The U.S. Court of Appeals for the District of Columbia Circuit ruled that the IRS must treat foreign gamblers the same way it taxes U.S. bettors when they visit a casino.

"After a night of gambling, it's no fun to walk out of the casino a loser," wrote Judge Brett Kavanaugh for a unanimous three-judge panel. "But it's even worse when the IRS, on your way out, tries to tax you on each individual bet that you happened to win over the course of your losing night."

U.S. citizens are taxed on the gains they make per session. When a gambler cashes out at the end of the night, he or she owes income tax on any profits. If the session was unsuccessful, the bettor owes nothing.

That has not been the case with foreign gamblers, who were taxed on every winning bet made in games like slot machines regardless of whether they ended up losing money.

Sang Park, a South Korean businessman, visited the Pechanga Casino and Resort in California in 2006 and 2007. While he won more than $500,000 playing slot machines, he lost even more, leaving him with more than $50,000 in losses for those two years of gambling, according to court documents.

Nevertheless, the IRS taxed him on his winnings, claiming he owed more than $150,000 despite the fact that he lost money. Park filed a lawsuit challenging his tax bill.

The ruling overturned a decision from the U.S. Tax Court upholding the IRS policy.

A spokeswoman for the IRS declined to comment.

The tax agency had based its policy on the fact that foreigners cannot deduct gambling losses from their income, as U.S. residents can, and thus should not be allowed to do so during individual gambling sessions.

Kavanaugh, however, called that a "non sequitur."

"The fact that non-resident aliens may not deduct gambling losses from gambling winnings does not tell us how to measure those losses and winnings in the first place," he wrote.

Denis McDevitt, Park's attorney, did not immediately respond to a request for comment.

The case is Park v. Commissioner of Internal Revenue Service, U.S. Court of Appeals for the District of Columbia Circuit, No. 12-1058.

(Reporting by Joseph Ax in New York; Editing by Will Dunham)

NEW YORK (Reuters) - The liquidators of two offshore Bear Stearns hedge funds have filed a $1.12 billion lawsuit accusing the major U.S. credit rating agencies of fraudulently issuing inflated ratings for securities that the funds owned.

The lawsuit against McGraw Hill Financial Inc's Standard & Poor's, Moody's Corp's Moody's Investors Service and Fimalac SA's Fitch Ratings was filed on Tuesday in a New York state court.

The case was brought by liquidators of Bear Stearns High-Grade Structured Credit Strategies (Overseas) Ltd and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage (Overseas) Ltd.

The two funds claimed to have suffered losses through their ties to the Bear Stearns High Grade Structured Credit Strategies Ltd and Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage Ltd, which both went bankrupt in July 2007.

Those funds had been managed by former Bear Stearns managers Ralph Cioffi and Matthew Tannin, who were acquitted in 2009 of federal criminal charges they misled investors. Last year, the men agreed to pay about $1 million to settle a related U.S. Securities and Exchange Commission civil case.

Tuesday's case was filed one day after a federal judge in California made a tentative ruling allowing the U.S. Justice Department to pursue its $5 billion civil lawsuit against S&P alleging the company defrauded investors by inflating ratings.

They accused the rating agencies of misrepresenting their independence, the quality of their models and the timeliness of their ratings for collateralized debt obligations and residential mortgage-backed securities.

The result was that the ratings were tainted for the purportedly "high-grade" securities they bought, resulting in the $1.12 billion of losses. The liquidators are also seeking punitive damages.

S&P spokesman Ed Sweeney said in an email that the allegations are "without merit and we will defend ourselves vigorously." Moody's and Fitch did not immediately return calls for a comment.

"The government case has opened up the ability of big institutional investors to bring these common-law fraud cases," said Joel Laitman, a partner in Cohen Milstein Sellers & Toll, who is not involved in the lawsuit.

In Monday's ruling in the federal government's case, U.S. District Judge David Carter in Santa, Ana, California, said the government had sufficiently alleged that S&P intended to deceive investors with ratings that were objectively and subjectively false. Carter plans to issue a final ruling by July 15.

The case is Varga et al v. McGraw Hill Financial Inc et al, New York State Supreme Court, New York County, No. 652410/2013.

(Reporting By Karen Freifeld; Additional reporting by Jonathan Stempel; Editing by Kenneth Barry)

WASHINGTON (Reuters) - The U.S. Internal Revenue Service, still reeling from its worst crisis in years, is taking steps to halt bonuses for union employees and senior executives, the acting IRS commissioner told employees on Tuesday.

