This week in tax: Fox News eligible for Dominion case tax break
Fox News can claim a tax break on its historic settlement with Dominion Voting Systems, while the European Parliament has backed what would be the world’s first carbon border tax.
Fox News could receive a tax break of up to $213 million after settling a defamation case with voting machine company Dominion Voting Systems in what may be the largest defamation settlement by a US media company.
After agreeing to settle the case, Fox News and its parent company Fox Corporation will pay out $787.5 million to the company. The settlement was agreed on Tuesday, April 18.
Investigative news outlet The Lever was the first to report that if Fox Corporation is able to write off the entire amount, it could be set for the hefty tax break.
Brian Nick, chief communications officer at Fox Corporation, told The Lever he was able to “confirm tax deductibility” of the settlement, but he could not confirm the exact amount.
The deductible nature of the expenses comes from the media company’s ability to write the settlement fee off as “ordinary and necessary” business expenses.
Dominion Voting Systems sued the US media organisation for its promotion of false claims regarding the reliability of the company’s voting machines during the 2020 presidential election. The initial claim was worth $1.6 billion.
European Parliament approves carbon border tax
The European Parliament approved proposals to make climate change policies stricter and establish a carbon border adjustment mechanism, reported EurActiv on Tuesday, April 18.
Europe may be set to impose the world’s first carbon border tax regime following the EU vote. European leaders reached a deal to implement a CBAM in December 2022, but this vote clears the proposal go to the next step where EU countries will decide the future of the CBAM.
This proposal includes an upgrade of the bloc’s carbon market which is set to raise the cost of fossil fuels in Europe. Since 2005 carbon emissions from businesses have been cut by 43%, but the EU is looking to reduce emissions even further. The EU plan aims to cut carbon emissions by 62% from 2005 levels by 2030.
Corporate tax hike may not hold back US investment in Northern Ireland
US investment in Northern Ireland will not be held back by the rise of UK corporate tax, according to Joe Kennedy III, US special envoy for Northern Ireland.
President Joe Biden has pledged up to $6 billion in investment in Northern Ireland if the country’s power-sharing arrangement is restored. Kennedy said that US companies already active in Ireland could take an all-island approach despite the higher corporate tax burden.
“Taxes are certainly an important calculation for a business community, of course, so is talent, so is employees, so is quality of life, so are the other services that can be provided,” said Kennedy, reported The Guardian on Wednesday, April 19.
“And my point is, Northern Ireland has an awful lot to offer,” he added.
The UK government increased the corporate tax rate from 19% to 25% this month. It was the largest rise in corporate tax in the country for decades.
US firms face precision malware attacks on tax filings
Malware and phishing attacks have been aimed at tax firms during their busiest period of the year in the US, according to British cybersecurity firm Sophos Group.
The tax filing deadline in the US was Monday, April 17. As firms scrambled to help their clients meet the deadline, hackers and scammers saw their opportunity to take advantage.
Emails with vague titles like ‘Prospective Client Enquiries’ have flooded inboxes, attempting to hook firms into a negotiation, before the sender follows up with a malicious link.
In response, Microsoft broadcasted an advert to warn firms about the risks of malware and cybercrime targeting tax services. The company claimed that it had observed criminal activity targeting tax firms since February.
Recent attacks have been aimed exclusively at “organisations that deal with tax preparation, financial services, CPA and accounting firms, and professional service firms dealing in bookkeeping and tax”, said Microsoft.
US tax credits boost manufacturing ahead of new limits
Seventy-five large manufacturing operations have been announced since the Inflation Reduction Act and the Chips Act came into force, the Financial Times reported on Monday, April 17.
A growing number of US manufacturing companies are starting new operations thanks to the industrial policies of the Biden administration, including tax credits for electric vehicle (EV) and semiconductor chip production.
However, the US Treasury is reducing the scope of the tax credits for EV production. Companies including BMW, Hyundai and Volkswagen have been excluded because they fall short of US sourcing requirements, according to CNBC, while businesses such as Ford, General Motors and Tesla will still qualify.
The IRA included $369 billion of tax credits, grants and loans for renewable energy development. Meanwhile, the Chips Act targets $39 billion in funding and $24 billion in tax credits to the semiconductor manufacturing sector.
Next week in ITR
ITR will be looking at the implications of ChatGPT and other artificial intelligence programmes for the tax profession, particularly whether tax advice or parts of it face a threat from automation.
We will also be publishing a special report on the impact of the BEPS project on intellectual property (IP) management in multinational companies and how tax departments can work better with IP teams. BEPS may be catching out some in-house IP professionals, it seems.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.