NYSE working with IEG to develop new asset class, Natural Asset Companies

The New York Stock Exchange and Intrinsic Exchange Group (IEG) are working together to develop a new class of publicly traded assets called Natural Asset Companies, or NACs. © Shutterstock NACs are sustainable enterprises that hold the rights to ecosystem services produced by natural, working or hybrid lands. Natural assets produce about $125 trillion annually […]

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The New York Stock Exchange and Intrinsic Exchange Group (IEG) are working together to develop a new class of publicly traded assets called Natural Asset Companies, or NACs.

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NACs are sustainable enterprises that hold the rights to ecosystem services produced by natural, working or hybrid lands. Natural assets produce about $125 trillion annually in ecosystem services, such as carbon sequestration, biodiversity, and clean water. This significant economic output underscores the financial potential of an asset class that is wholly based on environmental investment.

“This new asset class on the NYSE will create a virtuous cycle of investment in nature that will help finance sustainable development for communities, companies and countries,” Douglas Eger, CEO of IEG, said. “Together, IEG and the NYSE will enable investors to access nature’s store of wealth and transform our industrial economy into one that is more equitable.”

IEG has developed an accounting framework, in consultation with former Financial Accounting Standards Board (FASB) Chairman Robert Herz and leading accounting firms, to measure ecological performance to complement GAAP financial statements.

The NYSE will seek SEC approval for unique listing requirements tailored to NACs and incorporating IEG’s accounting methodology. IEG and the NYSE would then begin working with the first NACs to help prepare them for listing and trading as publicly held entities on the NYSE.

“With the introduction of Natural Asset Companies, the NYSE plans to provide investors an innovative mechanism to financially support the sustainability initiatives they deem critical to our future. Our work with Intrinsic Exchange Group is another example of the NYSE tapping into our community to drive meaningful progress on ESG issues with a solutions-based approach,” Stacey Cunningham, president of NYSE Group, said.

IEG is currently advising a number of sovereign nations on the potential creation of NACs. IEG and the Inter-American Development Bank (IDB) are working with the Government of Costa Rica to lay the foundation for NACs that would preserve and grow natural assets throughout the country. In the private sector, IEG anticipates announcing its first partnership later this fall in collaboration with a multinational corporation.

“In addition to GAAP financial statements, we believe it is absolutely critical to provide investors in Natural Asset Companies with relevant, reliable and understandable information on the flows of the ecosystem services they produce and their stocks of natural capital assets,” Herz, the former chairman of FASB, said.

IEG has received initial funding from IDB Lab and IDB, The Rockefeller Foundation, Aberdare Ventures and Entertaining Ideas.

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Sen. Crapo, Rep. Brady propose tax gap reform bill

U.S. Rep. Kevin Brady (R-TX) and U.S. Sen. Mike Crapo (R-ID) recently introduced a bill that would address the tax gap and initiate reforms within the Internal Revenue Service. © Shutterstock Their bill, the Tax Gap Reform and Internal Revenue Service (IRS) Enforcement Act, H.R. 5206/S. 2721, would require the IRS to provide annual tax […]

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U.S. Rep. Kevin Brady (R-TX) and U.S. Sen. Mike Crapo (R-ID) recently introduced a bill that would address the tax gap and initiate reforms within the Internal Revenue Service.

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Their bill, the Tax Gap Reform and Internal Revenue Service (IRS) Enforcement Act, H.R. 5206/S. 2721, would require the IRS to provide annual tax gap estimates in coordination with the Joint Committee on Taxation. In addition, it would require the IRS to use existing data and tools to improve its corporate audit selection process and increase enforcement against high-income non-filers. Further, it would create an IRS enforcement fellowship pilot program to assist with the agency’s most complex audits and case selection decisions. And it would codify President Joe Biden’s pledge to not increase audits of taxpayers making less than $400,000 per year and prohibits the establishment of new bank reporting requirements.

The bill is in response to a proposal by Democrats to increase IRS funding by $80 billion over the next 10 years to expand enforcement and compliance activities at the IRS, as well as financial account information reporting.