Bowing to "an unfortunate byproduct" of government-wide budget cuts, acting commissioner Danny Werfel said the move does not reflect poorly on employees' work and follows a bonus freeze already in place for non-union employees and managers.

The tax-collecting agency was engulfed in controversy in May over the handling of applications for tax-exempt status from conservative political groups. The affair led President Barack Obama to oust Werfel's predecessor amid an FBI investigation and congressional hearings.

While the so-called IRS 'Tea Party' targeting scandal has not ended, with congressional investigators continuing to gather testimony, the agency has been moving on with its work.

IRS employee bonuses have come under political fire in recent months. Senator Charles Grassley, an Iowa Republican, in June questioned a proposed IRS plan to pay $70 million in bonuses this year. The IRS has about 90,000 employees.

If the IRS halts bonuses for union workers, the agency could avoid two furlough days scheduled for this year, Werfel said. Union workers would be paid as usual for those days, while taxpayer services, like IRS call centers, would remain open.

The IRS employees' union pushed back on Werfel's announcement and said it will keep negotiating the bonus issue.

"The awards are legally required as part of the collective bargaining agreement" between the union and IRS, Colleen Kelley, president of the National Treasury Employees Union, said in a statement.

The IRS does not need to cancel bonuses to prevent the two furlough days, said the union. The average bonus is $1,500 per IRS union employee, the union said.

Separately on Tuesday, a House of Representatives committee proposed a $9 billion, or 24 percent, cut to the IRS's fiscal year 2014 budget.

(Editing by Kevin Drawbaugh and Doina Chiacu)

Queen Elizabeth's grandson, known in the military as Captain Wales, spent three years training for the qualification, which places him at the very top of his profession, his Commanding Officer Lieutenant Colonel Tom de la Rue said.

"This was a tremendous achievement for Captain Wales who passed with 'flying colors'," de la Rue said.

Harry, third-in-line to the British throne, returned in January from a 20-week posting in Afghanistan, his second tour of duty in the country. He was also awarded a prize for best Co-Pilot Gunner at an earlier stage of his training.

Harry's military role has enhanced his status in Britain and helped overcome his reputation as a royal wild child. His elder brother William is also a helicopter pilot, working as a search and rescue pilot for the Royal Air Force.

(Reporting By Max de Haldevang, editing by Gareth Jones)

(Reuters) - The city of Detroit filed a lawsuit against bond insurer Syncora Guarantee Inc claiming the company blocked an agreement the city hopes to conclude with major creditors involving revenue from the city's three casinos.

The suit filed on Friday by Detroit's state-appointed emergency manager, Kevyn Orr, focuses on the city's estimated $15 million a month casino tax revenue. The city maintains Syncora told U.S. Bank, which controls the casino funds that were used as collateral in a deal with creditors, not to give up to $11 million a month to Detroit.

The city said those funds were part of ongoing discussions with creditors UBS AG and Bank of America Merrill Lynch and sought to have the funds released.

"Syncora has asserted rights it does not have over collateral it does not need for the purpose of holding the City hostage for ransom," said the lawsuit, filed at the Circuit Court for Wayne County.

Fred Hnat, a managing director at Syncora, said the bond insurer would have "no comment at this time."

The Wall Street Journal cited sources familiar with the matter as saying the city believed Syncora was standing in the way of a deal in which the creditors would get more than 70 cents on the dollar on nearly $340 million in secured debt. In return, Detroit would receive $11 million a month in tax revenue from its three casinos, funds that were used as collateral to back the debt.

"Syncora was interfering with the city's ability to restructure," emergency manager Orr told Reuters.

In the lawsuit, the city said the $11 million would be sufficient to "fund the wages and salary of City fire fighters for two months, or of City police officers for one month."

Detroit has some $18.5 billion in long-term debt and Orr was appointed by Michigan Governor Rick Snyder to fix the city's financial crisis. Orr has sweeping powers and is trying to conclude deals with creditors to avoid bankruptcy.

In a news release, the city said at a hearing on Friday afternoon that Wayne County Circuit Court Judge Annette Berry "granted the city's request for a temporary restraining order" and asked U.S. Bank to release the funds to the city. Berry set a hearing for July 26 before Judge Jeanne Stempien where Syncora "must show cause why further preliminary injunction should be granted."

The Wayne County clerk could not be reached for comment.

(Writing by Nick Carey. Editing by Andre Grenon)

Temperatures were likely to hit well over 100 degrees Fahrenheit (38 degrees Centigrade) in Fresno, California, Phoenix and to the north in Boise, Idaho, and Spokane, Washington, according to Accuweather.com.

