Tax legislation should be a priority of Congress after the election. What can we expect from a gridlocked Washington? The answer depends on whether the two parties are willing to talk with — rather than shout at — each other.

The Bush tax cuts expire after December 31. If Congress does nothing, then capital gains, dividends, and individual tax rates will all increase and the estate tax, after a year off, will return with a vengeance. Business can also expect a tax increase:

• Bonus depreciation (which allows taxpayers to deduct 50 percent of capital expenditures in the year in which the property is placed in service) will expire;


• The R&D tax credit — which expired (for the 13th time) on December 31, 2009 — has yet to be extended, even though there’s a consensus that it should be and the expectation that it would be; and


• Numerous other investment incentives will also disappear.

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Since my most recent post last month, I’ve been busy examining two research areas I will discuss in the coming weeks: the finance function’s role in corporate sustainability efforts (primarily defined as relating to environmental and social responsibility issues) and how the finance function might look in 2020 and beyond, given the global forces acting on organizations right now.

These projects have been eye-opening, and so have several of the publications, reports, articles, and white papers I’ve been reading as part of my research. For example, here’s what a corporate treasurer had to say about the current state of enterprise risk management:

“The financial crisis of [2008-2009] has awakened the need to comprehensively review and manage risks, especially those that seem very remote. If Lehman Brothers can go under, if AIG can go to the brink due to material exposures to a specific market that was deemed ‘safe,’ and if government default is viewed as a possibility, then we need to reassess our risks with a completely different mind-set. The comment ‘That can never happen’ will probably never be used in risk assessments again.” more

At its meeting earlier this week, the Federal Reserve announced its plans to purchase $600 billion in Treasury securities over the next 8 months, or at a rate of about $75 billion per month. This second round of quantitative easing — QE2 as it’s quickly become known — is designed to “promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its [the Fed’s] mandate.”

The last part of the statement refers to the Fed’s dual mandates, as directed by Congress: full employment and price stability. At the moment, of course, unemployment is just shy of 10 percent. Inflation, as measured by the BLS’s Consumer Price Index, is slightly above 1 percent.

QE2 is an effort to boost employment and perhaps asset values, by putting more money into the system through the Fed’s purchases of Treasury securities, which this article in the Kansas City Star explains. more

Have you ever been told that a problem is just a software glitch? Sort of makes the problem, whatever it was, seem minor.

Frequently, it isn’t minor. Jeff Papows, CEO of WebLayers, a software company, and author of the book Glitch: The Hidden Impact of Faulty Software, likes to tell the story of the $23,148,855,308,184,500 computer glitch. Just so you know that it’s not a typo, Papows spells it out in words, too: twenty-three quadrillion, one h hundred forty-eight trillion, eight hundred fifty-five billion, three hundred eight million, one hundred eighty-four thousand, five hundred dollars (no cents).

That was the amount a young man was charged on his debit card when he purchased a pack of cigarettes. You knew smoking was bad for you, but not that bad. Obviously, a mistake that egregious did not require an army of lawyers to untangle, but it still took a few days to straighten out. For CFOs, the question should arise: What far less obvious but possibly more damaging mistakes are being made by your IT systems, and what can you do about it? Papows offers some answers. more