Created to support small businesses during the Covid-19 pandemic, the employee retention credit, or ERC, is worth thousands of dollars per eligible employee. However, the tax break sparked a wave of companies pushing small businesses to wrongly claim the credit — and the agency temporarily stopped processing new filings in September amid a “surge of questionable claims.”
“With the aggressive marketing we saw with this credit, it’s not surprising that we’re seeing claims that clearly fall outside of the legal requirements,” IRS Commissioner Danny Werfel said in a statement Wednesday.
Starting this week, ineligible taxpayers will start receiving copies of Letter 105 C for disallowed claims. Later this month, the IRS will unveil a “voluntary disclosure program” for taxpayers who wrongly claimed the credit. The agency is rejecting filings from entities that didn’t exist or didn’t have paid employees during the eligibility period.
“The action we are taking today is part of an initial set of steps in our compliance work in this area,” Werfel said. “More letters will be going out in the near future, including both disallowance letters and letters seeking the return of funds erroneously claimed and received.”
The announcement comes less than two months since the IRS unveiled a special withdrawal process for small businesses that wrongly claimed the credit to avoid repayment, interest and penalties.
The president on Wednesday highlighted the parts of his Investing in America agenda aimed at supporting small businesses at Wisconsin’s Black Chamber of Commerce in Milwaukee. His remarks specifically focused on the success of “Bidenomics” for minority-owned small businesses, especially in contrast to the policies of former President Donald Trump.
“On my watch, energy and emergency relief went to minority-owned businesses first, not last.”
The Department of the Treasury estimates that Biden’s investments in community lenders will lead to a $50 billion increase in lending to Latino communities and a $80 billion rise for Black communities. A White House official noted before Wednesday’s event that Black small business ownership is growing faster than it has in 30 years and the creation rate of Latino small businesses is at a decade high.
Biden’s push to spotlight his support for economic equity comes amid dismal polling that shows him losing ground with Latino voters, a key demographic that helped put him in the White House in 2020.
A recent CNBC survey found that Republican front-runner Donald Trump has a 5-point lead against Biden among Latinos. Biden did maintain a significant lead against Trump with Black voters, 75% of whom said they would support the current president in a hypothetical matchup.
It is a strategy that has helped him before. In 2020, Biden campaigned on the idea that closing the racial economic equity gap would help heal the pandemic-stricken economy.
As such, Biden made minority-owned business investment a central pillar of his “Build Back Better” economic platform. He pledged to create a fund with $30 billion of seed money for small businesses and to “advance racial equity.”
This rhetoric came against the backdrop of a broader reckoning over racism in policing that sparked protests nationwide. Biden’s focus on correcting racial inequity also served as a contrast to his Republican opponent, Trump.
“Every instinct Trump has is to add fuel to the fire,” Biden said at the time.
On Wednesday, Biden again differentiated his diversity stance from Trump.
“Diversity is our strength as a nation,” Biden said. “I don’t believe, as our former president said again yesterday, that immigrants are polluting our blood.”
The president was referring to Trump’s recent claim that immigrants are “poisoning the blood” of America, which the Biden campaign said “parroted Hitler.”
Biden has made headway on some of the campaign promises from 2020 and he wants voters to know it.
These grants would provide a meaningful boost to small business owners of color who face well-documented obstacles in securing capital investments and loans.
But these wins come after a year of economic woes that have exacerbated the headwinds facing minority small business owners.
A White House official noted that beyond the more deep-rooted hurdles that Black and Latino business owners face, this year has also brought “inflationary pressures.”
There are many causes for the record-high inflation that has squeezed budgets: supply chain disruptions causing product shortages, interest rate volatility boosting producer costs and pent-up demand lingering from the pandemic. Biden has pointed the finger at corporate price-gouging to explain why some consumer prices have not come down even as the economy appears to be recovering.
The December CNBC All-America Economic Survey found that Biden’s approval ratings have fallen to an all-time low, driven in part by his handling of the economy.