Temperatures in western states are 10 to 20 degrees above average, according to the National Weather Service.

"Many of the same locations that broke records over the weekend may break them again on Monday," it said on its web site.

The blasting heat was expected to last at least through Tuesday, meteorologists said.

"While many folks over the interior West are accustomed to and expect hot weather during the summer, this pattern is taking the heat to the extreme," said AccuWeather meteorologist Alex Sosnowski.

In Death Valley, California, the mercury hit 128 degrees F (53 degrees C) on Saturday and Sunday, tying the June record, meteorologists said. The highest temperature recorded on earth was 134 degrees F (57 degrees C) in Death Valley in 1913.

In the eastern United States, meanwhile, low heavy cloud cover and the threat of thunderstorms were causing flight delays at airports in the New York City region and in Philadelphia.

Dry drought conditions and concern over the risk of fires were forcing the cancellation of Fourth of July fireworks celebrations, particularly in Colorado, Utah, Arizona and New Mexico, according to Accuweather.com.

The heat wave, caused by a dome of hot air trapped by a high pressure ridge, contributed to the death of an elderly man on Saturday in Las Vegas, where searing temperatures reached an all-time high of 118 F (48 C) and sent scores of people to hospitals with heat-related illnesses.

(Reporting and writing by Ellen Wulfhorst)

"Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution," he said in a speech on energy policy at Georgetown University. "The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward."

The Keystone XL pipeline would carry oil from Canada to refineries in Texas.

(Reporting by Mark Felsenthal; editing by Jackie Frank)

In an interview on NBC's "Today" show, the Southern food doyenne said she never intentionally hurt anyone and that it was important for her to tell "everyone out there what I believe and how I live my life."

When asked if she felt she had racist tendencies, she replied, "No."

It was her first TV interview since The Food Network said Friday it would drop her show after she was sued for discrimination and admitted in a legal deposition that she had used a racial slur in the past.

Deen, who has built a business empire that includes cookbooks, restaurants and kitchen supplies, was also dropped by pork giant Smithfield Foods Inc last week. On Wednesday, Walmart was the latest company to sever ties.

"We are ending our relationship with Paula Deen Enterprises," Walmart spokeswoman Danit Marquardt told Reuters.

Marquardt said Walmart, the biggest division of Wal-Mart Stores Inc, the world's largest retailer, will not place new orders beyond those already committed with Deen's company for branded products including groceries, cookware and candles.

The controversy surrounding Deen erupted last week when a deposition was released in transcript form in which Deen, who is white, was asked if she had used the "N-word," and responded, "Yes, of course."

The "N-word" is a euphemism for "nigger," an epithet for black people.

The deposition related to a racial and sexual discrimination lawsuit filed by a former employee, Lisa Jackson, who worked for Paula Deen Enterprises.

The lawsuit alleges that when Deen discussed plans for her brother Earl "Bubba" Hiers' 2007 wedding with Jackson, Deen said she wanted a "true Southern plantation-style wedding."

"Well, what I would really like is a bunch of little niggers to wear long-sleeve white shirts, black shorts and black bow ties, you know in the Shirley Temple days, they used to tap dance around," Deen said, according to the lawsuit.

Asked about the epithet in the deposition on Wednesday, Deen said she had used the slur when describing, probably to her husband, how a black man robbed a bank where she was working in the 1980s. She said she had used the word since, "but it's been a very long time."

Deen recalled the bank robbery and said: "I had had a gun put to my head, a shakin' gun." She did not give a full description of that incident.

DEEN SAYS SHE IS "HEARTBROKEN"

On "Today," Deen said she was thankful for the support she has received, and also heartbroken because she has had to comfort friends distressed about things being said about her that she said were untrue.

"If there's anyone out there that has never said something that they wish they could take back, if you're out there, please pick up that stone and throw it so hard at my head that it kills me. Please, I want to meet you. I want to meet you," she said, sobbing.

The 66-year-old celebrity chef had called off a scheduled interview with NBC on Friday to discuss the situation and instead released a video defending herself.

The Food Network, which is owned by Scripps Network Interactive Inc, later said it would not renew her contract when it expires at the end of June.

Deen's fans have voiced their support for the chef online, expressing anger on the Facebook pages for the Food Network and Walmart, with many saying they'll boycott both companies for severing ties with Deen. The story was corrected to add dropped words in 11th paragraph

(Reporting by Patricia Reaney and Jessica Wohl; Editing by David Storey, Piya Sinha-Roy and Stacey Joyce)

The price of oil spiked above $100 a barrel for the first time since September as a showdown between Egypt's president and military approached a deadline.

