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Thread: 1209 North Orange Street

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    Olympic Champ kr1963's Avatar
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    Thumbs Up! 1209 North Orange Street

    Critics Say Delaware Helps Companies Avoid Taxes - NYTimes.com

    Critics Call Delaware a Tax Haven

    Wall Street, Sand Hill Road, LaSalle Street: Some corporate addresses scream money. Then there is North Orange Street, which whispers it.

    North Orange, a ho-hum thoroughfare in Wilmington, Del., is, on paper, home to more than 6,500 companies. Many of them are empty shells. They make nothing and sometimes employ just a lone clerk. But all are there for the same reason: to help corporations avoid paying taxes in other states.
    The Obama administration has riled corporate America by cracking down on secretive offshore tax havens. But now a big onshore refuge — Delaware — is drawing scrutiny, too.

    Squeezed by hard times, states are pushing to collect taxes that corporations are avoiding through Delaware shell companies. Maryland has reclaimed $267 million in such taxes, including interest and penalties, and has assessed an additional $143 million.

    About 20 states have adopted laws that would effectively keep companies from using the decades-old tax loopholes in Delaware. At stake are tens of billions of dollars in annual tax receipts, funds that states say they need during this recession.

    Critics of the arrangement in Delaware say it cheats state governments out of money. Delaware, these people say, has created its own onshore Cayman Islands. Even the Swiss are complaining, claiming that the United States is letting this homegrown haven flourish even as the I.R.S. pursues offshore shelters.

    Defenders of the arrangement — corporate executives, tax lawyers and, unsurprisingly, Delaware officials — rebuff such criticism. Mailbox subsidiaries like the ones along North Orange Street do nothing to minimize companies’ federal tax bills, they say. Corporations must still pay Uncle Sam. Moreover, these people say, many companies are drawn to Delaware for its business-friendly laws and courts, not to save on taxes.

    That is certainly the view at 1209 North Orange Street, a nondescript low-slung building at the corner of West 13th Street. This address serves as a tax minimizer for dozens of brand-name companies, among them Dillard’s, the department store chain based in Little Rock, Ark., and Kentucky Fried Chicken, which is part of Yum Brands of Louisville, Ky. All of them, and nearly two-thirds of the Fortune 500, have tax-exempt subsidiaries at this address to reduce their state tax bills.

    Jerry Daniel, the vice president for government relations at the Corporation Trust Company, which runs 1209 North Orange, does not see what all the fuss is about. After all, the arrangements are legal.

    “The image of Delaware as a tax haven is totally unfair,” Mr. Daniel said. “Even if you incorporate here, you still have to pay a full federal tax bill.”
    That argument does not sit well with David E. Brunori. A professor at George Washington University School of Law and a specialist in state taxes, Professor Brunori said the Delaware loophole was not harmless.
    “It is a vehicle for avoiding otherwise legitimate tax liabilities at a time when states need money badly,” Professor Brunori said.

    Shirley Sicilian, the general counsel of the Multistate Tax Commission, an intergovernmental state tax agency, said that “states increasingly want to make sure that income that’s earned in their state is actually taxed in their state, particularly in a bad fiscal situation like now.”

    At the center of the dispute are legal entities known as Delaware holding companies, which have been around for decades but took off in the 1990s, when accountants began pushing them aggressively. Corporations are allowed to establish these shell companies in Delaware, as well as in Nevada and Wyoming.

    Typically, they then transfer to these subsidiaries ownership of things like trademarks, patents and investments. Delaware does not tax holding companies set up to own and collect income from such lucrative intangible assets.

    The parent companies of these shells usually pay royalties to the Delaware subsidiaries to lease back those assets. By doing so, they can claim income tax deductions in states where they actually do business. The shells also funnel profit, tax free, back to their parents, in the form of dividends and loans.

    Some corporations have abused the system. Before WorldCom collapsed in 2002, it shifted $19.4 billion in intellectual property tied to “management foresight” to a Delaware holding company.

    Emboldened by recent court decisions that have challenged such arrangements, a growing number of states are moving aggressively to claim taxes that they say are rightfully theirs.

    It will not be easy, tax experts say. Many corporations have found new ways to exploit the loophole, said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities. The moves include creating “embedded royalty” companies, in which corporations set up Delaware holding companies that license their assets to other Delaware entities. The secondary Delaware entities buy goods or services from other parts of the company, add in the price of the royalty, and sell them back to the operating company, giving it a tax break on the royalty.

    In recent months, the Delaware loophole has drawn heated criticism from the world’s leading offshore tax havens, including Switzerland and the Cayman Islands.

    In April, a senior official of the Cayman Islands Financial Services Association asserted that Delaware, along with Nevada and Wyoming, promoted tax evasion and money laundering, thus qualifying the United States as a tax haven. Federal officials view the issue as a state matter and are not pushing for changes in Delaware, the home state of Vice President Joseph R. Biden Jr.

    In any case, Delaware officials dismiss the idea that their state is some sort of shady tax haven. Richard J. Geisenberger, Delaware’s assistant secretary of state, said that the loophole “is simply a state tax law.” It does not enable tax evasion, he said.