For Latino voters specifically, polling has shown that the rising cost of living and jobs are top of mind heading into ballot season, which could explain why they are fleeing Biden’s camp.
The IRS unveiled a “special withdrawal process” for companies with pending claims in September. The new voluntary disclosure program offers applicants the chance to repay credits received at a 20% discount to cover third-party promoter fees.
However, it’s a “limited-time offer,” IRS Commissioner Danny Werfel said during a press call Thursday. The deadline to apply to the voluntary disclosure program is March 22, 2024.
“We urge employee retention credit recipients who think they were misled by promoters to review these special programs, including either the disclosure program or the withdrawal option, depending on their situation,” Werfel said.
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Werfel said the IRS is sending another round of letters to companies that wrongly received the ERC and those taxpayers will not be eligible for the voluntary disclosure program.
“It’s for those that have received the claim, or received their credit, and have not yet heard from the IRS,” he said.
To qualify for the program, companies must provide the IRS with contact information for any advisors or tax preparers who assisted them with the erroneous claim, along with details about the services.
The actor, who was set to be a major chess piece in Disney’s Marvel Cinematic Universe, was found guilty in connection with a March 25 incident that erupted between Majors and his ex-girlfriend in New York. He faces up to one year in jail. He is scheduled to be sentenced Feb. 6.
The Majors firing adds to Disney’s strain. While the actor most recently appeared in the Marvel’s second season of “Loki,” the studio had previously not commented on his future with the brand.
Following the incident, but prior to his conviction, Majors was dropped from several marketing campaigns as well as by his talent agency. Disney previously pulled his film “Magazine Dreams,” once considered an Oscar contender, was also pulled from the calendar.
Majors’ character in the MCU was supposed to be the next big villain of the franchise. Already, he’s portrayed several variations of Kang, a time-traveling baddie bent on conquering the multiverse, since 2021.
In the same way that Josh Brolin’s Thanos was the over-arching antagonist of the first decade of Marvel’s theatrical storytelling, Major’s Kang was established to be the next, culminating in another Avengers team-up movie in 2026 called “The Kang Dynasty.”
With Majors’ conviction, Disney now has to make a choice: recast the role of Kang or completely alter its plans for the MCU.
The Marvel franchise, overseen by producer and executive Kevin Feige, has previously recovered from a string of lackluster films and has a deep well of stories and characters to pull from. Its box office track record is unrivaled. In just 15 years, this franchise has released 33 films and generated nearly $30 billion in global box office.
Not to mention, Marvel has its own theme park lands at Disneyland in California and in Shanghai, and is one of the top-selling properties in the retail market right now.
However, in Disney’s exuberance to pad its fledgling streaming service Disney+ during the Covid pandemic, it saturated the market with hit-or-miss television series. It introduced dozens of new heroes and villains, fundamentally altering the universe in which previous films had been set. For many casual fans, the inundation of content began to feel more like homework than entertainment.
Disney shells out north of $200 million for each of its film and television productions, making it vitally important that moviegoers see these flicks in theaters and Disney+ subscribers watch them.
Marvel has recast roles within the MCU before. Don Cheadle took over as James Rhodes from Terrence Howard after the first “Iron Man” film, Mark Ruffalo replaced Edward Norton as Bruce Banner, aka the Hulk, and Harrison Ford is taking over for the late William Hurt as Gen. Thaddeus Ross in the upcoming “Thunderbolts.”
Additionally, Kathryn Newton became Cassie Lang in “Ant-Man and the Wasp Quantumania,” replacing Emma Fuhrman from “Avengers: Endgame.” And the character of Fandral from “Thor” transitioned from Josh Dallas to Zachary Levi in “Thor: The Dark World.”
Rate cuts next year could push transformational deal-making to 2025. If media or technology companies want to acquire large assets and don’t have the cash on hand, they’ll want to wait for cheaper money.
“I had lunch in late November with the CEO of a major studio, and what he expressed is uncertainty around operating in this monetary policy environment,” said Martin. “What is the cost of capital? Am I better served punting until 2025 where I have more clarity when interest rates come down or remain static?”