The Dow Jones industrial average slipped 18 points, or 0.1 percent, to 14,913 in the first few minutes of trading Wednesday.

The Standard & Poor's 500 index was down five points, or 0.3 percent, at 1,608.

The Nasdaq composite fell five points, or 0.1 percent, to 3,428.

U.S. markets will close at 1 p.m. ahead of the July 4th holiday.

Portugal's stock index plunged 6 percent after the country's foreign minister resigned, further undermining the government and its commitment to an austerity program.

On Tuesday, the administration unexpectedly announced a one-year delay, until after the 2014 elections, in a central requirement of the law that medium and large companies provide coverage for their workers or face fines.

Separately, opposition in the states from Republican governors and legislators has steadily undermined a Medicaid expansion that had been expected to provide coverage to some 15 million low-income people.

Tuesday's move which caught administration allies and adversaries by surprise sacrificed timely implementation of Obama's signature legislation but might help Democrats politically by blunting an election-year line of attack Republicans were planning to use. The employer requirements are among the most complex parts of the health care law, designed to expand coverage for uninsured Americans.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Treasury Assistant Secretary Mark Mazur said in a blog post. "We have listened to your feedback and we are taking action."

Business groups were jubilant. "A pleasant surprise," said Randy Johnson, senior vice president of the U.S. Chamber of Commerce. There was no inkling in advance of the administration's action, he said.

"We commend the administration's wise move," said Neil Trautwein, a vice president of the National Retail Federation. It "will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment."

But the delay could also whittle away at the law's main goal of covering the nearly 50 million Americans without health insurance.

Liberals immediately raised concerns. Will employees be able to get taxpayer-subsidized individual coverage through new health insurance markets if their company does not offer medical benefits? Uninsured people can start signing up Oct. 1 for the new individual policies.

"If the administration is going to give employers a break, it should not do that at the expense of millions of uninsured or underinsured workers who have been looking to have health insurance available to them on Jan. 1, 2014," said Richard Kirsch, a senior fellow with the Roosevelt Institute in New York, a think tank dedicated to promoting progressive policies.

Under the health law, companies with 50 or more workers must provide affordable coverage to their full-time employees or risk a series of escalating tax penalties if just one worker ends up getting government-subsidized insurance. Originally, that requirement was supposed to take effect Jan. 1, 2014. It will now be delayed to 2015.

Most medium-sized and large business already offer health insurance and the mandate was expected to have the biggest consequences for major chain hotels, restaurants and retail stores that employ many low-wage workers. Some had threatened to cut workers' hours, and others said they were putting off hiring.

Business groups have complained since the law passed that the provision was too complicated. For instance, it created a new definition of full-time workers, those who put in 30 hours or more. It also actually included two separate requirements, one to provide coverage and another that it be deemed "affordable" under the law. Violations of either one exposed employers to fines. But such complaints until now seemed to be going unheeded.

There is no coverage requirement or penalty for smaller businesses. Also, for businesses of any size, there is no penalty if their workers are poor enough to be eligible for Medicaid.

The delay in the employer requirement does not affect a provision in the law that requires individuals to carry health insurance starting next year or face fines. That so-called individual mandate was challenged all the way to the Supreme Court, which ruled last year that the individual requirement was constitutional since the penalty would be collected by the Internal Revenue Service and amounted to a tax.

Tuesday's action could provide cover for Democratic candidates in next year's congressional elections.

The move undercuts Republican efforts to make the overhaul and the costs associated with new requirements a major issue in congressional races. Democrats are defending 21 Senate seats to the Republicans' 14, and the GOP already had begun to excoriate Senate Democrats who had voted for the health law in 2009.

Senior White House adviser Valerie Jarrett cast the decision as part of an effort to simplify data reporting requirements.

She said since enforcing the coverage mandate depends on businesses reporting about their workers' access to insurance, the administration decided to postpone the reporting requirement, and with it, the mandate to provide coverage.

"We have and will continue to make changes as needed," Jarrett wrote in a White House blog post. "In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening."

Republicans called it a validation of their belief that the law is unworkable and should be repealed.

"The president's health care law is already raising costs and costing jobs. This announcement means even the Obama administration knows the 'train wreck' will only get worse," House Speaker John Boehner, R-Ohio, said in an email. "This is a clear acknowledgment that the law is unworkable, and it underscores the need to repeal the law and replace it with effective, patient-centered reforms."

___

Associated Press writers Donna Cassata, Sam Hananel and Josh Lederman contributed to this report.