“In light of recent proposals to massively expand the IRS, with unprecedented amounts of mandatory funding, and the IRS’s continued abuses of taxpayer rights and privacy, any additional IRS funding and monitoring of Americans’ private finances must come with guardrails to help protect against abuses,” Crapo, ranking member of the Senate Finance Committee, said. “This legislation places important guardrails around IRS funding to protect taxpayers’ rights and privacy.”

The legislation is supported by the National Taxpayers Union, Americans for Tax Reform and the Center for a Free Economy.

“This legislation is a strong alternative to recent proposals that would write an $80 billion check to the IRS with too little forethought,” Pete Sepp, president of the National Taxpayers Union, said. “If lawmakers move forward with an Internal Revenue Service (IRS) budget boost anyway, these reforms and more should be considered prerequisites for any major proposed increase in the IRS budget, and would both safeguard taxpayers’ rights and support taxpayers’ interest in an effective, modern, and agile IRS.”

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Wyden introduces bill to close tax loopholes for large corporations and wealthy investors

U.S. Sen. Ron Wyden (D-OR) introduced draft legislation to close loopholes that allow wealthy investors and large corporations to use pass-through entities, primarily partnerships, to avoid paying higher taxes. © Shutterstock Wyden’s bill would remove the complexity that exists in current partnership rules by closing certain loopholes. By closing these loopholes, an additional $172 billion […]

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U.S. Sen. Ron Wyden (D-OR) introduced draft legislation to close loopholes that allow wealthy investors and large corporations to use pass-through entities, primarily partnerships, to avoid paying higher taxes.

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Wyden’s bill would remove the complexity that exists in current partnership rules by closing certain loopholes. By closing these loopholes, an additional $172 billion would be generated in taxes, according to the senator’s office.

“The constant theme running through our tax code is paying taxes is mandatory for working people, but optional for wealthy investors and mega-corporations. That’s especially true when it comes to pass-through businesses and partnerships, the preferred tax avoidance tools for those at the top,” Wyden, chair of the Senate Finance Committee, said. “On the one hand, the rules are too complex for working people who don’t have armies of lawyers and accountants. On the other hand, complexity allows the wealthiest individuals and most profitable corporations to decide when, and whether, to pay taxes at all.”

“This proposal simply reduces complexity by closing loopholes that allow those at the top to pick and choose when, and whether, to pay tax. Raising more than $172 billion for priorities like childcare and paid leave by closing off these loopholes is a no-brainer,” he added.

Wyden said the partnership tax rules afford lots of flexibility in the allocation of partnership income and losses among partners. This bill would seek to remove options to decide when and whether to pay tax. This would simplify administration and curtail abuse.

“These proposals are directed to the major areas of abuse or ambiguity in the partnership law dealing with allocations by a partnership to a partner, basis adjustments of partners, and liabilities allocated to partners for tax basis and disguised sale purposes and should help the IRS in auditing more partnerships in an efficient manner. The IRS is behind the curve in terms of auditing partnerships and applying the complex partnership tax law to them, and these proposals will provide much needed simplification to help improve the overall effectiveness of the tax law. Although some flexibility in applying the partnership rules will be curtailed or eliminated, this was a necessary effect of the simplification of the provisions. Sufficient regulatory authority is granted to the Treasury and IRS in the proposals to help interpret and apply the new provisions in a fair and balanced manner to taxpayers who are partners in partnerships,” Monte Jackel, Of Counsel Leo Berwick, who reviewed these proposals in his personal capacity, said.

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Intercontinental Exchange, ADP team up to help investors navigate muni bond market

Intercontinental Exchange, the company that owns the New York Stock Exchange, and human resources company ADP are launching a new service designed to help investors better assess the stability and creditworthiness of issuers in the U.S. municipal bond market.© Shutterstock The new service links human resources and compensation data from ADP directly to more than […]

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Intercontinental Exchange, the company that owns the New York Stock Exchange, and human resources company ADP are launching a new service designed to help investors better assess the stability and creditworthiness of issuers in the U.S. municipal bond market.

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The new service links human resources and compensation data from ADP directly to more than one million municipal bonds covered by ICE’s reference data service. This will allow municipal bond investors to assess a wide range of dynamics that could impact a municipal issuer.

