Adding to what we discussed might happen in West Virginia, with that state lowering its corporate income tax rate, here are a couple additional nuggets we’ve found for your reading pleasure.

First, in Kentucky, State Reps. Bill Farmer of Lexington and David Floyd of Bardstown are suggesting that now is the time to eliminate the state’s corporate and individual income taxes. Its a funny suggestion on its surface, since, well, lots of states are having a hard time paying for much of anything these days. But there is a method to the madness, and here it is:

The legislation drafted by Reps. Bill Farmer of Lexington and David Floyd of Bardstown would replace the income tax by spreading the sales tax to a host of services that are currently exempt, including plumbing, roofing and other contracting work, and some consulting work. Another huge chunk of change would roll into the state’s bank account by charging 5 percent tax on rent paid for commercial — but not residential — real estate space, according to the 66-page bill.

Since Wal-Mart rents a lot of its properties to...wait for it...itself, could this mean Wal-Mart could potentially be taxed on its own rental fees? Possible, but there would be one sure tax Wal-Mart would have to worry about - under the proposal, Kentucky would collect taxes on charges that stores such as Kroger and Wal-Mart impose on product makers to have special displays at the end of their aisles. The legislation in question is viewed as unlikely to pass this session, but even Democrats in Kentucky have admitted the proposals are something to consider.

House Republicans draft tax reform proposal [Lexington Herald-Leader]

In North Dakota, Wal-Mart is lobbying hard for a bill to repeal a law that requires, with few exceptions, pharmacies be owned at least 51 percent by pharmacists. A repeal of that law would of course open the door for Wal-Mart and other chain pharmacies to waltz right in and start peeling off local drug stores.

Pharmacists and others called “North Dakotans for Prescription Facts” want the law retained, saying it will kill small town pharmacies and hurt personalized service. “North Dakotans for Affordable Health Care,” funded in large part by Wal-Mart and Walgreen’s, wants the law repealed.

N.D. legislative session will have plenty of bread-and-butter issues [Grand Forks Herald]

The collection is from an undisclosed company - unnamed because of state tax confidentiality laws.

The REIT loophole issue, which focuses on the use of captive real estate investment trusts to avoid paying state corporate income taxes, has been in the national spotlight for going on two years now. In North Carolina, Wal-Mart saved millions of dollars in state tax bills by essentially transferring its properties to its own REIT and paying rent to itself, then writing it off as a tax deduction. These transactions were frequently followed by rather suspicious looking characters in black masks trudging back to Bentonville with big old gobs of money that could have gone to funding state programs.

North Carolina got wise to the scheme and assessed Wal-Mart for back taxes. Additional states have sought ways to close the loophole up, either through attacking it directly or by adopting combined reporting. Maryland is one of those states - last year Maryland Comptroller Peter Franchot announced that his state would no longer allow payments to captive REITs to be deducted from state tax returns. Now following its first publicized audit since then, Maryland will receive $10.8 million in back taxes for a 3-year period from the unnamed company.

We’ve chronicled again and again that Wal-Mart is one of the worst offenders in this area. Simply closing the loophole is one way to fix it. Adopting combined reporting is another. At least in Maryland’s case, the effort has already resulted in nearly $11 million coming back into the state treasury.

Maryland collects millions after closing tax loophole [Washington Post]

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