Saturday, April 03, 2010

Jawboning Charge-offs for ObamaCare

Paul Caron, the TaxProf, has linked to a number of sources regarding criticism by Rep. Henry Waxman (R-CA) of large companies which publicly took a charge against earnings after recent healthcare legislation was passed. Waxman felt that the companies were poisoning opinion regarding the legislation and asked officers of the companies to explain their decisions before Congress.

Commentor Ron on the TaxProf post probably has a good point regarding the complexity of the new healthcare law and potential for misunderstanding from all parties. That said, the act of threatening businesses who, as best I can tell, were trying to comply with GAAP is an unseemly use of Congressional power. Claims of politics by the companies would be more convincing if the charge-offs were being announced in October.


Blogger portlandmaxtrains said...

A question, my tax knowledge is limited, but isn't this type of question handled by a 'private letter ruling' or something similar? Did they make an attempt to make sure expensing these costs was the correct thing to do before going public with it? It sounds suspiciously like grandstanding and political theater on the part of AT&T et. al. to me.

3:01 PM  
Blogger Dan Meyer said...

Actually, in some ways this is more of a financial accounting issue than a tax issue. The Securities and Exchange Commission requires that large corporations report estimated quarterly income and are sure to give investors notice as quickly as possible if there is a chance that profitability or especially viability is at issue. COULD there be overreaction or political grandstanding--yes, but in my opinion it is more likely that these companies are trying to protect themselves from shareholder lawsuits or SEC sanctions by giving investors a heads up as soon as possible.

8:41 PM  

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