Still, major deals could be announced in 2024 with an assumption that the process of closing them will take 12 to 18 months. By that time, companies may bet on interest rates falling to levels more in line with the past 10 years.
Shari Redstone, chair of Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on Tuesday, July 11, 2023.
Shari Redstone has held talks for the last few months to potentially sell National Amusements, the controlling holding company of Paramount Global, according to people familiar with the matter who declined to be identified because the discussions are private. If that deal occurs in 2024, it could kick off a wave of strategic transactions, including selling dying cable networks to private equity firms, throughout the media and entertainment industry regardless of the macroeconomic environment.
Maybe that’s too grinchy. Some things will get better. The actors’ and writers’ strikes are over. The 2024 U.S. presidential election should help boost advertising dollars as global TV ad revenue is on pace to decline 18% this year, according to media investment firm GroupM.
Still, legacy media companies including Disney, Paramount Global, Warner Bros. Discovery and Comcast’s NBCUniversal are trying to figure out what investors want since pulling back on a narrative of subscription streaming video growth that dominated 2020 and 2021. Warner Bros. Discovery and Comcast have outperformed the S&P 500 in 2023, though just barely. Disney and Paramount Global have underperformed.
The overriding narrative for 2024 appears to be one of uncertainty on three key fronts: interest rates, regulatory policy and overall growth prospects. The industry should have more clarity in 2025 on all three topics to propel it forward, said Corey Martin, managing partner at entertainment law firm Granderson Des Rochers. Next year will probably be defined by preparation for action rather than actual transformation, Martin said.
This executive predicted “fool me five times, shame on me.” Disney has many strategic problems that don’t have easy answers, such as figuring out how ESPN’s business fits in a direct-to-consumer world and how to wind down its legacy TV cable networks. Those problems demand a leader with a steady hand who understands the industry. Is there a better leader of Disney than Bob Iger? The Disney board has decided, over and over again, that there is not. Why would this time be any different?
Nelson Peltz, founder and chief executive officer of Trian Fund Management, during the Future Investment Initiative (FII) Institute Priority Summit in Miami, Florida, on Thursday, March 30, 2023.
One thing that may prevent Iger from extending his contract is if Nelson Peltz and Jay Rasulo get board seats. Last week, activist investor Peltz and former Disney Chief Financial Officer Rasulo criticized Disney’s failed succession planning as part of a statement announcing their intentions to run for Disney’s board of directors when nominees are selected next year.
“In our view, Disney’s board has failed to fulfill its essential responsibilities – overseeing the development of an effective strategy, planning for orderly succession, aligning executive pay with performance, and ensuring accountability for operational execution,” Peltz said in the statement.
This executive predicted Peltz and Rasulo will win their campaign and both join the board. A second person guessed only Rasulo will get a spot — perhaps via a settlement before a vote.
In honor of the 12 days of Christmas, I asked 12 past and current executives at the world’s biggest media and entertainment companies for one industry-shaking prediction for 2024. And then I asked one more because this is the holiday season, and I was feeling generous. A baker’s dozen! Actually, I asked a few more, but some overlapped.
Some weren’t as good. The media industry didn’t bounce back from recession as well as one executive hoped. Netflix didn’t merge with another company. Apple didn’t ban TikTok from its app store.
One executive targeted NBCUniversal as the most likely acquirer of Warner Bros. Discovery. This executive predicted Comcast CEO Brian Roberts would spin off NBCUniversal so that the new company would trade separately. But, Comcast (and Roberts) would keep a controlling stake of the ownership of the new entity.
A second executive suggested a more expansive scenario. Comcast will keep its theme parks business but sell the rest of the company in exchange for WBD common shares. Comcast will get a premium for the remainder of NBCUniversal in exchange for Roberts giving up his voting shares. Warner Bros. Discovery CEO David Zaslav runs the combined company, with NBCUniversal film chief Donna Langley staying on to run an expanded studio
Warner Bros. Discovery CEO David Zaslav and Paramount CEO Bob Bakish met Tuesday to discuss the contours of a possible deal, said the sources, who declined to be named since the talks are private. The discussions are preliminary, and a deal may not materialize.
