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Apple CEO Tim Cook charmed the Senate today, testifying on the company's tax avoidance practices.

The most interesting part of the story wasn't on the Senate floor, however.

The report published by the Permanent Subcommittee on Investigations detailing Apple's strategies is a great read on its own.

The report gives an inside look on Apple's absolutely genius tax avoidance strategies. 

Apple uses a variety of offshore structures and arrangements to shift billions of dollars from the United States to Ireland.

The U.S. corporate tax rate is 35%, while Apple has negotiated a special corporate tax rate in Ireland of less than 2%.

Apple has found the secret to not paying taxes. You just avoid taxes by not declaring a tax residency for the company that oversees the entirety of your international income. 

First, let's look at Apple's main offshore holding company:

Apple Operations International (AOI) is the company's primary offshore holding company. It was registered in Cork, Ireland in 1980, and its purpose is to serve as a cash consolidator for most of Apple's offshore affiliates. It receives dividends from those affiliates and makes contributions as needed.

• Apple owns 100% of AOI either directly or through controlled foreign corporations. 
• AOI owns several subsidiaries, including Apple Operations Europe, Apple Distribution International, and Apple Singapore.
• AOI has no physical presence and has not had any employees for 33 years. It has 2 directors and 1 officer, all Apple Inc. brass. One is Irish, two live in California. 
• 32 of 33 AOI board meetings were held in Cupertino rather than Cork. 
• Shockingly, AOI doesn't pay taxes. Anywhere. The holding company had a net income of $30 billion from 2009 to 2012, but has not declared tax residency in any jurisdiction. 
• AOI's income made up 30% of Apple's total world profits from 2009- 2011.

• ASI buys Apple's finished products from contracted manufacturers in China — think Foxconn — and resells them at a major markup to other Apple affiliates in Europe, the Middle East, Africa, India and the Pacific.
• Although ASI is an Irish incorporated entity and the purchaser of the goods, only a small percentage of Apple’s manufactured products ever entered Ireland. 
• Upon arrival, the products were resold by ASI to the Apple distribution affiliate that took ownership of the goods. 
• Before 2012, ASI had no employees despite $38 billion in income over three years.
• Apple's cost sharing arrangement facilitated the shift of $74 billion in worldwide profits away from the United States from 2009 to 2012.
• ASI's parent company is Apple Operations Europe Inc. Together they own the intellectual property rights to Apple goods sold offshore.
• Like AOI, ASI claims to be a tax resident of nowhere. It's not obligated to pay taxes to any nation. 

Apple Sales International pays very, very little in global taxes:

The rest of the report is fascinating, but somewhat obtuse for people uninterested in international corporate finance.

Basically, Apple makes sure that income isn't taxed by the U.S. by exploiting a loophole in Subpart F of the corporate tax code.

They're able to route profits offshore and keep them there through licenses. 

Here's the bottom line. 

Apple was kind enough to tell the Senate investigators exactly how many taxes the company has dodged over two years by these arrangements:

Every day, Apple avoids paying more in taxes than Tumblr can hope to make all year.

 

Click here to read the full report > 

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CBS told Business Insider that it is "investigating" a claim by investigative reporter Sharyl Attkisson alleging an ongoing intrusion into her computers. 

Attkisson made the claim Tuesday morning during an interview with host Chris Stigall on WPHT Philadelphia. 

"There's been an issue in my home and an issue with my computers," Attkisson said on the radio show. "It's gone on for quite a long time."

Attkisson stressed, however, that she wanted to be careful to not make accusations "against a specific entity." 

But she did offer a comparison to the Justice Department's investigation into Fox News reporter James Rosen, a 2009 case that earned renewed scrutiny on Monday.

Stigall asked her if she thought it was related to Rosen's situation. An FBI agent wrote in a search warrant that Rosen was an "aider and abettor and/or co-conspirator" by soliciting information from a former State Department official.

"I don't know details of his — I only know what I've read," Attkisson said. "But I think there could be some relationship between these types of things and what's happened to me."

CBS spokesperson Sonya McNair told Business Insider that the network is "investigating the matter."

Attkisson, an Emmy Award-winning investigative reporter, has long reported on some of the issues that are most sensitive to the Obama administration, including the so-called "Fast and Furious" gun-walking scandal, the administration's spending on green energy, and, as of late, Benghazi. 

Attkisson has contributed to no fewer than 66 Benghazi-related items on the CBS website. She continued to doggedly cover it even when it dropped out of the mainstream.

The Department of Justice didn't respond to multiple requests for comment on Tuesday.

Here are Attkisson's comments on Stigall's radio show:

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WASHINGTON (Reuters) - A federal appeals court ruled on Tuesday that the U.S. government had properly classified top secret more than 50 images of al Qaeda leader Osama bin Laden taken after his death, and that the government did not need to release them.

The unanimous ruling by three judges on the U.S. Court of Appeals for the District of Columbia Circuit rejected a request for the images by a conservative nonprofit watchdog group.

Judicial Watch sued for photographs and video from the May 2011 raid in which U.S. special forces killed bin Laden in Abbottabad, Pakistan, after more than a decade of searching.

The organization's lawsuit relied on the Freedom of Information Act, a 1966 law that guarantees public access to some government documents.

In an unsigned opinion, the appeals court accepted an assertion from President Barack Obama's administration that the images are so potent that releasing them could cause riots that would put Americans abroad at risk.

"It is undisputed that the government is withholding the images not to shield wrongdoing or avoid embarrassment, but rather to prevent the killing of Americans and violence against American interests," the opinion said.

The court ruled that the risk of violence justifies the decision to classify the images top secret, and that the CIA may withhold the images under an exception to the Freedom of Information Act for documents that are classified.

Judicial Watch President Tom Fitton said in a statement that the ruling "would allow terrorists to dictate our laws." Fitton said his lawyers are considering what to do next. The group could ask the U.S. Supreme Court to hear the case.

A spokeswoman for the Justice Department, which represents the Obama administration in court, had no immediate comment.

The images show a dead bin Laden at his compound in Pakistan, the transportation of his body to a U.S. ship and his burial at sea, the government has said.

Some of the photographs were taken so the CIA could conduct facial recognition analysis to confirm the body's identity, according to court papers.

