The Wall Street Journal reports that Wal-Mart Stores, Inc. has used a complicated property-ownership scheme to duck taxes in 25 states, including North Carolina. A story in the Feb. 1 issue of the Journal says that "North Carolina tax authorities are challenging Wal-Mart, saying its REIT strategy was intended to 'distort [the company's] true net income,' according to its filings in the case in Superior Court in Raleigh, N.C."
The scheme involves placing ownership of store property in a Real Estate Investment Trust, with 99 percent ownership of the trust held by the parent corporation. The company-owned store pays rent to the REIT and the rent is a deductible business expense. Under state law, a REIT doesn't pay any income tax if it distributes its profits as dividends and those dividends are delivered tax-free to shareholders. So the company gets tax-free income while reducing its taxable income for the store.
The Journal reports that in 2005 the state "ordered Wal-Mart to pay $33 million for back taxes, interest and penalties stemming from the REIT. The company paid it and last year sued the state for a refund."
Wal-Mart has disputed the charges and defends its round-about rental plan as good business.
— Cecil Bothwell, staff writer
The scheme involves placing ownership of store property in a Real Estate Investment Trust, with 99 percent ownership of the trust held by the parent corporation. The company-owned store pays rent to the REIT and the rent is a deductible business expense. Under state law, a REIT doesn't pay any income tax if it distributes its profits as dividends and those dividends are delivered tax-free to shareholders. So the company gets tax-free income while reducing its taxable income for the store.
The Journal reports that in 2005 the state "ordered Wal-Mart to pay $33 million for back taxes, interest and penalties stemming from the REIT. The company paid it and last year sued the state for a refund."
Wal-Mart has disputed the charges and defends its round-about rental plan as good business.
— Cecil Bothwell, staff writer
Read more articles in:
NewsSubscribe to XpressMail. Free Sneak Peek. Every Week.
Want to know what's coming out in Xpress this week before the paper even hits the stands?
We've got your free sneak peek, along with deals available in XpressMail, our weekly email newsletter. (It's the best we can do without time travel.)
-
Comments
-
Related Articles
Comments
No commments yet.
Make a comment
Your comment has been submitted. TODO: Info about moderation
Click here to Comment Again