Posted on 02/01/2007 1:04:37 PM PST by MinorityRepublican
As the world's biggest retailer, Wal-Mart Stores Inc. pays billions of dollars a year in rent for its stores. Luckily for Wal-Mart, in about 25 states it has been paying most of that rent to itself -- and then deducting that amount from its state taxes.
The strategy is complex, but the bottom line is simple: It has saved Wal-Mart from paying several hundred million dollars in taxes, according to court records and a person familiar with the matter. And Wal-Mart is far from alone.
The arrangement takes advantage of a tax loophole that the federal government plugged decades ago, but which many states have been slower to catch. Here's how it works: One Wal-Mart subsidiary pays the rent to a real-estate investment trust, or REIT, which is entitled to a tax break if it pays its profits out in dividends. The REIT is 99%-owned by another Wal-Mart subsidiary, which receives the REIT's dividends tax-free. Wal-Mart gets to deduct the rent from state taxes as business expense, even though the money has stayed within the company.
Partly thanks to sophisticated financial strategies like these, states' tax collections from companies have been plummeting. On average, Wal-Mart has paid only about half of the statutory state tax rates for the past decade, according to Standard & Poor's Compustat, which collects data from SEC filings. The so-called "captive REIT" strategy alone cut Wal-Mart's state taxes by about 20% over one four-year period. Now several state regulators are trying to crack down on the strategy, used largely by retailers and banks, and some other states have changed their laws to try to end the practice. Yesterday, New York Gov. Eliot Spitzer included elimination of the loophole as part of his proposed budget, a fix he said would bring the state $83 million a year.
(Excerpt) Read more at online.wsj.com ...
From whom is there anything being stolen?......
How so? There's nothing illegal here. And they aren't stealing anything, so, by definition it can't be theft.
I guess that would depend on whether you're a shareholder or not. I'm not, but still, it's a legal and sound business practice which is probably broadly accepted and used by other large outfits. This, however, is Wal-Mart which it is so tres chic to bash. I rarely shop there, either, by the way, so I have no dog in this fight.
I do hope "Ode To Ted Kennedys Liver" was being sarcastic......
Wonder if I too can pay rent on the house I own?
Lower taxes mean lower prices. ;)
This is VERY common.
Lower prices everyday... works for me
>>What a scam. This is nothing more than bold-face theft.<<
Your post reminds me of what the editor of my high school paper told me once. He said he woud publish dumb opinions just to get people fired up and write responses.
Hey, you got me to respond!
What a scam. This is nothing more than bold-face theft.
It is our duty bound obligation to pay the least tax possible. Ask your self why the legistlatures set this up?
Let he who is without sin cast the first stone - a la labor unions. When the libs start pushing this issue they better make sure they have a clean house for the tax man... which they of course do not.
This issue will die a quite death except for a limited activist or two.
Nice theory, but it only works if the government decides to reduce spending by the amount in taxes that Walmart is able to avoid. In reality, the government will collect the money from someone else, and that someone else is usually people like you and me who can't afford an army of accountants and tax lawyers to exploit every loophole. I don't blame Walmart because its only obligation is to maximize profits for its shareholders, but please don't try to convince me that this is a victimless tax avoidance scheme.
For some self-employed people, it does work.
Reminds me of Stanley Tools relocation offshore to minimize taxes. Why does this bother some people?
It was said to be "unpatriotic" or "unAmerican" to use legal means to minimize taxes.
The mind boggles.
By saving money on their taxes, they can save me money in their store.
...then get outta my head!
A large number of companies have their headquarters in Delaware, due to their extremely generous tax structure. It would be interesting to see a list of the those in the top 500 who have incorporated there.
There was a guy I went to after my divorce that talked of how you could shield income. You start a consulting company in Arizona. This company then owns your home, your car, your boat, etc. When you take consulting jobs your company is paid $150 or so an hour, but you are only paid $25. You rent your house from the company, and you drive a company car.
Needless to say, your "company" has lots of savings and investments.
The key is that it is difficult to determine who actually owns the company for some reason, but I don't remember why.
It sure works for computing child support and maintenance/alimony.
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