The case is Judicial Watch Inc v. U.S. Department of Defense and CIA, U.S. Court of Appeals for the D.C. Circuit, No. 12-5137.

(Reporting by David Ingram; Editing by Doina Chiacu and Cynthia Osterman)

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Apple appeared in Washington D.C. to testify about its overseas profits, and its tax rate.

The main point of focus during the inquiry was an Irish Apple subsidiary called Apple Operations International (AOI).

AOI is the holding company that Apple's international sales flow through. Apple worked out a deal with the Irish government that AOI would only be taxed at ~2%.

There is nothing illegal about it. But, Senator Carl Levin of Michigan seemed to think it was shameful. He hammered Apple over AOI repeatedly.

In the end, this hearing seemed to do very little.

Apple discussed its tax operations, which are legal and designed to minimize its tax burdens.

Levin and Senator John McCain questioned whether or not this was best for the country.

The other Senators seemed to be largely sympathetic to Apple and said the tax code should be simplified.

One bit of news: Apple CEO Tim Cook said he thinks the rate for repatriating cash should be in the single digits.

And here's our live notes from the event.

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Senator John McCain just interviewed Apple CEO Tim Cook about the company's taxes and offshore profits. 

But the kicker came at the end, when McCain stopped his line of questioning by asking, "Why the hell do I have to keep updating apps on my iPhone all the time?"

Cook responded, "Sir,we're trying to make them better all the time."

McCain does have a point. It's really annoying to pop open the App Store every time there's a new update. We wish iPhones worked more like Android phones in that respect, letting you update apps automatically.

Here's the video:

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Apple executives are being grilled by the Senate today over their policies to minimize their U.S. corporate income tax expenditures by keeping a mountain of cash offshore. 

Tons of companies do this. Everyone from Google to Coca Cola keeps billions offshore in tax havens to minimize their liability.

Competitor Microsoft has one of the most elaborate off-shoring schemes. It's worth noting that their executives were grilled last September.  

However, Apple happens to be the company that keeps the most cash offshore, and offshoring has become a major problem. 

Here's the issue. 

Since 1950, corporate profits have exploded in the United States: 

However, corporate taxes as a percentage of government receipts are at an all-time low:

That's a startling divergence.

The Senate thinks that offshoring of corporate cash as a way to avoid corporate income tax is what's wrong.

Since Apple is one of the most notorious offshorers in the world, they're going to try to crucify them. 

Since the government is perpetually in a state of perceived fiscal crisis, it would be ideal to raise revenues from companies that are percieved as "tax dodgers" rather that turn the screws on actual people who can legally vote. 

That's why the Senate is trying to screw with one of America's best companies. 

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The New York Times' Gretchen Morgenson asks the following question this morning: is it a coincidence that the attorney who approved tracking the Associated Press's phone calls was also involved in hacking David Einhorn's phones eight years ago?

Here's the back story, according to Morgenson:

In 2004, Allied Capital was accused of illicitly accessing the phone records of David Einhorn, as well as CNBC's Herb Greenberg (then with Marketwatch) and an unnamed research analyst. 

Each had previously criticized Allied’s accounting and business practices.

Ronald C. Machen Jr., the guy in the new AP case, was then serving as counsel for Allied.

At first, Allied denied any wrongdoing.

But in 2006, they received a subpoena from the United States attorney’s office for the District of Columbia requesting records “regarding the use of private investigators by Allied Capital or its agents.”

Allied eventually admitted “that an agent of the company obtained what were represented to be telephone records of David Einhorn and which purport to be records of calls from Greenlight Capital during a period of time in 2005.”

In 2009, Machen was nominated for his current post, U.S. attorney for the District of Columbia.

In his official nominee questionnaire, he included his involvement in the Einhorn case as an example of the "most significant legal activities" he'd pursued in his career.

In the end, the Justice Department's investigation didn't go anywhere, and Allied never admitted any wrongdoing.

For the latest on the AP case, check out Josh Gerstein's dissection of how the Justice Department is going after leaks given the Washington Post's revelation that were treating Fox reporter Josh Rosen as a criminal. 

Click here to read the full story on NYTimes.com >

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Apple finds itself in front of a Senate Subcommittee today, defending its practice of keeping cash offshore in order to minimize their tax liability. 

The thing is, Apple is far from the only company that does this. While they keep the most cash offshore by far, other companies have similar schemes to dodge taxes. For example, we explained Microsoft's elaborate international tax avoidance structure earlier. 

The use of international tax havens by corporations was detailed in a Senate report released last September. 

Here's a list of companies that keep upwards of $5 billion in cash equivalents offshore, avoiding paying U.S. corporate income taxes: 

SEE ALSO: Two Charts That Show Why Politicians Are Trying To Crucify Apple

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President Barack Obama's image has been remarkably unscathed by the steady stream of new scandals that have plagued the White House over the past few weeks, including the IRS' targeting of conservative groups, the Justice Department's investigation of reporters, and new revelations about Benghazi. 

According to a slew of new polls that have been taken in the past four days, Obama's approval rating has remained constant, and in some cases risen, even as the public continues to pay careful attention to the scandals.

The lastest good news for Obama was a new Washington Post/ABC poll released Tuesday, which put his approval rating at 51 percent, his best mark in the survey since January. 

That followed a CNN poll released Sunday that showed 53 percent of respondents approve of Obama's job performance, up 2 points from April and 6 points from March. And Obama's approval rating reached a peak of 51 percent in Gallup's daily tracking poll on Saturday, holding steady at 49 percent on Monday.

Obama's mark in the CNN poll presents a stark contrast with that of the Republican Party, which saw its approval ratings tank to their lowest point ever in the survey.

The New York Times' statistical guru Nate Silver writes that what might be saving Obama's approval ratings is the improved outlook on the economy — which a recent Pew Research poll found still measured as more important than any of the three "scandals." 

There is evidence to support Silver's theory. In the Washington Post/ABC poll, Obama's approval rating on handling the economy jumped up to 48 percent, also his best mark since January. More people than ever — 56 percent — say that in terms of their personal experiences, the economy has begun to recover.

And 51 percent say Obama focuses on issues important to them personally, compared to just 33 percent who say the same about Congressional Republicans.

