LAT20170111

C2 WEDNESDAY,JANUARY11, 2017 LATIMES.COM/BUSINESS

BUSINESS BEAT

SAN FRANCISCO —
First he advised President
Obama. Then he advised
Uber. Now politicalbigwig
David Plouffe is headed for
the ChanZuckerberg Initia-
tive, the philanthropic or-
ganization founded by pedi-
atrician Priscilla Chanand
her husband, Facebook
Chief Executive Mark
Zuckerberg.
Plouffe, untilrecently a
senior advisor to San Fran-
cisco ride-hailing giant
Uber, willremaina board
member at thefirm while
leading the ChanZucker-
berg Initiative’s policyand
advocacy effort.
“Mark and Priscilla have
builta great team, andI am
honored to join them,”
Plouffewrote on hisFace-
book page Tuesday. “As the
President of ChanZucker-
berg Initiative Policy and
Advocacy, my job will be to
find creative ways to lift the
voices of those whowant to
builda better future —no
matter where they live, their
backgroundor their ideol-
ogy.”
Zuckerberg also an-
nounced on his Facebook
page that the initiative
brought onKen Mehlman, a
former campaign manager
for George W. Bush’s presi-
dential campaign,to chair
its policyadvisoryboard.
Chan and Zuckerberg
launched their philanthrop-
ic limited-liability company
in 2015, shortly after the
birthof their daughter, Max,
with a focus on personalized
learning,curing disease and
connecting people. Thecou-
ple pledged 99% of their
Facebook shares— valued
at more than $45 billion— to
the causeover their lifetime,
and last year pledged $3bil-
lion to fight diseases.
The hiring of Plouffe
shows an understanding
thatSiliconValleyalonecan-
not solve the country’s big-
gest problems. It also falls in
line with thetech world’s
growing realizationthat it
must overcome some of its
wariness of government and
take a seat at thetable to
bring about large-scale
change.
As the initiative seeks to
make advancements in edu-
cation and medicine, there
are obvious benefitsto hav-
ing political movers and
shakersonitsside.Plouffein
particular hasbui lt a repu-
tation as someone who can
soften acompany’s image
and improve its relationship
with lawmakers.
“We must participate in
policy and advocacy to
shape debates,”Zuckerberg
wrote in 20 15 at the launch of
the initiative. “Manyinstitu-
tionsareunwilling to dothis,
but progress must be sup-
ported by movementsto be
sustainable.”

[email protected]
Twitter: @traceylien

Uber

advisor

Plouffe

takes a

new job

Hewilllead the

policy and advocacy

effort for the Chan

Zuckerberg Initiative.

By Tracey Lien

DAVID PLOUFFEjoins
the organizationfounded
byPriscilla Chan and
Mark Zuckerberg.

Larry BusaccaGetty Images

By funneling much of its

overseas rev enue through

London instead ofa widely

used tax haven such as Dub-

lin,Ireland,Snapchatmaker

Snap Inc. standsto reco g-

nize similar benefits with far

less uproar.

Globalcorporations, led

by tech giants Appleand

Google, have faced in-

creased publi c scrutiny in

recent years for complex

schemes aimed at lowering

their taxes.Evenyoung, pri-

vately held software compa-

nies similarto Snap —in-

cluding Airbnb and Uber —

employ tactics thatcould

pull their taxeswell below

standard rates.

Many of them shelter

overseasrevenue in Ireland,

Luxembourg, the Nether-

lands and othercountries

with favorable taxrules. The

practice shields upwar d of

$240billion in potential an-

nual incomefrom taxes,ac-

cording to economists. But

pressure from regulators in

Europe and politicians

worldwidehasputthosecor-

porations on thedefensive

and spurred policy changes.

In the new climate, Snap,

which maintains its global

headquarters in Los Ange-

les, took the path of leastre-

sistance. Thecompany be-

hind the popular ad-sup-

ported video-sharing app

announcedTuesday that it

would collect ad revenue

from Britain andcountries

where it doesn’t have offices

in London. In countries

where it has branches, it will

pay taxes locally on income

generatedthere. Snap, for

now, hasads alesofficeinthe

U.S., Canada, Franceand

Australia.

“This allows usto pay

taxes in theU.K., which we

believe is part of being a

good local partner as we

growourbusiness,”thecom-

pany said.“We want to pay

taxes in thecountries where

we sell advertising, and this

is an important step in

building the infrastructure

to achieve thatgoal.”

