Look out for Zombie States – not only on Halloween




We call it the “Zombie Index” based on the work of Edward Kane, a prolific and respected finance professor at Boston College. Back in 1985 and 1989, Ed wrote two books warning about taxpayer exposure to losses from bank deposit insurance schemes, before we knew what hit us in the savings and loan crisis. Ed coined the term “zombie bank” to identify effectively-insolvent banks that were allowed to remain open by regulators and others. Deceptive accounting principles greased the wheels for regulatory forbearance, making “zombies” appear to be solvent. 

Zombies had incentives, in Ed’s terms, to “gamble for resurrection.” Insiders could capture the upside of riskier investments, while prospective losses could be socialized through the government’s sponsorship (and ultimately, bailout) of deposit insurance systems. These incentives ended up magnifying taxpayer losses during the 1980s deposit insurance crisis. Those losses ran in the hundreds of billions of dollars and helped set the stage for the massive financial crisis of 2008-2009.

Author(s): Bill Bergman

Publication Date: 25 Oct 2021

Publication Site: Truth in Accounting

Why Delaware is the sexiest place in America to incorporate a company



Let’s say you run a tennis ball company in California that rakes in $100m/year in net income.

In California, you’ll pay a state income tax (8.84% of net income) — and possibly an alternative minimum tax (6.65%) — in addition to the federal corporate tax rate of 21%.

By incorporating in Delaware, though, you can likely save millions in taxes with something called the “Delaware loophole.”

In Delaware, intangible assets — think trademarks, copyrights, and leases — are free from taxation. Companies will often transfer these assets to a Delaware subsidiary and pay their own subsidiary for the rights to use said assets.

Author(s): Zachary Crockett

Publication Date: 10 April 2021

Publication Site: The Hustle