Here's a chart that puts those numbers in perspective:

However, Obama does have reason to be concerned by some of the numbers in the surveys.

According to the Pew poll, for example, a plurality of respondents believe that the Obama administration was somehow involved in the IRS' targeting of conservative-sounding groups.

A plurality also disapproves of the Justice Department's obtaining phone numbers of Associated Press journalists, a number that could rise after renewed attention to the FBI's investigation of a Fox News reporter in a leak investigation.

Finally, in the WaPo/ABC survey, 55 percent of respondents believe that the Obama administration is "trying to cover up the facts" about Benghazi, compared with just 33 percent who say it is "honestly disclosing what it knows."

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Kentucky Senator Rand Paul went on a great rant during today's Senate subcommittee hearing on Apple's offshore tax practices, slamming his Congressional colleagues for even holding the hearing in the first place. 

"Frankly, I'm offended by the tone and tenor of this hearing," Paul said, laying into those who take issue with Apple's tax policies. 

"I'm offended by the spectacle of dragging in executives from an American company that is not doing anything illegal," he added. "If anyone should be on trial, it should be Congress." 

Apple CEO Tim Cook is testifying before the Senate Permanent Subcommittee on Investigations this morning to defend the company from accusations that it avoids tax payments by shifting profits to offshore subsidiaries in Ireland. 

Michigan Democratic Sen. Carl Levin, the chair of the subcommittee, said Monday that he has "never seen anything like" Apple's tax "gimmickry."

Paul took issue with the premise of Tuesday's hearing, however, and called on the Senate to stop "harassing" Apple, which he called one of "America's greatest success stories."

"Instead of doing the right thing, we drag businessmen and women in here to berate them for trying to maximize their profits for shareholders," Paul said. "Apple has done more to enrich people's lives than politicians will ever do." 

Watch the video below: 

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Today, Apple executives will testify before Congress about the details of their expansive tax-minimization system. 

Major tech companies exploit differences between taxation policies in different nations in order to pay as few taxes as possible. 

Apple isn't the only one. In fact their competitor Microsoft has a massive system by which to avoid taxation, detailed in another Senate report from last September. 

American companies keep sixty percent of their cash overseas and untaxed, some $1.7 trillion, according to a U.S. Senate HSGAC Permanent Subcommittee on Investigations released in September 2012. 

That report used Microsoft as a case study for the leaps and bounds that U.S. corporations go through to minimize their tax exposure, and illustrate the current flaws with the international corporate tax regime.

The Senate investigation found that Microsoft reduced its 2011 federal tax bill by a whopping $2.43 billion — or 44 percent — by using a wide, international network of controlled foreign corporations and the exploitation of various loopholes in the U.S. corporate tax code. 

According to Microsoft, the company paid $3.11 billion in federal taxes in 2011. 

According to the full Senate report, Microsoft Corp does 85 percent of its research and development in the United States. Of its 94,000 employees, 36,000 are in product R&D. The company had reported income of $23.2 billion, but with a federal tax liability of $3.11 billion only paid an effective federal tax rate of 13.4 percent. That's much lower than the top statutory rate of 35 percent for corporations.

The way the group accomplished this is through a wide variety of foreign groups in tax havens like Ireland, Puerto Rico and Singapore, and by exploiting a recently updated tax loophole.

In fairness to Microsoft, they're doing what nearly every other major technology company does. A Microsoft representative commented on the fiduciary responsibility to shareholders to maximize value.

The company accomplished this by selling the intellectual property rights for its retail businesses to different controlled companies in tax havens. 

The report found that Microsoft has three main revenue sources resulting from its intellectual property. The first is retail software which is comprised of the sale of products to consumers, retailers, and enterprise licenses to governments and businesses. The second is web products like Microsoft Bing and Xbox Live. The third is licensing to computer manufacturers who pre-install Microsoft on the products they sell.  

In the 1990s, Microsoft established three regional retail operating centers in Ireland, Puerto Rico and Singapore. These offices regionally oversee the first revenue stream, retail sales. The Ireland office oversees all retail operations in Europe, the Middle East, and Africa. Singapore oversees all operations in Asia, and Puerto Rico oversees all operations in North America. 

These three retail operation centers — plus Microsoft U.S. — all buy in to R&D cost sharing pool, which in turn gives them the right to sell Microsoft products in their respective zones. Each sector pays a percentage of the $9.1 billion Research & Development budget equivalent to their percentage of retail sales.

The Ireland office pays approximately 30 percent, Puerto Rico pays 25 percent, Singapore pays 10 percent and Microsoft U.S. — which oversees the third revenue stream, bulk sales to computer manufacturers like Dell and HP — pays 35 percent. 

In exchange, Microsoft Ireland, Singapore and Puerto Rico get the right to sell the retail products in their corner of the world and Microsoft U.S. gets the right to sell licenses to manufacturers. 

The foreign offices are actually comprised of multiple different, interconnected companies. The exploitation of the tax code is made possible by a complex arrangement between these companies. 

These are the major controlled foreign corporations involved in the scheme:

Puerto Rico

Microsoft Operations Puerto Rico (MOPR) is the company that pays for the right to sell Microsoft products in the Americas. MOPR makes digital and physical copies of Microsoft software and sells it throughout the United States and the rest of the Americas through different regional distributors.

When an American buys a copy of Microsoft Office in a Best Buy in Manhattan, that was produced in and shipped from Puerto Rico. 

MOPR is owned by a Bermuda-based entity, MACS Holdings, which in turn is owned by Round Island One, a fully owned Microsoft subsidiary that is based in Bermuda but operates in Ireland. 

To review: An American buys a copy of Microsoft Office at Best Buy in Manhattan. Best Buy bought that copy of Office from a Microsoft distributor. The regional distributor bought that copy of Office from Microsoft Operations Puerto Rico. Microsoft Operations Puerto Rico is owned by MACS Holdings, which itself is owned by Round Island One, which itself is owned by Microsoft Corp. 

The reason for that convoluted supply chain — the reason why that copy of Office wasn't just shipped from Microsoft Corp in Redmond, Washington to Manhattan — is that 47 percent of the profits from that sale go to Puerto Rico, untaxed by the U.S. federal government.

