Pagans 1, Mind Control Defenders 0
We’re all familiar with the idea of “tax exempt” organizations. The theory here is that some groups serve such valuable roles in society that they should be exempt from income, property, or other taxes. Here in the United States, Internal Revenue Code Section 501 lists 28 categories of exempt organizations, including churches, colleges, charities, social clubs, chambers of commerce, fraternal organizations, cemeteries, and even “mutual ditch or irrigation companies.”
Nobody gets a tax-exemption “for free,” and applying for it can be daunting. IRS Form 1023, “Application for Recognition of Exemption,” runs 28 grueling pages. There’s a shorter “EZ” version — but the checklist to see if you can even use it runs six full pages! And of course state and local governments have their own hoops to jump through. With that in mind, here are two stories that illustrate how that process can work — and not work.
The Cybeline Revival is a pagan sect founded in 1999 and dedicated to the principle that “the divine feminine, the mother goddess Cybele, is present in everything, thereby creating a connection in all living things, as well as giving rise to an obligation to do charitable work and a responsibility to improve the conditions of all people, particularly women.” In 2002, the group bought an old inn located in the town of Catskill, New York, about two hours up the Hudson from Manhattan. They used it as a home for transsexual women and as a headquarters for their faith.
In 2009, the group applied for a property tax exemption for the inn. The town assessor denied the request and a trial court agreed, ruling that the church used the property mainly to house members of the congregation. Last year, however, an appeals court overturned that decision, holding that the church did use the property “primarily for its religious and charitable purposes.”
Not everyone who applies for tax-exempt status succeeds, however. In August, the IRS shot down an application from a group dedicated to protecting the human rights of defenseless victims of involuntary microwave and mind control attacks “perpetrated by intelligence agencies, individuals, defense contractors, mental health agencies, and clandestine crime watch organizations who also work with organized crime syndicates.”
The group applied for tax-exempt status to help educate the public about involuntary mind control, develop weapons to cancel mind control attacks through electronic jamming, and implement counterattacks for particular victims on a case-by-case basis. They also set out to solicit donations to influence proposed legislation written by the group’s founder (who must be a hoot at cocktail parties).
So . . . did our friends at the IRS buy it? Of course not. (C’mon, guys, give ’em a little credit!) In fact, they dedicated 14 pages to not buying it, holding that: 1) the group failed to establish that their activities would be “educational,” 2) its funds would be used to reimburse the founder for expenses incurred prior to formation, and 3) its primary purpose was actually to lobby for anti-mind control legislation. (They diplomatically refrained from saying “you’re nuts” or “really???”)
We don’t need to use mind control techniques to know that you want to pay less tax. While we can’t protect you from clandestine crime watch organizations or crime syndicates, we can give you a plan to pay the least amount of tax, without lining your hat with tinfoil. So call us for your plan, before someone out there makes you want to pay more!
In The Headlines
Will Drillers Hit a Dry Well on Wall Street as Oil Prices Fall?
In a ballroom at the Dallas Ritz-Carlton in September, Aubrey McClendon told an investor conference that since leaving Chesapeake Energy last year to start his own company, American Energy Partners, he has raised an average of $1.6 million an hour. McClendon went on to list the Wall Street backers that have collectively handed his organization $13 billion. Among them: KKR, BlackRock, and Apollo Global Management. “Everybody here knows that capital is more easily accessed today than probably at any other point in your careers,” McClendon said.
On the day he spoke, oil traded at about $95 a barrel. By late October it was $80. Falling prices are testing investor commitment to the Wall Street-funded shale oil boom. The Energy Select Sector Index is down 15% since the end of August, compared with 2.1% for the Standard & Poor’s 500 Stock Index. Investor attitude toward the oil and gas industry has “certainly changed in the last 30 days,” Ron Ormand, managing director of investment banking at MLV & Co., said. “I don’t think the boom is over, but I do think we’re in a period now where people are going to start evaluating their budgets.”
Seven years into the shale boom, the oil and gas industry relies more than ever on Wall Street financing, exposing Wall Street even more to an industry known for wild ups and downs. U.S. onshore oil and gas producers sold new stock valued at $12.3 billion this year, the most in at least a decade, and issued an additional $29.2 billion in debt, according to Tudor Pickering Holt, an investment bank. Drillers, bankers, and analysts agree the shale industry could not have grown so big so fast without cheap and readily available capital. “It was a credit boom just as much as it was the shale boom,” says Eric Cinnamond, manager of the $691 million Aston/River Road Independent Value Fund. “When it’s all-you-can-eat at the credit buffet, they’ll take advantage.”
