Wal-Mart's Self-Dealing Income Tax Scam North Carolina Court Tosses Out $33.5 Million Case

[marmar]

from HuffPost:


Al Norman
Wal-Mart's Self-Dealing Income Tax Scam North Carolina Court Tosses Out $33.5 Million Case
Posted January 8, 2008 | 04:37 PM (EST)



Over the years, Wal-Mart has devoted much of its vaunted genius to devising new ways to exploit people. In its latest ploy, the company has targeted state taxpayers in a convoluted Ponzi scheme that leaves the retailer looking like a common tax deadbeat.

In February of 2007, the Wall Street Journal ran a story revealing that Wal-Mart pays billions of dollars a year in rent for its stores, but in 25 states -- most of them east of the Mississippi -- it has been paying most of that rent to itself, and then deducting that amount from its state taxes. By so doing, Wal-Mart has avoided paying several hundred million dollars in state taxes.

Based on a scheme developed by its accounting firm, Ernst & Young, for a "local tax reduction strategy," Wal-Mart's financial self-dealing allows it to pay rent to itself through a maze of eight corporate subsidiaries created in November of 1996, including Real Estate Investment Trusts (REITs). The rent appears as an expense on state tax forms, and is thus deducted from its taxable revenues. Under the agreement with itself, Wal-Mart pays 2.5% of gross sales monthly as rent to its own REIT, which then wires the money quarterly to Wal-Mart Property Company in the form of a dividend, which is then paid to Wal-Mart Stores as a tax-exempt "dividends received."

All of these transactions are handled through a "cash management agreement" between the corporate parties. Neither the REIT nor the Property Company ever had any employees. The REITs don't pay taxes, as long as they pay 90% of their income out in dividends to shareholders. In Wal-Mart's case, the REITs are owned by Wal-Mart subsidiaries which are registered in Delaware, a state that has no corporate income tax. Wal-Mart gets the benefit of the rent expense, but also gets the benefit of the non-taxed dividend, on the same monies. The dividends escape taxation, and the original rent that created the dividends is deducted from taxable income in the states where the "expense" is incurred. The rent, in essence, goes from one Wal-Mart pocket, into another. ......(more)

The complete piece is at: http://www.huffingtonpost.com/al-norman/walmarts-selfdealing-i_b_80524.html

[Fed_Up_Grammy]

1. I detest Walmart,but they are hardly the only business doing this.

[lildreamer316]

2. kick

[TechBear_Seattle]

3. K & R n/t

[old guy]

4. Isn't this akin to money laundering, or am I reaching too far?