Those profits were taxed by Puerto Rico at an effective rate of 1.02 percent in 2011, a massive savings from the U.S. corporate tax rate of 35 percent. Over three years, Microsoft saved $4.5 billion in taxes on goods sold in the U.S. alone. The company saved $4 million per day by routing domestic operations through Puerto Rico. 

Ireland

Microsoft Ireland Research (MIR) is the entity that buys into the R&D cost sharing agreement in exchange for the right to sell Microsoft in Europe, the Middle East and Africa. 

MIR doesn't actually create or sell any products to any customers. Instead, MIR immediately licenses the Microsoft intellectual property rights to Microsoft Ireland Operations Limited (MIOL) — a wholly owned subsidiary — for $9 billion.

MIR and MIOL are fully owned by Round Island One — the Bermuda company that operates in Ireland and also owns MACS Holdings.

MIOL manufactures copies of Microsoft products and sells them to 120 distributors in Europe, the Middle East and Africa. MIOL has 650 employees and MIR has 350 employees in Ireland, where they have an effective tax rate of 7.3 percent and 7.2 percent, respectively. MIR reported profits of $4.3 billion in 2011 and MIOL reported profits of $2.2 billion. Microsoft did not pay any U.S. tax on any revenues made by the Irish groups. 

No U.S. tax was paid on the $9 billion license payment from MIOL to MIR.

Singapore

In Singapore, Microsoft Asia Island Limited (MAIL) is the group that pays into the cost sharing agreement. MAIL is actually located in Bermuda and has no employees.

MAIL paid $1.2 billion to Microsoft Corporation for retail sales in Asia. MAIL licenses its rights directly to Microsoft Operations Pte. Ltd (MOPL) for $3 billion. Again, no taxes are paid on this amount. MOPL duplicates the Microsoft software and sells them to distribution entities around Asia.

MAIL and MOPL are both wholly owned subsidiaries of Microsoft Singapore Holdings Pte. Ltd, which is itself a wholly owned controlled foreign subsidiary of Microsoft U.S. 

MAIL had no employees but $1.8 billion in earnings. MAIL paid an effective tax rate of 0.3 percent. MOPL had $4.8 billion in revenues from the sale of Microsoft products, with a profit of $592 million and an effective tax rate of 10.6%. MOPL has 687 employees. 

The Law

Both the Ireland and Singapore arrangements are designed to subvert U.S. taxes entirely. Despite the fact that Microsoft can report these profits to investors — since every single company is technically a subsidiary of Microsoft — they don't need to report these revenues to the IRS because of the way that Ireland describes its relationships to these companies.  

Typically, any passive income — such as the licensing arrangements for intellectual property —paid from one separate legal entity to another separate legal entity was immediately taxable, even if both entities are within the same legal structure.

Because of a loophole in the tax law, Microsoft and other companies are able to have the lowest-tiered controlled foreign corporation disregarded and ignored for federal income tax purposes. Essentially, even though MOIL is a separate entity from MIR and all transactions between the two should be taxed, because of the "check the box" loophole MOIL and MIR are not considered separate entities in the eyes of the IRS so there is no tax.

A representative from Microsoft explained that the complex structure was a response to the complex tax code. "Microsoft has a complex business and we must comply with the complicated tax code of the United States, resulting in an exceedingly complex tax structure."

Microsoft has to compete globally. For the company, it makes sense to make the best use of that international presence to mitigate their tax liability. "One of the business imperatives faced by Microsoft and many US-based businesses today is that we must operate in foreign markets in order to compete and succeed as a company," the company said. "Foreign revenue growth helps support the growth of our U.S. operations, creating additional U.S. jobs and supporting an economic ripple effect that leads to greater growth in local communities.

The company is one of many firms urging corporate tax reform. "We’ve advocated for reforms to simplify the US tax code and make it more competitive with the rest of the world," the representative said. Microsoft abides by the law every step of the way, and when it comes to expenses Microsoft has a fiduciary responsibility to shareholders to minimize spending. 

Microsoft also holds the federal government responsible for establishing conditions where companies are forced to move operations to far-fetched islands in order to stay internationally competitive.

"US international tax rules are outdated and not competitive with the tax systems of our major trading partners," Microsoft said. "We believe the US should reform its tax rules to support the ability of worldwide American businesses to compete in global markets and invest in the US."

The details of those reforms, though, are crucial before moving forward. The Center on Budget and Policy Priorities report found that a shift to a territorial taxation system — which would not tax any annual income made in foreign countries, but would tax any and all repatriated income at a 35 percent rate — would only exacerbate current problems.  

It would create even greater incentives for U.S. multinationals to book profits overseas, potentially reduce wages domestically, could drain revenues from corporate income tax and would risk higher taxes on American small businesses. 

So despite the fact that both Microsoft and policymakers want to pursue a better system than the current tax regime, it's increasingly difficult to navigate a solution when literally billions of dollars hang in the balance. 

Most importantly, Microsoft is far from the only company that has developed a complicated corporate structure to reduce their tax liability. Almost every major U.S. corporation does this, and there's no reason for the companies to stop.

It makes perfect business sense to maneuver the corporate structure to minimize taxes, and there is a compelling argument that current conditions are set up so that companies would be financially irresponsible not to do it. Until a better taxation solution emerges, it's the only way to do business. 

Read the full Senate report here

Read more about the corporate income tax loopholes

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The U.S. Congress claims that Apple set up an international paper-based subsidiary called Apple Operations International to hide more than $30 billion in profit from tax collectors between 2009 to 2012.

Congress says this company has "no physical presence" and "no employees."*

But that doesn't appear to be true!*

Reuters photographer Michael MacSweeney says he has found an office in Ireland used by Apple Operations International, at least to collect mail. And he has a photograph to prove it!

So, according to Reuters, this building is where you can send stuff to the Apple legal entity that generates the $30 billion of profit and is safely out of the reach of greedy U.S. tax collectors:

*UPDATE: Gordon Trowbridge from Senator Carl Levin's office reached out to reiterate the Senate's position that Apple Operations International has no employees and no physical presence:

It’s incorrect to say AOI has employees or a physical presence at that location. Apple has told the subcommittee that AOI has no employees, and that its Cork mailing address is just that – a mail drop – and that AOI itself has no physical presence there (or anywhere else, I believe).  Apple has a whole network of Irish subsidiaries, most based at its Cork campus. It says it has about 4,000 employees in Ireland, but all of them are employed by other Apple entities, not AOI.