More than a decade ago, a technological breakthrough enabled companies to use hydraulic fracturing and horizontal drilling to extract fuels buried miles-deep in shale rocks. The catch was that the wells cost more to drill and depleted faster than conventional wells. Oil production from shale drilling declined by more than 80% over four years—three times faster than conventional vertical wells, according to the International Energy Agency (IEA).
Wall Street was happy to supply the cash. The economics of shale production are easier for investment managers and analysts to model than those of conventional drilling, according to Ralph Eads, Vice Chairman of investment bank Jefferies. The traditional search for underground pools of oil and gas is a hit-and-miss process. In contrast, the locations of fuel-soaked shale are well-known. “External money has flowed to shale plays like it never flowed to conventional exploration,” says Michelle Foss, an energy economist at the University of Texas at Austin.
Another factor working in fracking’s favor was that investors did not have a wealth of other opportunities to choose from. “After the tech bubble and then the real estate bubble, Wall Street had to put its money somewhere,” says Michael Webber, the deputy director of the Energy Institute at the University of Texas at Austin. “They put a lot of it into domestic onshore oil and gas production.”
Lower oil prices threaten to turn off the cash spigot. The U.S. benchmark price dropped to $79.44 a barrel on October 27, the lowest since June 2012. At that level, about one-third of U.S. shale oil production would be unprofitable, according to one recent estimate by analysts for Sanford C. Bernstein. “The cash flow will go down as the prices go down,” says Philip Verleger, who was the director of the Office of Energy Policy for President Jimmy Carter and now runs an energy consulting firm. “The amount of money advanced to these people to continue the drilling will dry up entirely.” The IEA predicted in November 2013 that the U.S. would pass Russia and Saudi Arabia to become the biggest oil producer in the world by 2015. Any slowdown in U.S. output, says Vikas Dwivedi, an oil and gas economist for Australian investment bank Macquarie, “would reshape the way everybody would think about oil.”
A Leaner, Meaner ING Returns to its Innovative Roots
After a bailout, ING Group spun off its U.S. retail bank and insurance businesses. Now CEO Ralph Hamers says the company is ready to move forward. In his presentations to investors, Ralph Hamers looks as if he is trying to channel Steve Jobs. The ING Group CEO moves around the stage, pointing to financial diagrams with excitement. “It looks a bit gimmicky, but investors seem to really like it,” says Jefferies analyst Omar Fall. “He’s young. He’s animated. He presents very well.”
That charisma is just part of why investors have embraced Hamers, 48, in the one year since he took over as CEO. The Dutch banking giant’s stock has risen 35% during his tenure, trading recently at 11.29 euros on the Amsterdam exchange.
ING Group was formed in 1991 from the merger of a Dutch retail bank, NMB Postbank Group, and a Dutch insurance company, Nationale-Nederlanden, each of which was more than a century old. It soon earned accolades for launching one of the first online-banking platforms, ING Direct, which continues to be successful today in countries like France, Spain, and Italy. The idea: easy access to a savings account, with little to no fees and no minimum balance, all without a physical branch.
But the global recession was hard on ING, which had become too complex. In 2008 the company took a bailout of 10 billion euros from the Dutch government and was ordered by the European Commission to shed its insurance and investment management businesses. By May 2013, ING had spun off its U.S. insurance business and renamed it Voya Financial. Then earlier this year, it shed its European insurance arm, taking it public with the name NN Group. ING still owns 32% of Voya and 68% of NN but plans to offload them by the end of 2016. Previously, it sold its U.S. retail bank ING Direct to Capital One (now called Capital One 360) and later sold its South Korea insurance business to a private equity group for $1.65 billion. As Morningstar analyst Vincent Lui puts it, “It has to go from Ma Bell to smaller Bell.”
Hamers is a company man who joined ING in 1991 and rose in the ranks, working in virtually every sector of the company, most recently as CEO of ING Belgium. While the restructuring groundwork was laid by his predecessor, Jan Hommen, Hamers must now move ING forward as a pure-play European retail bank.
Even after cutting off so many limbs, ING, with 32 million clients in more than 40 countries, is no tiny player. Its $114.3 billion in revenues for 2013 puts ING at No. 49 on Fortune’s 2014 Global 500 list. Domestically, it remains the biggest bank in the Netherlands. But globally, it faces BNP, Société Générale, Barclays, and other European competitors who offer online banking. So now Hamers is aggressively pushing mobile. “When you move from Internet banking to mobile banking, many banks say, ‘Okay, we can just take our Internet processes and copy it to mobile.’ That’s not how it works,” he said. “It’s a completely different experience, with different expectations. It sounds very simple to offer easy banking, but there’s a lot to it.”
