Wisconsin Public Radio: Discussing Corporate Income Tax

“companies like Wal-Mart, get ‘breaks’ from governments, which are legally offered to them ...... It may not be to the standard you choose to desire, but, remember, it is the lawmakers who create those ‘breaks’, not Wal-Mart!!  If there is a tax law or regulation, why shouldn’t Wal-Mart or any other company take advantage of it, you take advantage of your tax ‘breaks’, don’t you? “RDS~~~~~~Note:For those who are tired of being broke and broken by breaks for corporate America and foreign interests,please heed the words of RDS, and find out if your state has legislated the combined ta reporting method yet. Type in combined tax reporting into the search engine in the upper right hand corner of this page. YOUR staste’s financial health depends upon it.

“Note:For those who are tired of being broke and broken by breaks for corporate America and foreign interests”

Note: If you are ‘broke’, you aren’t paying any state or federal taxes, therefore any ‘breaks’ given corporations and foreign interests, aren’t costing you a dime!!

funny ddrb you are silent as can be about all your favorite stores cheating on their taxes but pick on wm huh?

...you aren’t paying any state or federal taxes,

You must be a way better tax cheat than Wal-Mart, RDS. Tell me, how do you avoid sales tax or the tax on gasoline, or any of the myriad state and federal taxes everyone pays every day?

I personally think states should raise the TAX on rental property to make up for the Wal-Mart shortfall. Especially in economically deprived states like..um...Arkansas.

Lastly, loyalty to a business is always misplaced. Your attitude toward your business must be one of cold indifference. If you find fulfillment in work, do not let this alter your judgment. It is irrelevant. WalMart will discard you like an old shoe as the occasion arises. Reserve your loyalty for your family. This is the only place it actually counts.

“Tell me, how do you avoid sales tax or the tax on gasoline, or any of the myriad state and federal taxes everyone pays every day?”

I was talking about ‘Income taxes”, but as long as you brought it up, does that ‘everyone’ you mentioned, include “wealthy poeple”, on top of the high income and capital gains taxes they pay, that ‘poor’ people don’t?

GROWING NUMBER OF STATES CONSIDERING
A KEY CORPORATE TAX REFORM
By Michael Mazerov

A growing number of states are giving serious consideration to a major reform in their corporate income taxes long advocated by state tax experts.  The governors of six states — Iowa, Massachusetts, Michigan, New York, North Carolina, and Pennsylvania — all recommended in 2007 that their states implement this policy, which is known as “combined reporting.” New York enacted combined reporting legislation retroactive to the beginning of 2007 as part of the state’s budget bill for FY2007-08.  Michigan included combined reporting in its newly-enacted “Michigan Business Tax,” which will take effect in 2008.  And West Virginia enacted combined reporting as well, effective with the 2009 tax year.

Most large multistate corporations are composed of a “parent” corporation and a number of “subsidiary” corporations owned by the parent.  Combined reporting essentially treats the parent and most subsidiaries as one corporation for state income tax purposes.  Their nationwide profits are combined — that is, added together — and the state then taxes a share of that combined income.  The share is calculated by a formula that takes into account the corporate group’s level of activity in the state as compared to its activity in other states. 

By requiring corporate parents and subsidiaries to add their profits together, combined reporting states are able to nullify a variety of tax-avoidance strategies large multistate corporations have devised to artificially move profits out of the states in which they are earned and into states in which they will be taxed at lower rates — or not at all.  These strategies cost the non-combined reporting states billions of dollars of lost corporate income tax revenue they need to finance essential public services, like education and health care.  Households and small businesses, which do not have the opportunities or resources to engage in interstate income-shifting, end up paying higher taxes than necessary to make up for the taxes that large corporations are able to avoid. -(Center on Budget and Policy Priorities,updated September12,2007.)------------------------------------------------------------------------------------------------------- Note: There is a wonderful map of the U.S. on the aforementioned site which illustrates which states have combined reporting,have pending legislation,have no combined reporting,or have had it for many years. It also offers extensive info regarding the PICS and REITS that are rendered void by the combined reporting method .WalMart is used as a specific illustration re:PICS and REITS. .....Out of the 45 sites mentioned as having been cancelled,27 sites are in states that DO have,or have recently enacted, or are in process of adopting the combined reporting method.Only 10 of the states where the remaining 18 projects have been cancelled ,DON’T have combined reporting methods.According to my math, that means ,60% of the cancelled sites are, or would be, in combined tax reporting states.I have tried to be as conscientious as possible in compiling these stats. I certainly would welcome correction if I am in error.In NO way am I saying this is the reasoning behind WalMart’s choice to cancel ANY of these projects. I am merely making an observation.~~~~~~~~~~ (I origianlly posted this in Spring,2008)