SEE ALSO: Apple's Tax-Dodging Techniques Are Quite Spectacular

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Jon Stewart ripped a triumvirate of actors in Washington, D.C., on Monday, asking if anyone can "do their jobs" in the town amid three "scandalous" issues that have captivated the town's attention over the past couple of weeks. 

Stewart continued to rip into President Barack Obama, particularly over the IRS' inappropriate targeting of conservative groups. He lambasted White House adviser Dan Pfeiffer, who had somewhat of a rough day while appearing on five Sunday shows.

Pfeiffer pledged that the White House was not aware of the IRS scandal as it unfolded, but Stewart said that there is a gap between being "aware of" something and "involved in" it. 

"It's like — your kids want to make dinner for you," Stewart said. "You don't have to be involved. But you should be aware that they're doing it, or you'll get stuck explaining why your house burned down."

But then he showed clips of Republicans' hyperbolic accusations — before Senate Minority Mitch McConnell added that "we don't know what the facts are."

"The administration's lack of transparency is equal only to the Republicans' fact-free, bone-deep certainty and contempt," Stewart said.

In times like these, Stewart said, Americans turn to the fourth estate — the press. But even the media hasn't been able to do its job over the past few weeks.

Watch the clip below, courtesy of Comedy Central:

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The number of Americans who view the Republican Party unfavorably has hit a record high, according to a new poll released by CNN on Monday, despite scandals that have plagued the White House over the past few weeks. 

The poll found that 59 percent of respondents view the GOP unfavorably, a record that has only shown up one other time in the poll's results since tracking began in 1992.

The Republican Party's net favorability ratings are down 8 points in the past two months. The amount of respondents viewing the GOP favorably fell from 38 percent to 35 percent, while the number of people who view the party unfavorably climbed five points, up from 54 percent in March. 

The only other time the party's favorability ratings have been this low came in the aftermath of the summer 2011 fight over raising the nation's debt ceiling.

The poll's findings — combined with President Barack Obama's continued popularity — suggest that Republicans remain susceptible to overreach on the issues of Benghazi and the IRS' targeting of conservative-sounding groups applying for tax exempt status.

The same poll found that 54 percent of respondents said the GOP was "reacting appropriately" to the IRS' targeting, compared with just 42 percent who said they were "overreacting." Majorities also believe, however, that what Obama has said about the scandal has been at least "mostly true," and that the IRS acted on its own in carrying out the targeting.

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Apple CEO Tim Cook is appearing before Congress tomorrow to talk about the company's taxes and offshore profits.

It looks like it's going to be a showdown in D.C. between Apple and Senators who think it's conducting shady business to avoid paying taxes.

Senators Carl Levin and John McCain put out a statement saying Apple has subsidiaries in Ireland that it funnels profits through, thus allowing it to avoid paying taxes.

Apple admits that it has a subsidiary in Ireland, but says it's completely legal. It also says it doesn't use tax gimmicks.

Sen. Levin disagrees with Apple, saying:

"Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven ... Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed."

Here is the memorandum from Levin and McCain:

Senate on Apple

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Elizabeth Warren made headlines last week for saying that she believes students should pay the same rate for loans as big Wall Street banks, 0.75%.

The Obama administration extended the 3.4% interest rate on subsidized federal student loans last year, but that measure is set to expire in July, leaving room for reform.

The House Republicans, The President's Office, Democratic Senators Jack Reed (D-R.I.) and Dick Durbin (D-Ill.), and Senator Elizabeth Warren (D-Mass.) all have their own plans on the table.

Think tank The Brookings Institute laid down each plan one by one. The only one it doesn't take seriously at ALL is Warren's.

From Brookings:

Sen. Warren’s proposal should be quickly dismissed as a cheap political gimmick. It proposes only a one-year change to the rate on one kind of federal student loan, confuses market interest rates on long-term loans (such as the 10-year Treasury rate) with the Federal Reserve’s Discount Window (used to make short-term loans to banks), and does not reflect the administrative costs and default risk that increase the costs of the federal student loan program.

Setting aside this one embarrassingly bad proposal, the remaining proposals raise a set of questions that need to be answered in order to select the ideal policy...

Ultimately, Brookings advocates for (shocking) a compromise. The Obama plan allows the rate to move with market conditions (as does the House Republicans'). The two plans differ in that Obama does not want the rate to vary over the life of the loan (House Republicans do).

Durbin and Reed's plan looks a lot like the House Republican plan, but puts a cap on interest rates and uses a different benchmark for the rate — the 91-day Treasury rate plus a percentage determined by the Education Secretary to cover administrative costs rather than 10-year Treasury Bonds.

But again — Warren's proposal is going nowhere.

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Journalists are understandably alarmed by the revelation that President Barack Obama's Justice Department targeted Fox News reporter James Rosen during a leak investigation of a State Department employee. 

The news, reported by the Washington Post late Sunday night, reveals that the Obama administration will apparently stop at nothing to track down whistle-blowers who leak classified information. In Rosen's case, that included implicating him as a "criminal co-conspirator" whose actions were punishable with up to 10 years in prison. 

While it is not uncommon for the government to investigate leaks, it is unprecedented for a journalist to be accused of committing a crime for reporting on classified information. 

The Justice Department's application for the search warrant for Rosen's Gmail account reveals the extent of the administration's Orwellian maneuvers. By granting the search warrant, the judge alarmingly agreed that Rosen was an "aider and abettor and/or co-conspirator" in leaking the information.

Here are the most chilling parts of the search warrant: 

The following sections indicate that DOJ tracked Rosen's phone calls: 

And movements at the State Department: 

What's also clear from the search warrant is that the DOJ had already established that State Department employee Stephen Jin-Woo Kim was the source of the leak: 

The search warrant application indicates that DOJ was also looking for any other potential sources that Rosen might have had, noting the clandestine system that Rosen had set up for communicating with sources using code names and asterisks: 

 

The New Yorker's Ryan Lizza points out this interesting footnote:

And the big finish: 

Read the full search warrant here > 

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President Obama can claim to have killed Osama bin Laden. He can reasonably take credit for helping to avert a second Great Depression.

