the proposed Sec. 751(b) regs in the hypo sale of assets after the distribution B's Sec. 743(b) adjustment is triggered, P/S recognizes $(25) of ordinary loss, and allocates it to B. Since B went from zero ordinary income to $(25) of ordinary loss the distribution to A is subject to Sec. 751(b). (!) The proposed regulations allow the following: One. P/S is deemed to distribute $25 of U/R to B in which B takes a basis of $25. Two. B is deemed to sell the U/R back to P/S. B has zero recognized gain, A/R $25 A/B $25. Three. B contributes the $25 cash sales proceeds back to the P/S. Four. The P/S now has $25 of cost basis in $25 of the U/R from the deemed purchase from B. Five. P/S distributes $50 of U/R now with a common basis of $25 to A. These deemed events preserve the original $25 of ordinary income to A as A now has $50 of ordinary income property with a basis of $25. Wild stuff. Once again so much for tax simplification. (It took me a moment to realize this isn't Treasury and IRS being nice about anything, notice the "uncorrected" example creates a juicy artificial ordinary loss for B. The reg approach seeks to stop clever advisors from hacking the system.)

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Auditors have a critical job, verifying the financial reporting that underpins our capital markets. So who audits the auditors? The PCAOB does, and we tell #investors and others what we observe. I urge anyone who cares about U.S. capital markets to check out PCAOB inspection reports, read the inspection-related insights generated by our hardworking staff, and sign up to receive updates on our inspection efforts. #PCAOBprotects

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Punitive damages, including the $200 million in this case, are taxable. With adept tax planning through AFG Settlement Planning, there is potential to significantly reduce the tax impact on the attorney fees portion of the punitive damages, potentially saving the plaintiff about $40 million in taxes. Contact us today to learn more about the double tax trap of punitive damages and how our program can help 412-214-8801. #verdicts #punitivedamages Brian Adair Cindy Miklos

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Read the latest article about AI and Tech in M&A transactions in this month's Smart Business, featuring insights from Buckingham Partner Mitchell Kolesar https://lnkd.in/gDcHpYEc

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