ddrb,

Over the past 30 years or so, many companies have moved their operations from the northern states with high corporate taxes, to the southern states, and overseas, I predict we’ll see another big exodus of companies from the states that put a bigger tax burden on companies operating within those states!!  Michigan is already hurting, I hate to see what will happen once those tax proposals are enacted!!  You can only squeeze so much out of a company, before they take flight!!

June 24, 2008

PROPOSED “BUSINESS ACTIVITY TAX NEXUS” LEGISLATION
WOULD SERIOUSLY UNDERMINE STATE TAXES ON CORPORATE PROFITS AND HARM THE ECONOMY
By Michael Mazerov

Highlights

A bill under consideration in both houses of Congress would take away from the states authority they currently have to tax a fair share of the profits of many corporations that are based out-of-state but do business within their borders.  The Senate version of the “Business Activity Tax Simplification Act” (“BATSA”), S. 1726, was re-introduced in the 110th Congress by Senators Charles Schumer and Mike Crapo on June 28, 2007.  The House version, H.R. 5267, was re-introduced on February 7, 2008 by Representatives Bob Goodlatte and Rick Boucher.  H.R. 5267 was the subject of a hearing in the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee on Tuesday, June 24, 2008. .

BATSA defines many activities commonly conducted by corporations within a state as being no longer sufficient to obligate the corporation to pay several different kinds of taxes to the state (or to its local governments).  Moreover, these “safe harbors” from taxation are defined in a highly ambiguous, arbitrary and inconsistent manner.  These new restrictions on state and local taxing authority would have far-reaching, adverse impacts on the revenue-generating capacity and fairness of state and local tax systems.  The most significantly affected taxes would be the corporate income taxes levied by 44 states, the District of Columbia, and New York City.  If enacted, BATSA would have the following effects:

The legislation would cause state and local governments collectively to lose substantial tax payments from out-of-state corporations that would be freed from their current obligations to pay taxes on their profits and gross sales to particular jurisdictions.  A significant share of currently-taxable corporate profits would go untaxed by any state, leading to a net revenue loss for the states as a whole.  According to a Congressional Budget Office estimate done in 2006 on a substantially similar version of the bill, state revenue losses would grow to $3 billion annually within five years of enactment.
BATSA would block particular states from taxing particular corporations on income earned in those states.  Even if those corporations’ profits might ultimately be taxed by their home states, BATSA still would unfairly deprive other states and localities of their right to tax the profits of specific out-of-state corporations that benefit from services these jurisdictions provide.
BATSA would stimulate a wave of new corporate tax sheltering activity aimed at cutting state and local business taxes.
The legislation would mire state and local governments and corporations alike in a morass of litigation over whether particular businesses are or are not protected from taxation under the numerous vaguely-defined provisions of BATSA.
BATSA would reward major multistate corporations that have the resources to engage in aggressive tax-avoidance behavior with much lower tax burdens than their small, locally-oriented competitors.
For example, if BATSA were enacted:

A television network would not be taxable in a state even if it had affiliate stations and local cable systems within the state relaying its programming and regularly sent employees into the state to cover sporting events and to solicit advertising purchases from in-state corporations.
A bank would not be taxable within a state even if it hired independent contractors there to process mortgage loan applications and the loans were secured by homes located within the state.
A restaurant franchisor like Pizza Hut or Dunkin’ Donuts would not be taxable in a state no matter how many franchisees it had in the state and no matter how often its employees entered the state to solicit sales of supplies to the franchisees or to train the franchisees in company procedures.
These are just a few examples of the types of corporations that would be protected from state corporate income taxes by the provisions of BATSA.  That corporations engaging in such extensive in-state activities would be immunized from taxation suggests why a congressionally-imposed BAT nexus threshold even loosely based on the current text of BATSA would be a prescription for further litigation, inequity among businesses, and erosion of a vital source of funding for state and local services.

