This topic was not listed sense 2003 but articles show its has been
practiced and with some success.
The legislation that passes my not completely close this loophole.
"Wal-Mart is currently in court in North Carolina, seeking to force a
refund of the
$30.2 million it claims the state owes it for improperly assessing
income tax. Wal-Mart has been using a "captive REIT" strategy to
company's true net income, and in the process cutting its state taxes
by over 20%
over one four-year period. Wal-Mart also sought - and was denied - a
refund in Louisiana.
· New York Governor Eliot Spitzer has included closing the REIT
loophole as a
priority in his 2007 budget proposal, a move estimated could raise as
$104 million for the state in the next year. Massachusetts Governor
has discussed a similar proposal. Connecticut and Maryland have both
announced recently they will examine the "captive REIT" strategy......
Regardless of outcome, these REIT cases illustrate exactly how much
corporations can hide by moving it around through subsidiaries instead
of paying it in
state tax. According to a N.C. Revenue Department auditor's report,
over the four-year
audit period, Wal-Mart and Sam's Club paid over $7 billion to company
REITs estimated to have saved the company approximately $230 million
in state taxes
nationwide.30 Not every state has the capacity to challenge these
practices - Maryland,
for example, acknowledged it could be losing millions of dollars, but
prior to its recent
announcement that it would investigate the practice, the Maryland
had maintained that under existing law it is a legitimate tax shelter
- so unless loopholes
are closed or legal action taken many states will continue to lose
As The Wall Street Journal revealed in excerpts from an Ernst & Young
training manual, these
contacts serve no business purpose other than "tax planning".....
Former New York Governor George Pataki proposed legislation similar to
Spitzer's proposal in 2006 [to close the loophole}, but it too was
rejected by the New York legislature. "
Jesse Drucker, "Wal-Mart cuts taxes by paying rent to itself," The
Wall Street Journal, February 1, 2007.
Chenango Business Services