As a further effort to push technology, Hamers appointed ING Group’s first chief innovation officer in June. He also launched an internal cultural exchange program, promoting “agility” as the core value. “Let’s face it,” he said. “While you’re restructuring, you have different priorities. At the same time, still you always have to think, what is next? Who is going to disrupt me, or can I disrupt myself in order to improve?”
Sources:
1. http://buswk.co/1wUsifd – BusinessWeek
2. http://for.tn/1s3NRp7 – Fortune
The Good News Is . . .
• The economy grew at a solid pace during the third quarter, showing the U.S. on relatively firm footing as worries mount about a global slowdown. Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 3.5% annual rate from July through September, according to the Commerce Department. Business investment grew and exports showed resilience against a backdrop of slowing global growth. Government outlays enjoyed a large boost from military spending alongside a brightening budget picture in cities and states.
• Visa, Inc., a leading credit card and payments technology company, reported earnings of $2.18 per share, an increase of 17.8% over year-ago earnings of $1.85. The firm’s earnings topped the consensus estimate of analysts by $0.08. The company reported revenues of $3.2 billion, an increase of 8.6%. Management attributed the company’s results to increased payments volume growth, on a constant dollar basis, both domestically and cross-border.
• Chiquita Brands International and two Brazilian companies announced that they had reached a deal for the Brazilians to acquire the banana producer. The agreement provides that the Cutrale Group, a wholesale orange juice producer, and the Safra Group, a holding company, will pay $14.50 a share, or about $680 million, to acquire all outstanding shares of Chiquita and take it private. The Cutrale-Safra group said in a news release, “Chiquita will be able to take advantage of the vast knowledge of the Cutrale Group in farming, processing, technology, sourcing, distribution, logistics and marketing.”
Sources:
1. http://on.wsj.com/1wNKA4a – Wall Street Journal
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://vi.sa/1vwmc1d – Visa, Inc.
4. http://nyti.ms/1xMMPl1 – NY Times Dealbook
Planning Tips
Tips for Starting an Encore Career
Thinking about a second career? You are not alone. As many as 8.4 million Americans between the ages of 50 and 70 have already launched “encore careers,” according to a survey on boomers, work, and aging by the MetLife Foundation and Civic Ventures, a San Francisco think tank. Often, these are positions that combine income with personal meaning and social impact. Below are some tips to help you if you are thinking about your next career.
Determine your goals – Do your research. Have a mental picture of where you want to go and write down your goals. Check out websites such as Encore.org, RetiredBrains.com, Workforce50.com, and aarp.org/workresources to get an idea of what others are doing and what jobs are out there now. Investigate fields that have a growing demand for workers.
Prepare yourself – Many people know they want to keep working or even need to, yet they wrestle with just what it is they are looking for in their job and life. Start by making an honest appraisal of your skills and interests. Much of what you already know is transferable to your next undertaking. The key is to match your next job or career to your interests and personality. To help get you started, toss around ideas for career alternatives with friends and family. Check out self-assessment quizzes at the career advice section of sites like CareerPath.com and Monster.com.
Connect with a network – It helps to find a group of like-minded people who have already gone through late-life career change. You can learn from their firsthand experiences of how they made the move. It is critical to soak up as much as you can about the businesses that appeal to you. Talk with people who work in those fields. Apply for an internship or fellowship. Consider volunteering or moonlighting to get a sense of what the job entails.
Upgrade your skills and education – You may need to learn new skills and maybe even earn a degree in a new field. If possible, take mandatory courses before retiring or leaving your current job. Professional programs, graduate schools, and community colleges offer evening and weekend classes that you can fit into your current schedule. Your current employer might pay part of the bill, but make sure you check the fine print; you might have to reimburse tuition expenses if you leave your job within a set timeframe.
Evaluate your finances – Your new salary may be far less than you were earning in your first career. As a result, you may need to adjust your lifestyle if you are relying on the income for living expenses. If you are already receiving Social Security benefits, keep in mind that earning income may reduce them. If you decide to embark on an entrepreneurial path, you might have to dig into savings or even take out a loan for startup expenditures. And it is quite possible that you could be saddled with a tuition bill or even go without income for a year or so while you gain necessary training for a new line of work. If you are going back to school, seek financial aid. Take advantage of educational tax breaks. Depending on your income, you might qualify for the lifetime learning credit, worth up to $2,000 each year. If you make too much to qualify, you still might be able to claim a deduction associated with tuition and fees, up to $4,000.
Sources:
1. http://on.mktw.net/1wSX3lr – MarketWatch.com
2. http://bit.ly/1wT2PoU – US News & World Report
3. http://usat.ly/1j7bWMJ – USA Today
4. http://bit.ly/1wT2Qt3 – Intuit
5. http://nyti.ms/1G83g1f – New York Times
6. http://bit.ly/1ua13yu – Inc.