Meanwhile, Warner Bros. Discovery, the result of a merger between Warner Media and Discovery, has been slashing costs and attacking its debt levels under Zaslav. The company has since said its streaming business has become profitable while other streamers, outside of leader Netflix, try to reverse losses.
Last month, Zaslav and Liberty Media’s John Malone, a Warner Bros. Discovery shareholder and board member, appeared to indicate that the company was preparing to become a buyer within the next year or two. The broader media industry is widely considered ripe for consolidation. Media executives are worried, however, that President Joe Biden’s administration could be hostile to a big media merger.
Warner Bros. Discovery is approaching the two-year anniversary of its 2022 merger. That’s a key benchmark for Reverse Morris Trust tax reasons. It means that Warner Bros. Discovery can do another significant deal two years after the close of the previous merger.
Axios previously reported the Paramount-Warner Bros. Discovery talks. Warner Bros. Discovery’s stock fell more than 5% Wednesday after the news broke, while Paramount shares bounced a little off their lows.
That’s where Warner Bros. Discovery finds itself today. The company has held preliminary merger talks with Paramount Global, the media conglomerate controlled by Shari Redstone. Warner Bros. Discovery Chief Executive David Zaslav met with Paramount Global CEO Bob Bakish on Tuesday to discuss what a merger of the companies may look like, according to people familiar with the matter.
“Crush” may actually be too strong here. This is not a case of both companies lusting for each other. It’s more of a partnership of necessity. Neither company has a clear future competing for content in a streaming-dominated world where Apple, Amazon, Netflix and YouTube owner Google have far larger balance sheets. They just want to survive and boost their share price.
But maybe Warner Bros. Discovery would rather merge with Comcast’s NBCUniversal — if Comcast is open to it. There may be regulatory issues with NBCUniversal. It’s unclear whether officials would allow Universal and Warner Bros. to come together. This year, they’re the top two U.S. movie studios by revenue. While smaller than Warner Bros. or Universal, Paramount is still a top five studio most years.
Deal structure will be important here. If Comcast spins out NBCUniversal to merge with Warner Bros. Discovery, it could theoretically give Zaslav debt-free earnings to strengthen the combined company’s balance sheet.
That might be more enticing than taking on Paramount Global’s $15 billion of debt. Warner Bros. Discovery has nearly $45 billion of debt and has worked to bring down its leverage all year by boosting free cash flow. Buying Paramount Global might be viewed as starting over for Zaslav, who hasn’t made many friends in Hollywood with his intensive cutting of both jobs and content spending.
It’s also possible Comcast CEO Brian Roberts wants to hold on to NBCUniversal and isn’t interested in doubling down on legacy media right now. NBCUniversal isn’t in merger talks with anyone right now, according to a person familiar with the matter. Spokespeople for Comcast, Warner Bros. Discovery and Paramount Global all declined to comment.
Generally speaking, Comcast’s NBCUniversal has similar assets to Paramount Global. They both have broadcast networks: NBC for NBCUniversal and CBS for Paramount Global. They both own a slew of aging cable networks. NBCUniversal’s include Bravo, E! and USA. Paramount Global’s include Nickelodeon, MTV and Comedy Central. Both companies have subscale, money-losing streaming services. Paramount Global owns Paramount+ (and Showtime), and NBCUniversal has Peacock.
Opening discussions with Paramount Global should give Warner Bros. Discovery a read on where Comcast stands on deal-making. Is Comcast OK with Paramount Global and Warner Bros. Discovery merging? Or does Roberts want to combine with Warner Bros. Discovery instead, leaving Paramount Global without an obvious dance partner? Would that lead Redstone to selling her stake in National Amusements and letting someone else, like David Ellison at Skydance, figure out the future for Paramount Global?
Those discussions have now begun. They will almost certainly heat up in the coming weeks and months. The starting gun has been fired. Welcome to 2024.