Ruleseitherrecently en-

acted or in theworks are

turning locales such as Dub-

lin into less-attractive tax

havens than theywerebe-

fore 2014. For instance, the

infamous“DoubleIrish”tax-

avoidance strategy em-

ployed by the likes of Apple

and Oracle— whe re a pair of

Irish subsidiaries separates

afirm’s prof its and taxation

—is no longeravailableto

new firms. And the atmos-

phere remains turbulent:

Appleisbattlinga$14-billion

back-taxescharge sought by

European Commission offi-

cials.

“It would make sense for

companiesto think long and

hard about moving their

subsidiaries and affiliatesto

Dublin,” said Sepi Ghias-

vand, an attorney at Hop-

kins Carley in Silicon Valley.

In contrast, London has

been boosting incentives

and moved to bring down its

corporate tax rate to 17 % in

the coming years — well be-

low the U.S.’s 35% and close

to Irela nd’s 12.5%. There-

cent devaluation of the

British pound has lowered

the cost of doing business.

Treatmentof capital gains,

foreign earnings and re-

sea rch spending isgenerous

to businesses and their

shareholders, corporate tax

experts said. Theyals o ex-

pect British lawmakersto

pile on business-friendly

policies as thecountry fol-

lows through on its separa-

tion from the European

Union,a plan nicknamed

Brexit.

The EuropeanUnion is

hopingto standardize tax

policies across its member

nations. But Britain will be

motivated to stop busi-

nessesfrom leaving for the

EU by makingconcessions,

the thinkinggoes. Financial

analysts estimate that Snap

isn’tyet generating profits,

so it has timeto wait out the

legislative processtoo.

“You could makethe case

London is the most favor-

able destination forcompa-

nies right now,” said Robert

Willens,a tax and account-

ing consultant whoteaches

at Columbia University.

“The U.K. system might not

be quite as good onevery

count as Ireland, but it’s

comparable andyou don’t

risk the pub licity damage

nowthatIreland has been so

identifiedas a tax haven.”

Snap hasgrown from a

handfulofemployeesinLon-

donto 75 in the lastyear.

Last week, the company

changed itscorporate name

in Londonfrom Snapchatto

Snap Groupto reco gnize its

new structure.

The London plans are far

from likelyto mollify critics

of corporate America’s tax-

avoidance strategies. Snap

could still end up paying

verylittle in taxes, especially

if ratescontinueto tumble.

Should taxes hold steady,

Snap stillwould come out

ahead byavoiding theafter-

the-fact liability that Apple

is no w battling.

Snap’s finances and fu-

ture plans are publi cly un-

known, leaving much in

question. Revenuereached

about $400million last year,

according to estimates.

More could become clear if,

as expected, thecompany

files to tradeits stock publi-

cly in thecoming months.

[email protected]

CORPORATETAX EXPERTSexpect British lawmakers to pile on business-friendly policies as the countryfollowsthrough on its sepa-

ration from the EuropeanUnion, aplan nicknamed Brexit. Above, awoman takes a photoat the Houses ofParliament in central London.

DanielLeaf-OlivasAFP/Getty Ima ges

Snap may dodge tax criticism

Snapchat makersays

it will collect much

ofits overseas ad

revenue inLondon.

By PareshDave

WASHINGTON—Two

Republican senators are

asking President-elect Don-

ald Trump to quicklyre-

move Richard Cordray, the

director of the Consumer Fi-

nancial Protection Bureau,

setting upa potential legal

and political showdown over

the controversial agency.

“It’s time to fire King

Richard,” said Sen. Ben

Sasse(R-Neb.),amemberof

the Senate Banking Com-

mittee and like many Re-

publicansa harsh critic of

the agency created by the

2010 Dodd-Frank financial

regulatory overhaul.

“UnderneaththeCFPB’s

Orwellian acronym is an

attack on the American idea

thatthe people who write

our laws are accountable

to the American people,”

Sasse said. “President-elect

Trump has the authority to

remove Mr. Cordray and

that’s exactly what the

American people deserve.”

Sasse and Sen. Mike Lee

(R-Utah) have writtento

Vice President-elect Mike

Pence requesting that

Trump take the action

“promptlyafter his inaugu-

ration.”

The lawmakers cited an

October federal appeals

court ruling that the inde-

pendentconsumer bureau’s

structure is unconstitu-

tional because itgives the

directortoo much power.

Under Dodd-Frank, the

directorserves afive-year

term andcan beremoved

only “for cause,” such as ne-

glect of duty.

