Wal-Mart Rolls Back Tax Cuts
In law school, you learn in basic tax (”baby tax,” we called it) that you can’t avoid tax on a transaction by making it into a series of transactions. A North Carolina judge must have been paying attention that day.
Judge Clarence Horton Jr. has ruled against Wal-Mart in a $33.5 million tax dispute with NC revenue officials. Wal-Mart had paid the amount in question and had asked for a refund based on a series of transactions created to reduce its tax burden.
According to court records, Wal-Mart transferred ownership of its stores to a number of in-house real estate investment trusts (REITS). The retail giant then cut its tax obligation by taking deductions for rent payments to the REITS. Judge Horton stated that “there is no evidence that the rent transaction, taken as a whole, has any real economic substance,” other than for cutting Wal-Mart’s taxes. No word yet on an appeal.
This is not the first time that Wal-Mart’s tax schemes have raised eyebrows; the company has been attacked on a number of fronts for its attempts to lower its tax bill.
(Hat Tip: Miki)
