North Carolina's investigation of WalMart in this matter may expose corrupt tax practices that had more in common with 'Enron style accounting' than legal tax practices of a good community business partner --which WalMart spends plenty on advertising.
Now that North Carolina has drawn attention to WalMart's 'special project' other States are bound to take a look at WalMart practices as well.
http://rawstory.com/news/2007/Court_docs_WalMart_plotted_strategy_in_1023.htmlWhen the Wal-Mart corporation sent out a 2001 plea to heavy-hitting accounting houses requesting some bright ideas about how the retail giant might be able to pay less in state taxes, Ernst & Young LLP was eager to pitch in. But after being challenged by North Carolina's attorney general, the big-time firm's secret tax-slashing strategies have come to light in an array of revealing materials filed in court.
"Big companies hardly ever discuss how outside accountants, lawyers and investment bankers help them cut their tax bills," reports Jesse Drucker of the Wall Street Journal, who writes that the court filings offer "a rare window into accountants' role in generating tax-reduction ideas at one major company."
Drucker says that after their hiring, Ernst & Young "swung into action. Senior tax experts at the big accounting firm swapped ideas via email and in a series of meetings. At least one gathering, according to an internal Ernst & Young calendar, took place in Wal-Mart's headquarters in the 'Tax Shelter Room.'"
Among the revelations in the documents, according to the Journal, is evidence that Wal-Mart aggressively capitalized on its move a decade ago to transfer ownership of the company's stores to real estate investment trusts (REITs), subsidiaries that are exempt from federal tax provided that 90% of income is paid out in shareholder dividends. In California, Wal-Mart followed the firm's advice to claim tax deductions on shareholder dividends that were technically never paid. Exploiting a loophole in California law that doesn't require dividend recipients to list that money as taxable income, Wal-Mart's REITs would simply take a hefty tax deduction for paying dividends to another subsidiary, which in turn would opt not to report the earnings. The practice resulted in a dramatic savings on tax bills in the state."
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