In a 2-1 ruling,a three-

judgepanelof the U.S. Court

of Appeals for the District of

Columbiaruled that struc-

ture was a vio lation of the

Constitution’s separation of

powers because it limited

the president’s authority.

The solution fromthe

court was to strike downthe

law’s “for cause” provision,

meaningthepresidentcould

remove the consumer bu-

reau director for anyreason,

the same as with otherexe-

cutive branch appointees.

The CFPB is appealing

the ruling, asking all of the

court’s judgesto review it.

Thatchallenge has led

some legal scholarsto argue

that it could pose legal prob-

lems for Trumpto remove

Cordray immediately upon

taking the White House.

Cordray’s term doesn’tex-

pire until July 20 18.

The move alsowould ig-

nite a political dispute with

Democrats such as Sen.

Elizabeth Warren (D-

Mass.), who came up with

theidea oftheagencyand

helped launch it as an

Obamaadministrationaide.

Supporters note that the

bureau hasreturned more

than $11 billion in refunds for

consumers and helpedto

unravel Wells Fargo & Co.’s

unauthorized accounts

scandal.

“Mr. Cordray is anex-

traordinary director who

has doneexactly what Con-

gress told himto do — de-

fendconsumers andrebuild

the financialsystem after a

massive collapsejust eight

years ago,” said Ed

Mierzwinski,consumer pro-

gram director at theU.S.

Public Interest Research

Group.“And now you’ve got

senators panderingtoward

powerful special interests

[trying to have him re-

moved].”

Thecourt hasn’tyet ac-

cepted the appeal, meaning

that the panel’s ruling is not

formally ineffect. And there

is the risk that thecourt

could overturn theruling,

restoring theconsumer bu-

reau’s structure as set up by

Dodd-Frank.

Cordray alsocould sueto

challenge his removal. And

he won’t resign,consumer

bureau spokeswoman Jen

Howardsaid.

“Director Cordray was

confirmed bya bipartisan

group of66 senatorsto serve

atermuntilJuly20 18 andhas

no plansto step down,” she

said.

Sasse and Lee argued in

their letter, sentto Pence on

Monday,thatTrumphasthe

constitutional authority to

remove Cordray. Andthey

said Trump hasa good rea-

son: Cordray “has pursued

costly regulatory policies

thatareradicallyopposedto

the Trump administration’s

pro-growth agenda.”

Republicans have com-

plained that the bureau

wieldstoo much power over

financial products and that

itsattemptsto helpconsum-

ers with new regulationson

mortgages, payday loans

andother lending have re-

stricted accessto credit.

GOP critics also have op-

posed the bureau’s struc-

ture, which includesa single

director and a budget

funded from the Federal

Reserve thatavoids thecon-

gressional appropriations

process.

Republicans have unsuc-

cessfully pushed legislation

to change the agency’s lead-

ershipto a bipartisancom-

missionandsubjectitsfund-

ing to annual app ropria-

tions thatwould give law-

makers more leverage over

bureau policies. President

Obama has threatened to

veto any such changes.

Those legislative initia-

tives stand amuch better

chance with Trump in the

White House,althoughWar-

ren and Senate Democrats

would probably try to block

any billchanging the bu-

reau’s structure.

Trump has promisedto

dismantleDodd-Frank.And

asweeping proposal by

House Financial Services

Committee Chairman Jeb

Hensarling (R-Texas) to re-

place the law would rename

thebureau the Consumer

Financial Opportunity

Commission, replace the

singledirectorwithfivec om-

missioners and subject itto

congressional appropria-

tions.

Evenif Trump doesn’tre-

move Cordray, House and

Senate Republicans have

the majorities needed to

overturn bureau actions

they oppose. Theycouldn’t

take such a step under

Obama because hewould

have vetoed the disapproval

legislation, said Edward

Mills,a pol icy analyst at in-

vestment bank FBR Capital

Markets.

And when Cordray’s

term expires, Trump will be

ableto nominate a replace-

ment witha less aggress ive

approach to regulation,

Mills said.

“I would expect that new

director to likely signifi-

cantlyreduce the agenda

and/or staff and focus” of the

bureau, he said.

jim.puzzanghera

@latimes.com

Twitter: @JimPuzzanghera

Ouster of agency chief urged

Two GOPsenators

askTr umptoremove

Richard Cordrayfrom

U.S. consumer bureau.

By Jim Puzzanghera

RICHARD CORDRAY

won’t resign, an agency

spokeswoman says.

AlexWongGe tty Images