Wal-Mart challenged by N.C. tax authorities

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

About Cecil Bothwell
A writer for Mountain Xpress since three years before there WAS an MX--back in the days of GreenLine. Former managing editor of the paper, founding editor of the Warren Wilson College environmental journal, Heartstone, member of the national editorial board of the Association of Alternative Newsweeklies, publisher of Brave Ulysses Books, radio host of "Blows Against the Empire" on WPVM-LP 103.5 FM, co-author of the best selling guide Finding your way in Asheville. Lives with three cats, macs and cacti. His other car is a canoe. Paints, plays music and for the past five years has been researching and soon to publish a critical biography--Billy Graham: Prince of War:

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