And here is a very recent WalMart strategy to bypass combined reporting law-an insertion of a last minute 2300 word amendment written by WalMart lobbyists in Massachusetts, allowing 80/20 companies to register as FOREIGN investors :~~~~~~~“Wal-Mart retained at least 8 lobbyists to ply its issues on Beacon Hill, which ranged from legislation regulating the retailer’s credit cards, to preventing big box stores from selling gasoline below cost. Wal-Mart weighed in on bills related to electronic identity theft, the use of radio frequency identification devices, and private check cashing services.

But the retailer also paid Bay State Strategies and Holland & Knight to lobby against H. 3756, Governor Deval Patrick’s “Act Improving the Fairness of the Tax Laws.” The Governor’s bill contains a provision that would require Wal-Mart to pay millions of dollars in state income taxes that the retailer has dodged by creating “sham transactions” that it pays to itself.

H. 3756 would close this tax loophole, forcing Wal-Mart to pay at much as $5 million in state taxes that it has previously dodged. Patrick refiled his legislation in January, 2008, saying, “Under the current system, small businesses are at a disadvantage, while larger corporations avoid paying their fair share.” One of the main larger corporations not paying its fair share is Wal-Mart. And the corporation is paying big bucks to lobbyists to keep it that way. According to the Governor’s office, closing this one loophole would generate another $271 million in revenues for the Commonwealth in FY 2008.

On December 28, 2007, the Commonwealth’s Study Commission On Corporate Taxation, reported that multi-state corporations like Wal-Mart were allowed to “shift income out of corporations engaged in business in the Commonwealth to affiliates in low-tax jurisdictions, thus reducing Massachusetts taxes paid.” The legislation opposed by Wal-Mart eliminates this shifting of income by adopting “combined reporting,” under which affiliated corporations engaged in unitary business activities combine their incomes and apportionment factors and file as one entity.”

The Study Commission concluded that “combined reporting would modernize the corporate tax structure in the Commonwealth and would reduce opportunities for tax avoidance through transactions among affiliated corporations.” ~~~~~~~~~~~~~~~ Note:A little background on the very recent 2300 word last minute amendment (written by WalMart lobbyists ) to the Massachusetts combined reporting legislation, ALLOWING 80/20 status in Massachusetts. It helps when your lobbyists are writing the law along with acquiescent accomplices,better known asLlocal,state and federal politicians....doing a job ON their constituency INSTEAD of doing a job FOR their constituency.

(Continued) This week, when the Massachusetts General Court went to close the “separate reporting” tax loophole by adopting combined reporting, Wal-Mart offered a last-minute amendment on the House floor, which was adopted with no roll call vote, and no real debate. “It was somewhat embarrassing,” one Baystate lawmaker told The Boston Globe. The 2,300 word amendment allows a corporation to avoid taxes if they maintain a major portion of their business overseas.

This is the same Whac-A-Mole game being played in Illinois—a story that was narrated by the Wall Street Journal last November. Wal-Mart opened up an office in Florence, Italy—a country where it has no stores—and because Illinois tax rules only apply to profits made in Illinois---Wal-Mart avoided taxes by using its office in Italy as a tax Whac-A-Mole. The retailer put all its Illinois stores under the control of its own REIT.

The stores paid “rent” to the REIT, and deducted those rent payments as an expense from its taxable income. The REIT paid its money to a Delaware subsidiary. To get around combined reporting—which Illinois has—Wal-Mart created yet another Delaware company called WMGS Services, with an office in Florence. WMGS is owned by Wal-Mart Property Company. Because Wal-Mart Property is just a shell, owning no stores and having no employees, Wal-Mart can claim it’s a “80/20” company---that 80% of its workers and property are overseas.

When the Wall Street Journal paid the Florence Wal-Mart operation a visit, a worker there said the company had 22 employees in Florence. By appearing to be a foreign company, the Arkansas-based Wal-Mart tries to shelter its profits from taxation. La Dolce Vita—Walton style.

The Illinois Department of Revenue Whacked Wal-Mart for $26.4 million (Huff Po, May 2008)Note: Will this be the template to avoid combined reporting in other states?