“This data is incredibly powerful and can be used by market participants to drill into the financial stability of a municipal issuer,” Lynn Martin, president of fixed income & data services at ICE, said. “ADP’s human capital data is impressive in its timeliness and breadth of coverage, and by linking it to our municipal fixed income data, we’re able to give investors and market participants convenient access to a broad set of alternative datasets to better understand the implications and risks of their investments.”

Users will have access to granular aggregated and anonymized human capital data, including average gross pay, total projected income, average commute distance, details into specific job sectors, and more than 50 other distinct fields. Further, the data can be used to see trends over time to help users see how a municipality or region’s population changed over time. The data will be consistently updated with ADP’s anonymized and aggregated data.

“Our work with ICE highlights that ADP’s anonymized and aggregated data can help investors discover and better understand the U.S. municipal bond environment,” Jack Berkowitz, chief data officer at ADP, said. “ADP serves more than 900,000 clients worldwide, including approximately 75% of the Fortune 500. Our depth of information and data makes us a powerful input for real-time socioeconomic analysis.”

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U.S. Chamber of Commerce releases report examining impact of capital gains tax hike

The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness released a report this week that examines the impact of a proposed 98 percent tax increase on carried interest capital gains that will be among the major tax hikes on businesses that will be considered as part of the $3.5 trillion budget reconciliation bill in […]

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The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness released a report this week that examines the impact of a proposed 98 percent tax increase on carried interest capital gains that will be among the major tax hikes on businesses that will be considered as part of the $3.5 trillion budget reconciliation bill in Congress.

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The report, entitled Impact on Jobs, Tax Revenue, and Economic Growth of Proposed Tax Increase on Carried Interest, said the tax increase would reduce investment, lead to job losses, and decrease tax revenues at the local, state, and federal levels.

“New carried interest taxes would harm the innovators who are leading America out of the pandemic and the main street businesses that are fueling the economic recovery,” Tom Quaadman, executive vice president of the U.S. Chamber Center for Capital Markets Competitiveness, said.

“Moderna, for example, was able to tap private equity and venture-capital funding to conduct the research that led to the Covid-19 vaccine. Similarly, private equity funding provided a lifeline to thousands of American businesses and real estate partnerships that are crucial for new home construction and affordable housing. Almost doubling certain taxes on private equity and venture capital investments will restrict access to capital, harming job creation and innovation,” Quaadman added.

The report estimates that it could result in 4.9 million job losses within five years and annual net revenue tax losses of $96 billion over that time. Also, it estimates that pension funds would lose up to $3 billion annually while private equity, venture capital, real estate partnerships, and their portfolio companies would be directly hit by the tax increase.

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Democratic U.S. senators offer recommendations on international tax overhaul

Several Democratic senators offered feedback to a proposal by U.S. Senate Finance Committee Chairman Ron Wyden (D-OR) and U.S. Sens. Sherrod Brown (D-OH) and Mark Warner (D-VA) to overhaul the U.S. system for international taxation. © Shutterstock The responding senators, Sens. Sheldon Whitehouse (D-RI), Dick Durbin (D-IL), Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), and […]

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Several Democratic senators offered feedback to a proposal by U.S. Senate Finance Committee Chairman Ron Wyden (D-OR) and U.S. Sens. Sherrod Brown (D-OH) and Mark Warner (D-VA) to overhaul the U.S. system for international taxation.

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The responding senators, Sens. Sheldon Whitehouse (D-RI), Dick Durbin (D-IL), Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), and Jack Reed (D-RI) offered several recommendations to keep it aligned with President Joe Biden’s outline for international taxation.

Among their recommendations, they call for a rate on foreign profits, specifically Global Intangible Low-Taxed Income (GILTI), that is no lower than what President Biden proposed, but ideally equals the domestic tax rate, to reverse incentives for companies to shift profits and outsource jobs overseas. Further, they call for reforms to address flaws in the Trump tax law’s Base Erosion and Anti-Abuse Tax (BEAT) provision and repeal a tax break created by the Trump tax law known as Foreign Derived Intangible Income (FDII). The latter encourages large multinationals to locate assets like plants and equipment offshore.

In addition, the senators would like to see it include reforms to prevent “inversions,” where companies renounce their U.S. citizenship to avoid taxes. Also, they would like to see it restrict the interest deduction for multinational enterprises with excess domestic indebtedness, and require public disclosure of profits, taxes, employees, and tangible assets to the IRS.

