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Journal Issue
Bankruptcy Code
Bankruptcy Rule
Plush Sports-Doll Maker Bleacher Creatures Files for Bankruptcy
Matthew Hoffman had an unusual thought while in the stands at a Phillies game in the summer of 2010: “What would Chase Utley look like if he were a Muppet?,” the Philadelphia Inquirer reported yesterday. From that musing about the team’s former second baseman, the Plymouth Meeting father of three would launch Bleacher Creatures LLC six months later, its 10-inch plush dolls and other collectibles becoming popular among fans of professional sports teams, action heroes, singers, politicians and even Pope Francis. His Holiness was tickled to see his likeness when a young girl handed it to him upon his arrival in New York in September 2015, days before his U.S. visit brought him to Philadelphia. Although the pontiff kept the doll, his influence was no match for the challenges of today’s retail environment. Bleacher Creatures filed for chapter 11 protection, citing $1.5 million in assets as of the end of March and $1.8 million in liabilities. “It’s humbling and it’s disappointing,” Hoffman said, adding that his company, which had 12 employees at its peak, now had six as it continues to accept orders, design new products, and prepare for a sale. He hopes to be part of the leadership of the reorganized company, but it is not yet clear how many bidders there will be. He says he expects the process to take about nine weeks. Hoffman is focused on seeing that orders are fulfilled and “selling as much as I can to recover as much as I can for my creditors.”
U.S. Companies Push Hard for Lower Tax Rate on Offshore Profits
Major U.S. multinationals are pushing the Trump administration to deepen the tax break it has already tentatively proposed on $2.6 trillion in corporate profits being held offshore, a key piece in Washington's intricate tax reform puzzle, Reuters reported today. As President Donald Trump tries to deliver on his campaign promise to overhaul the tax code, lobbyists for technology, drug and other manufacturers are working with officials behind closed doors. In line with tax cuts already embraced by Republicans in the House of Representatives, the lobbyists said they are telling the White House and Treasury Department that if companies are forced to bring home, or repatriate, foreign earnings, they want a sharply reduced tax rate. The lobbyists are making an aggressive case that cutting the tax rate on offshore profits to 10 percent from 35 percent, as the administration has indicated it may favor, is not enough. Rather, they want a lower, bifurcated rate of 3.5 percent on earnings already invested abroad in illiquid assets, such as factories, and 8.75 percent on cash and liquid assets.
Republicans Grapple Over Corporate Tax Reform Without Hurting Small Businesses
Small businesses have become the crux of the tax reform debate, with Republicans saying that it makes no sense to do only a corporate overhaul because it will leave behind millions of mom-and-pop shops that file their taxes as individuals, The Washington Times reported yesterday. Under current law, small businesses that file as individuals end up at a disadvantage, House Speaker Paul Ryan (R-Wis.) said. The U.S. corporate tax rate is 35 percent — much higher than the worldwide average of 23 percent — but small businesses that file as “subchapter S corporations” can pay even higher individual rates. “The top tax rate on subchapter S corporations in America — which is eight out of 10 businesses in America — their top tax rate’s 44.6 percent,” he said. “You throw the Ohio income tax on top of that or the Wisconsin income tax, and we are taxing businesses, employers, jobs more than 50 percent in many cases.” Republicans are trying to build momentum for their push for tax reform, knowing they will get little help from Democrats. Efforts to find common ground with President Obama on corporate taxes went nowhere, but with total control of the levers of Washington, Republicans are aiming even bigger now, saying both sides of the tax code can be overhauled to the benefit of everyone.
Analysis: Retail Funk: Stores Facing Biggest Challenges Since Recession
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Small-Business Confidence Reaches Highest Point Since December 2004
Confidence among small business, in the upswing since the election, in January reached its highest point in more than a decade, according to the National Federal of Independent Business (NFIB), the Wall Street Journal reported today. The NFIB’s small-business optimism index edged up to 105.9 in January, the highest point since December 2004 and follows December’s largest month-over-month increase in the survey’s history. The NFIB — a conservative-leaning small-business lobby based in Washington, D.C. — said that while recent trends look much like the surge in 1983, which was followed by 7 years of gross domestic product expansion averaging 4.5 percent, such expansion is unlikely this time due to differences in excess capacity available to absorb higher demand.
Trustee Goes After HDL's Charitable Contributions
The dismantled remains of one of Richmond’s most charitable companies has started demanding the return of some of its gifts, the Richmond (Va.) Times-Dispatch reported on Sunday. While the now-bankrupt blood-testing firm Health Diagnostic Laboratory enjoyed years from 2008-15 as one of Richmond’s fastest-growing companies, it simultaneously earned a reputation for philanthropy, but HDL’s swift downfall and 2015 bankruptcy on the heels of a federal investigation into whether it paid doctors illegal kickbacks for using its service has left many of those gifts in jeopardy as the company’s bankruptcy trustee attempts to recoup more than $600 million for its creditors. Co-founder and former CEO Tonya Mallory was well-known for her charitable tendencies. In 2011, HDL gave $2.35 million to the Science Museum of Virginia, at the time the largest corporate gift the museum had received. In addition to the large gifts, HDL gave smaller contributions throughout the community — from sponsoring a viewing of a health-focused documentary to donating to area private schools. In a complaint that Richard Arrowsmith, HDL’s liquidating trustee, filed in September against Mallory and dozens of other former HDL executives and employees, he claims that HDL “squandered millions of dollars through inappropriate corporate sponsorship and large charitable gifts.” The trustee’s legal counsel has sent demand letters to various area organizations in which it calls the donations “fraudulent transfers.”