The IHOP Corp., best known for its International House of Pancakes chain of restaurants, has agreed to pay $11 million in taxes and interest to settle a dispute with the Internal Revenue Service concerning its federal income taxes between 2000 and 2003.
The dispute is related to the tax on franchise fee income. IHOP executives will pay $7.7 million in federal income taxes and $3.3 million in interest.
As part of the agreement, IHOP will report additional income for those tax years which will increase its federal income tax liability. It also will amend its 2004 and 2005 federal tax returns to reflect the agreement, which is expected to result in a $3.1 million refund for previously paid federal income taxes.
The settlement is not expected to affect the company’s past income statements or future accounting practices.
There are about 1,278 IHOP restaurants in the United States and Canada.
Wachovia exec goes to HP
Ken Thompson, Wachovia chief executive, has been elected to Hewlett-Packard’s board of directors.
The computer company’s board made headlines after a boardroom scandal broke earlier this year and the company employed tactics to discover who leaked information to the media.
HP used imposters to obtain the phone records of journalists and board members.
In a regulatory filing this week, HP disclosed that the Securities and Exchange Commission has issued a formal order of investigation regarding the company’s spying tactics.
Thompson is the seventh director of the nine-member HP board who has had no previous ties to the company.
HP officials said Thompson was a standout candidate for the board position because of his experience running a large organization.
Wachovia operates in 15 states and is the nation’s fourth largest financial institution. It currently holds the No. 57 spot among Fortune 500 companies.
Thompson’s acceptance of the position comes on the heels of Wachovia’s $24 billion acquisition of Golden West Financial Corp.
Thompson is expected to receive an annual cash retainer of $50,000 and an additional $150,000 retainer in the form of stock or stock options.
Jobless rate lowest since ’01
Through October, U.S. employment grew by 437,000 jobs to reach a total of 145.3 million jobs — the lowest unemployment rate since 2001.
The number of U.S. jobs in professional and business services, including health care, food services and mining, saw increases, while the manufacturing and construction industries lost jobs, according to the U.S. Department of Labor.
Professional and business services added 43,000 jobs. Health care jobs grew by 23,000. Mining jobs grew by 5,000. Construction lost 26,000 jobs and manufacturing shed 39,000 jobs.
The statistics also show that average hourly earnings rose by 6 cents or 0.4 percent in October to reach $16.91. Hourly wages have grown 3.9 percent during the past year.
The average workweek increased by 0.1 hour to 33.9 hours in October.
Bills would offer SOX break
Two U.S. House and Senate bills that seek to ease accounting burdens called for as part of the Sarbanes-Oxley Act of 2002 have been introduced and are awaiting committee consideration.
Rep. Tom Feeney, a Republican from Florida, and Sen. Jim DeMint, a Republican from South Carolina, are sponsoring HR 5405 and S 2824. The bills would allow certain companies with a market capitalization of less than $700 million to decide whether to comply with Section 404 of the act.
Section 404 of the SOX law requires public companies to implement internal auditing controls verified by an outside auditor. To view the either bill, visit thomas.loc.gov.
Phone tax formula issued
The Internal Revenue Service has announced a formula that will allow businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds.
Officials said the formula will save businesses from gathering up to 41 months worth of phone records.
Businesses and tax-exempt organizations can calculate their refund amounts by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax.
In May 2006, the IRS announced that businesses and tax-exempt organizations which paid the long-distance telephone excise tax could request a refund on their 2006 federal income tax returns.
To request a refund, businesses, including sole proprietors, corporations, partnerships and tax-exempt organizations must complete Form 8913, called the Credit for Federal Telephone Excise Tax Paid form.
But, businesses still have the option of tallying the actual excise taxes paid.
The refund is capped at 2 percent of the total telephone expenses for businesses and tax-exempt organizations with 250 or fewer employees — which covers more than 99 percent of all filers.
The refund is capped at 1 percent for those with more than 250 employees. Most organizations in this category typically are able to determine the actual amount they paid in long-distance excise tax.
IRS officials said businesses should attach Form 8913 to their regular 2006 income tax returns. Tax-exempt organizations must attach it to Form 990-T.
Rob Larimer covers banking and finance for the Colorado Springs Business Journal.