“Fixing our international tax system will provide a major source of revenue to finance President Biden’s Build Back Better plan to create an economy that works for everyone,” the senators wrote. “But its importance goes beyond raising revenue. Strong international tax reform will make our tax code fairer for and improve the competitiveness of American workers and domestic businesses.”

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SEC outlines accounting misconduct complaint

The Securities and Exchange Commission (SEC) filed a complaint against The Kraft Heinz Company and two former company executives alleging various types of accounting misconduct.© Shutterstock Per the SEC’s order, from the last quarter of 2015 to the end of 2018, Kraft recognized unearned discounts from suppliers and maintained false and misleading supplier contracts — […]

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The Securities and Exchange Commission (SEC) filed a complaint against The Kraft Heinz Company and two former company executives alleging various types of accounting misconduct.

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Per the SEC’s order, from the last quarter of 2015 to the end of 2018, Kraft recognized unearned discounts from suppliers and maintained false and misleading supplier contracts — which resulted in improperly reducing the company’s cost of goods sold and allegedly achieved cost savings.

The SEC said the accounting improprieties resulted in Kraft reporting inflated adjusted EBITDA, which is an performance metric used by investors.

“Investors rely on public companies to be 100 percent truthful and accurate in their public statements, especially when it comes to their financials,”
SEC Division of Enforcement Director Gurbir S. Grewal said. “When they fall short in this regard, we will hold them accountable. No matter how complex and far-reaching the financial misconduct, we will vigorously pursue wrongdoers because that’s what investor protection requires.”

Kraft, which did not admit or deny the agency’s findings, consented to cease and desist from future violations and payment of a civil penalty of $62 million.

Additionally, according to the SEC, Kraft’s former Chief Operating Officer Eduardo Pelleissone consented to cease and desist from future violations, pay disgorgement and prejudgment interest of $14,211.31, and pay a civil penalty of $300,000. Also, without admitting or denying the agency’s allegations, Kraft’s former Chief Procurement Officer Klaus Hofmann consented to a final judgment permanently enjoining him from future violations, ordering payment of a civil penalty of $100,000 while barring him from serving as an officer or director of a public company for five years. Hofmann’s settlement is subject to court approval, according to the SEC.

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Crapo, Brady urge Biden Administration not to use OECD to compel tax changes

Republican leaders in Congress are warning the Biden Administration not to use the negotiations at the Organization for Economic Co-operation and Development (OECD) to compel Congress to make U.S. tax law changes.© Shutterstock The U.S. Treasury Department recently acknowledged significant U.S. tax law changes would need to be made to the U.S. global minimum tax […]

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Republican leaders in Congress are warning the Biden Administration not to use the negotiations at the Organization for Economic Co-operation and Development (OECD) to compel Congress to make U.S. tax law changes.

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The U.S. Treasury Department recently acknowledged significant U.S. tax law changes would need to be made to the U.S. global minimum tax (GILTI) to comply with the OECD agreement negotiated by Treasury.

U.S. Senate Finance Committee Ranking Member Sen. Mike Crapo (R-ID) and U.S. House Ways and Means Committee Ranking Member Rep. Kevin Brady (R-TX) said the administration is using the OECD process to push for changes to GILTI. This action would essentially compel Congress to take specific legislative action, undermining its taxing authority, the GOP lawmakers said.

“Soon after negotiating an agreement at the OECD, Treasury Secretary Yellen acknowledged that Congress would be required to enact significant domestic tax law changes in order to comply with the agreement. Whereas prior administrations took the position that Treasury cannot bind Congress, this Administration has taken the approach of using the global stage to attempt to force Congress’s hand,” Crapo and Brady wrote to their Democratic counterparts, Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Richard Neal (D-MA).

“This concerning development suggests the Administration has represented to our global partners that it can unilaterally compel changes in tax law, a significant infringement on Congressional authority” the letter said.

Crapo and Brady said the Administration should not negotiate for an agreement at the OECD that would target American companies or make them less competitive.