But Obama has yet to master his management of the federal government, as shown this month by the disturbing revelations about the IRS targeting Tea Party groups, the Justice Department hunting for leakers by seizing Associated Press phone records, and the talking points written by the administration that may have been edited to hide information about the Benghazi terrorist attack.

In some ways, he is making the case that any stewardship of the $3.45 trillion institution—the epitome of too big to fail—can be perilous, if not impossible. This is a troubling development for a president whose polices are based on the idea that government can improve people’s lives.

Consider the administration’s agenda before these three controversies blew up, the ones it claims the country truly cares about. 

It must finalize rules from the 2010 Dodd-Frank overhaul of Wall Street regulations in the hopes of preventing a repeat of the 2008 financial collapse.

It must wrap-up key elements of Obamacare, so that health insurance can be offered through government exchanges and penalties extracted through the IRS for those who decline coverage.

It must negotiate with distrusting House Republicans to lift the debt ceiling next autumn, or risk default.

Add to these initiatives a growing to-do list:  Passing immigration reform. And figuring out executive actions to address climate change. Also, winding down the Afghan War. And sorting through the sequestration cuts. And fixing the widespread problem of sexual assaults in the military. And don’t forget moving political nominees—such as Penny Pritzker for Commerce secretary—through the Senate.

Not surprisingly, White House chief of staff Denis McDonough commanded staffers to devote no more than 10 percent of their time to the IRS, AP, and Benghazi controversies, according to The New York Times on Friday.

Obama’s managerial abilities are being called into question, with the Washington Post noting on Sunday that he is either too aggressive or too reticent when steering the ship of state. The White House claims its policy was to be ignorant of the inspector general’s audit showing that the IRS began in March, 2010 to single out for strict review Tea Party groups that applied for nonprofit status.

“You have a cardinal rule, which is you do nothing to interfere with an independent investigation, and you do nothing to offer the appearance of interfering in an independent investigation,” Obama senior adviser Dan Pfeiffer told CBS News’ “Face the Nation” on Sunday. “So I do feel like we handled this in the appropriate way.”

Even if the administration respected the independence of the Treasury Inspector General for Tax Administration, it seems to have been hands-off before the audit started.

Still, if White House personnel were in the dark, other agency officials were not. A report by Reuters states, “The Treasury Department's internal watchdog, J. Russell George, told the House panel that Deputy Treasury Secretary Neal Wolin, an Obama political appointee, learned nearly a year ago that a government watchdog was looking into inappropriate targeting by the IRS. Wolin, the No. 2 official at Treasury, is due to testify next week before the House Oversight and Government Reform Committee. 

Treasury Department lawyers told the White House Counsel, Kathryn Ruemmler, about the inspector general's audit during the week of April 22, but the information was not relayed to Obama, who said he learned about it from media reports on May 10.

Congressional Republicans feared that newly established conservative groups were receiving special IRS scrutiny, as more and more “social welfare” organizations with an ideological agenda were being established after the 2010 Supreme Court ruling on Citizens United removed some of the restrictions on independent political expenditures.

Rep. Charles Boustany, (R-La.) among others, raised these concerns at a March, 2012 hearing, technically before the start of the inspector general’s audit. At that time, then IRS commissioner Douglas Shulman insisted, “there is absolutely no targeting.”

The administration had little incentive to pursue the matter further.

Preemptive efforts asking the IRS to cooperate fully with Congress might have given Republicans the scent of scandal during the middle of Obama’s re-election campaign. But once the inspector general’s audit started last June—the White House kept its distance to avoid any conflicts of interest, since any meddling could erode confidence in the government.

Now, with the release of the audit last week, the erosion in confidence appears inevitable, regardless of any cardinal rules being followed inside the West Wing.

The Justice Department has launched an investigation, the inspector general appears to be pursuing a follow-up, and House Republicans are hungry for more hearings to address unanswered questions.

“Officials at Treasury knew about this a year ago, officials at the IRS knew about this two years ago,” House Ways and Means Committee Chairman Dave Camp, R-Mich., said Sunday on NBC’s “Meet the Press.”  “Congress has been trying to get answers for two years and we were stonewalled.”

House Budget Committee Chairman Paul Ryan, (R-Wisc.) explained that the inspector general’s audit—which is different from an investigation—never addressed basic issues such as the motives of IRS employees.

The IRS officials interviewed for the audit claimed then and later that they lacked the guidance and manpower to oversee the flood of more than 60,000 organizations applying for nonprofit status.

“They didn't look at emails, they didn't look at intent, they didn't look who was in the chain of information,” Ryan told “Fox News Sunday.” “So, none of that information has been acquired yet. That's what the IG is doing now. That's what our congressional overseers are doing now as well.  So, all we have is a simple audit. We don't have a thorough investigation. That's not the report we got. That is what is now occurring.”

In making his rounds at the Sunday talk shows, Pfeiffer, the White House communications adviser, acknowledged that the administration must repair the damage caused by the IRS, before more Americans lose what little faith they have left in the government.

“This was a breach of the trust,” he said. “Regardless of the motivation, regardless of how it happened, it was a breach of the trust, so we have to fix it, we have to restore that trust.”

But even the managerial choice to have Pfeiffer appear on television as Obama’s point man could prove to be a mistake. As pointed out by CBS News’ “Face the Nation” host Bob Schieffer, Pfeiffer had no direct knowledge of how the IRS audit unfolded and the administration’s past interactions with the agency.

Schieffer wryly noted that the administration tried a similar tactic last year, when it sent United Nations Ambassador Susan Rice to the Sunday talk shows to discuss the attack in Benghazi that killed four Americans.

The attack was a terrorist assault, but Rice portrayed it during her interviews as the result of a spontaneous riot, a false claim made as talking points were edited from the initial intelligence on the ground.

Much like Pfeiffer with the IRS, Rice had no direct pipeline to information about Benghazi.
 
“That was just a PR plan to send out somebody who didn’t know anything about what happened,” Schieffer said. “Why are you here today? Why isn’t the White House chief of staff here to tell us what happened?”

Pfeiffer dodged the question.

More from The Fiscal Times:

• Wall Street's May Rally Just Keeps on Tickin'
• Why the IRS Scandal Could Bring Down Obamacare
• The Pentagon’s Incredible $1.5 Trillion Mistake

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DES MOINES, Iowa (AP) — Is the tea party getting its groove back? Shouts of vindication from around the country suggest the movement's leaders certainly think so.

They say the IRS acknowledgment that it had targeted their groups for extra scrutiny — a claim that tea party activists had made for years — is helping pump new energy into the coalition. And they are trying to use that development, along with the ongoing controversy over the Benghazi, Libya, terrorist attacks and the Justice Department's secret seizure of journalists' phone records, to recruit new activists incensed about government overreach.

"This is the defining moment to say 'I told you so,' " said Katrina Pierson, a Dallas-based tea party leader, who traveled to Washington last week as the three political headaches for President Barack Obama unfolded.

Luke Rogonjich, a tea party leader in Phoenix, called the trio of controversies a powerful confluence that bolsters the GOP's case against big government. "Suddenly, there are a lot of things pressing on the dam," said Rogonjich.

It's unclear whether a movement made up of disparate grassroots groups with no central body can take advantage of the moment and leverage it to grow stronger after a sub-par showing in last fall's election had called into question the movement's lasting impact. Republicans and Democrats alike say the tea party runs the risk of going too far in its criticism, which could once again open the door to Democratic efforts to paint it as an extreme arm of the GOP.

"Never underestimate the tea party's ability to overplay its hand," said Democratic strategist Mo Elleithee. "Just because there is universal agreement that the IRS went too far, that should not be misread as acceptance of the tea party's ideology of anger."

At the very least, furor over the IRS devoting special attention to tea party groups claiming tax-exempt status is giving the tea party more visibility than it has had in months, and it's providing a new rallying cry for tea party organizers starting to plot how to influence the 2014 congressional elections. The law allows tax-exempt organizations to lobby and dabble in politics as long as their primary purpose is social welfare.

The tax-agency scandal — it has led to the acting IRS commissioner's ouster, a criminal investigation and Capitol Hill hearings — seems to validate the tea party's long-held belief among supporters that government was trampling on them specifically, a claim dismissed by ousted commissioner Steven T. Miller. He has called the targeting "a mistake and not an act of partisanship."

Nevertheless, Sen. Marco Rubio, R-Fla., elected in 2010 with tea party backing, said the IRS scandal "confirms many of the feelings that led to the tea party movement in the first place."

"What's happened here is a reminder of, this is what happens when you expand government," he said in an interview with The Associated Press. "That and the disaster that is Obamacare is going to be a real catalyst in 2014 and beyond."

Tea party activists hope they also can drive support ahead of the elections by stoking widespread suspicions that the Obama administration and State Department are hiding key details about the September 2012 attack in Benghazi, Libya, that killed the U.S. ambassador and three other Americans. The seizure of Associated Press phone records also plays into their argument that government is too intrusive.

Tea party activists have tried to take advantage of the issues that have put some of their central tenets — limited government and civil liberties — in the spotlight.

From around the country last week, they headed Washington to hold a news conference on the Capitol steps and meet with members of Congress. Those who stayed home jammed House and Senate phone lines with calls urging congressional action as the IRS saga unfolded. An email from Teaparty.org that was sent to activists proclaimed: "We've worked so hard these past few years and it's paying off! We're witnessing the unraveling of a presidency at an unprecedented rate."

Freedomworks, a national tea party group, spent the week circulating petitions for congressional hearings and encouraging leaders of local groups who believe they have been targeted by the IRS to include their story on a national database to build the case against the agency.

"Perhaps all this attention will break something loose," said Jim Chiodo, an activist from Holland, Mich.

It wasn't long ago that the tea party was the hot new political kid on the block, bursting onto the national scene during the contentious summer debate over health care in 2009. Over the next few years, the loosely affiliated conservatives and civil libertarians would leave their mark on the 2010 elections by helping Republican candidates win Senate races in Florida, Kentucky, Utah and Wisconsin and scores of House races.

Those victories resulted in House and Senate Republican caucuses getting pushed to the right in legislative battles, making life difficult for Obama and his Democrats in an era of divided government.

But the movement's success was muted in 2012 when Republicans nominated the establishment-backed Mitt Romney for president, though he did little to inspire the tea party. He lost, and so did many tea party-backed House and Senate candidates.

Now, tea party activists say they are emboldened and won't be afraid to recruit candidates to run in Republican primaries against incumbents who appear to go easy on the Obama administration, particularly in light of the IRS scandal.

"It's one of those issues we should just raise hell about," said Nashville Tea Party leader Ben Cunningham.

Some say they're now even more suspicious of government than before.

"I personally feel so vindicated," said Mark Falzon, a New Jersey tea party leader. But he added: "What's scaring me now is what's going on below the water line that we're not seeing."

Republicans say that the tea party will have an opportunity come 2014 to make its mark again, particularly with Obama not at the top of the ticket. Also, they say that with Obama's health care law going into effect and with the slew of latest controversies, they now have concrete issues to point to when arguing against government overreach.

"Suddenly, this is a very real demonstration of too much power ceded to government bureaucrats," said Matt Kibbe, president of Freedomworks. "This is no longer theoretical."

___

Associated Press writers Steve Peoples in Boston and Bill Barrow in Atlanta contributed to this report.

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Apple CEO is testifying before Congress tomorrow about its offshore cash, and its tax practices.

Ahead of the actual testimony, Apple released what it's going to say.

In short, Apple says it paid $6 billion in taxes to the U.S. Treasury and it uses no gimmicks.

It defends its foreign subsidiaries, saying that it's using them in a legal and ethical way. It says it doesn't have money on Caribbean Islands, or the Cayman Islands.

Apple also called for simplifying the tax code.

Here are the highlights:

Apple starts by saying it pays all of its required taxes in the U.S. and abroad.

• "Apple pays all its required taxes, both in this country and abroad."
• "Apple welcomes an objective examination of the US corporate tax system, which has notkept pace with the advent of the digital age and the rapidly changing global economy."
• "Apple is likely the largest corporateincome tax payer in the US, having paid nearly $6 billion in taxes to the US Treasury in FY2012. These payments account for $1 in every $40 in corporate income tax the USTreasury collected last year."
• "The Company expects to pay over $7 billion in taxes tothe US Treasury in its current fiscal year."