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SEC charges crypto lending platform with fraud

The Securities and Exchange Commission (SEC) has filed an action against an online crypto lending platform, its founder, its chief domestic promoter and his affiliated company.© Shutterstock Per the SEC, the action was levied against BitConnect, the firm’s founder Satish Kumbhani, Glenn Arcaro and others — alleging they defrauded retail investors out of $2 billion […]

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The Securities and Exchange Commission (SEC) has filed an action against an online crypto lending platform, its founder, its chief domestic promoter and his affiliated company.

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Per the SEC, the action was levied against BitConnect, the firm’s founder Satish Kumbhani, Glenn Arcaro and others — alleging they defrauded retail investors out of $2 billion via a global fraudulent and unregistered offering of investments into a program involving digital assets.

“We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets,” Lara Shalov Mehraban, associate Regional Director of SEC’s New York Regional Office, said. “We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

The complaint was filed in the United States District Court for the Southern District of New York.

The SEC complaint charges the defendants with violating federal securities law antifraud registration provisions, seeks injunctive relief, disgorgement plus interest and civil penalties.

The SEC’s Office of Investor Education and Advocacy and Enforcement’s Retail Strategy Task Force provided an Investor Alert on Digital Asset and Crypto Investment. Also, Investor.gov could be accessed by investors as a means of garnering more information about digital asset and crypto investments, as well as fraud warning signs.

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New report shows Social Security benefit cuts projected by 2034

Federal agencies released the annual Social Security and Medicare Trustees Reports this week, revealing that Social Security will have to cut benefits by 2034 – one year earlier than previously projected – unless Congress does something to address the program’s long-term funding shortfall. © Shutterstock The timeframe of the of the projected benefits cut was […]

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Federal agencies released the annual Social Security and Medicare Trustees Reports this week, revealing that Social Security will have to cut benefits by 2034 – one year earlier than previously projected – unless Congress does something to address the program’s long-term funding shortfall.

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The timeframe of the of the projected benefits cut was moved up one year due to the impacts of the pandemic.

Treasury Secretary Janet Yellen said the administration is committed to safeguarding the programs.

“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” Yellen said. “The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”

The report was released by the Treasury in conjunction with the U.S. Department of Health and Human Services, U.S. Department of Labor, Centers for Medicare and Medicaid Services, and Social Security Administration.

“The Biden-Harris Administration’s commitment to building back better isn’t only about roads or bridges, it is also about rebuilding our promise of a secure retirement for America’s workers, retirees and their families,” Labor Secretary Marty Walsh said. “As our economy gets healthier, so do the trust funds that sustain Social Security and Medicare. We will continue working to deliver on the promise of financial security in retirement for all of America’s workers.”

Social Security Administration Acting Commissioner Kilolo Kijakazi said the projections in this year’s report include the best estimates of the effects of the COVID-19 pandemic on the Social Security program. The commissioner reiterated that Social Security will continue to play a critical role in the lives of 65 million beneficiaries and 176 million workers and their families.

Health and Human Services Secretary Xavier Becerra added that Medicare has been a lifeline for over 63 million Americans. Becerra said the Biden-Harris Administration is committed to ensuring the program remains available for future generations.

“The Biden-Harris Administration is committed to running a sustainable Medicare program that provides high quality, person-centered care to older Americans and people with disabilities,” Centers for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure said. “Medicare trust fund solvency is an incredibly important, longstanding issue and we are committed to working with Congress to continue building a vibrant, equitable, and sustainable Medicare program.”

Senate Finance Committee Chair U.S. Sen. Ron Wyden (D-OR) said the report provides another stark example of how this pandemic has further hurt the American worker and underscored the need to protect health care for the most vulnerable.

“According to the report that came out today, the Social Security trust fund will be depleted a year earlier than last projected. That means workers in the future will take a 25 percent cut in benefits, even though they’ll still be contributing to Social Security with every single paycheck. And while the projected depletion of the Medicare Trust Fund remains unchanged from last year’s report, this provides cold comfort to the millions of Americans who rely on the Medicare program for their health care,” Wyden said.

“Congress must work hand in hand with President Biden to ensure that Medicare and Social Security will keep the promises made to workers, seniors and people with disabilities to ensure a dignified retirement and high-quality health benefits,” Wyden added.

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