• "Apple does not use tax gimmicks. Apple does not move its intellectual property into off shore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenuelast year and two-thirds of its revenue last quarter. These foreign earnings are taxed inthe jurisdiction where they are earned (“foreign, post-tax income").

• Apple has a lot of cash overseas. It's not going to bring it back to the U.S. because it will be lose 35% of the cash to taxes. It's smarter to just borrow cash than to repatriate it.
• "Apple supports comprehensive reform of the US corporate tax system. The Company supports a dramatic simplification of the corporate tax system that is revenueneutral, eliminates all tax expenditures, lowers tax rates and implements a reasonable taxon foreign earnings that allows free movement of capital back to the US. Apple believessuch comprehensive reform would stimulate economic growth. Apple supports this planeven though it would likely result in Apple paying more US corporate tax."

And here's what Apple says changes to the tax code should be:

• Be revenue neutral
• Eliminate all corporate tax expenditures
• Lower corporate income tax rates
• Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.

Apple Testimony

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Fox News Executive Vice President Michael Clemente has released a scathing statement on the leak investigation involving Fox News reporter James Rosen.

Here's the full statement, provided by a network spokesperson:

“We are outraged to learn today that James Rosen was named a criminal co-conspirator for simply doing his job as a reporter. In fact, it is downright chilling. We will unequivocally defend his right to operate as a member of what up until now has always been a free press.”

A Washington Post report Sunday night brought renewed attention to the case involving Rosen and Stephen J. Kim, a former State Department official.

In an application for a search warrant on Rosen's email communications, FBI agent Reginald Reyes wrote that there was probable cause Rosen had violated the Espionage Act by soliciting classified information from Stephen J. Kim, a former State Department official. Reyes wrote that Rosen was an "aider and abettor and/or co-conspirator" in leaking the information.

Reyes wrote that Rosen may have committed a "conspiracy to violate" section of a law against leaking classified info, which he wrote was "punishable by up to 10 years imprisonment."

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Earlier, it was reported that the FBI had specifically investigated a Fox News reporter as part of an investigation into leaks.

New Yorker reporter Ryan Lizza points out the "most chilling" part of the search warrant on Fox News reporter James Rosen during a 2009 leak investigation. 

In an application for a search warrant, FBI agent Reginald Reyes wrote that there was probable cause Rosen had violated the Espionage Act by soliciting classified information from Stephen J. Kim, a former State Department official. Reyes wrote that Rosen was an "aider and abettor and/or co-conspirator" in leaking the information.

According to the search warrant, which was posted by the Federation of American Scientists, Reyes wrote that Rosen may have committed a "conspiracy to violate" section of a law against leaking classified info, which he wrote was "punishable by up to 10 years imprisonment."

Reyes also wrote that the FBI had exhausted all other alternatives in the leak investigation when applying for a search warrant, short of asking Rosen to voluntarily provide his email communications.

"Because of the Reporter's own potential criminal liability in this matter, we believe that requesting the voluntary production of the materials from Reporter would be futile and would pose a substantial threat to the integrity of the investigation and of the evidence we seek to obtain by the warrant," Reyes wrote.

The Washington Post brought renewed attention to the 2009 investigation with a report late Sunday night.

The report comes at a time when the Obama administration is facing renewed scrutiny over leak investigations, a week after the Associated Press said that the Department of Justice had obtained more than two months of some of its reporters' phone records.

Here is the full search warrant:

James Rosen search warrant

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President Barack Obama had a big month of April, as the White House was largely captivated by some major news events — the Boston Marathon bombings and the fertilizer plant explosion in West, Texas.

As always, White House photographer Pete Souza documented Obama's every step along the way. We've pulled 26 of Souza's best photos from his April set.

President Barack Obama reacts to a missed shot on the White House Basketball Court during the Easter Egg Roll.

President Barack Obama welcomes Robby Novak, known as “Kid President,” to the Oval Office.

President Barack Obama talks with Rachel Robinson, widow of Jackie Robinson, before the “42” movie screening in the White House.

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The Department of Justice heavily tracked Fox News reporter James Rosen during a 2009 leak probe, according to a report from Ann E. Marimow in the Washington Post.

The report comes at a time when the Obama administration is facing renewed scrutiny over leak investigations, a week after the Associated Press said that the Department of Justice had obtained more than two months of some of its reporters' phone records.

For many in the media world, this case seems even more troubling. It involves the prosecution of Stephen J. Kim, who revealed classified information to Rosen. According to the report, Kim told Rosen that the U.S. believed North Korea would react to new United Nations sanctions by employing more nuclear tests.

What makes this case different from the AP probe is that Rosen is a possible target. In addition to tracking his trips to and from the State Department as well as personal calls and emails, FBI agent Reginald Reyes suggested in court documents obtained by the Post that Rosen had broken the law. He was not charged.

From the Post's report:

Reyes wrote that there was evidence Rosen had broken the law, “at the very least, either as an aider, abettor and/or co-conspirator.” That fact distinguishes his case from the probe of the AP, in which the news organization is not the likely target.

Using italics for emphasis, Reyes explained how Rosen allegedly used a “covert communications plan” and quoted from an e-mail exchange between Rosen and Kim that seems to describe a secret system for passing along information. [...]

However, it remains an open question whether it’s ever illegal, given the First Amendment’s protection of press freedom, for a reporter to solicit information. No reporter, including Rosen, has been prosecuted for doing so.

The New Yorker's Ryan Lizza suggested that the Obama administration was "criminalizing reporting," and the Daily Beast's Eli Lake called it a "war on journalism": 

Case against Fox's Rosen, in which O admin is criminalizing reporting, makes all of the other "scandals" look like giant nothing burgers.

— Ryan Lizza (@RyanLizza) May 20, 2013

Serious idea. Instead of calling it Obama's war on whistleblowers, let's just call it what it is: Obama's war on journalism.

— Eli Lake (@EliLake) May 20, 2013

Kim, meanwhile, has pleaded not guilty and could face up to 15 years in prison if convicted. 

Neither Rosen nor Fox News immediately responded to a request for comment on Monday.

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