    Still, the loophole — and potential for companies to abuse it — worries Peter L. Faber, a prominent lawyer specializing in state tax at McDermott Will & Emery in Washington. In some cases, a single clerk may tend dozens of shell companies. Even the paperwork associated with these companies is back at the home office.

    “I’ve seen a lot of companies with solid structures, and more with not,” Mr. Faber said of the Delaware entities.

  2. #2
    Olympic Champ kr1963's Avatar
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    Default Re: 1209 North Orange Street

    Microsoft's Billion Dollar Nevada Tax Dodge - Microsoft Tax Dodge

    Microsoft makes its home in Redmond, Washington. It has 40,224 employees and 79 physical sites here. Since 1997, Microsoft has dodged $728.8 million in taxes by recording its software licensing revenue in Nevada. If this practice is proven to be illegal, the company could owe as much as $1.24 billion with interest and penalties.

    About one third of Microsoft's revenue comes from selling software licenses to large corporations and PC manufacturers. Washington State has no income tax but requires businesses to pay what are called Business and Occupation or B&O taxes.

    Microsoft is one of the richest, most successful corporations in American history. In the past twelve years, Microsoft earned $127 billion in profit from $460 billion in revenue and currently has $36 billion in cash on hand.
    Microsoft is supposed to pay a .484 percent tax on its revenue from software licensing. However, since 1997, the company has claimed it's exempt from this tax because it accounts for this income from Nevada.
    RCW 82.04.2907 - Tax on royalties from granting intangible rights
    (1) Upon every person engaging within this state in the business of receiving income from royalties or charges in the nature of royalties for the granting of intangible rights, such as copyrights, licenses, patents, or franchise fees, the amount of tax with respect to such business shall be equal to the gross income from royalties or charges in the nature of royalties from the business multiplied by the rate of 0.484 percent.
    While it's tax dodge seemed small at first, it's grown with the company's success - now averaging $80 - $90 million annually.

    Washington's Infrastructure is Literally Crumbling...

    go to the link for videos...

  3. #3

    Default Re: 1209 North Orange Street

    Companies are always going to find ways out of paying so much in taxes. I don't know why some people think that taxing them more is going to help anything. They will simply take their business elsewhere, much like what they did with the addresses in Deleware. If we want to keep businesses and jobs in America we have to entice them to stay, not entice them to leave. Cap and trade will make all of this worse, especially in the manufacturing industry.

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    Olympic Champ kr1963's Avatar
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    Default Re: 1209 North Orange Street

    I agree with you in principal as I am not into taxing very much myself as an individual & as a business owner but my point for posting this was to show the hypocrisy of these "American Companies" who donate to the US Olympic teams & wave their American Flags while trying to figure out all the legal loopholes, (or create them) so the individuals get the brunt of the tax burden & they don't pay their "fare share."

    It is a "dirty little secret" that has been around for years that if the average person knew about, they would be pretty POed IMO.

  5. #5

    Default Re: 1209 North Orange Street

    Quote Originally Posted by kr1963 View Post
    I agree with you in principal as I am not into taxing very much myself as an individual & as a business owner but my point for posting this was to show the hypocrisy of these "American Companies" who donate to the US Olympic teams & wave their American Flags while trying to figure out all the legal loopholes, (or create them) so the individuals get the brunt of the tax burden & they don't pay their "fare share."

    It is a "dirty little secret" that has been around for years that if the average person knew about, they would be pretty POed IMO.
    That's a pretty good point and didn't Bill Gates come out and say that he would support higher taxes? If so, then why is his company trying to hide from them? But all in all, I think we and businesses are taxed enough. Government should learn to do with what they have instead of misspending and then raising taxes to cover for it.

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    Olympic Champ kr1963's Avatar
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    Default Re: 1209 North Orange Street

    No I am anti-income tax all the way. It is plank in the Communist Manifesto & in this country it is A PROGRESSIVE tax which completely penalizes production. That's just WRONG.

    Now companies spend a good portion of their GI on accounts trying to find all the legal loopholes to avoid taxation. And those expenses are just past onto the consumer. With the IRS we would see a real growth in our economy.

  7. #7
    World Champ ODH's Avatar
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    Default Re: 1209 North Orange Street

    Quote Originally Posted by quinn14 View Post
    That's a pretty good point and didn't Bill Gates come out and say that he would support higher taxes? If so, then why is his company trying to hide from them? But all in all, I think we and businesses are taxed enough. Government should learn to do with what they have instead of misspending and then raising taxes to cover for it.
    Bill Gates does not own Microsoft. He is a large shareholder and I believe now just has an advisory position. Companies are also legally obligated to maximize shareholder value, so he isn't in the position to inlfuence Microsoft's tax policy and even if he was he would have to try to minimize the corporation's tax burden even if it went against his personal beliefs.

    He has publically come out against the repeal of the estate tax, which effects him greatly (or I guess it effects his heirs greatly becasue he will be dead before it effects him).

  8. #8

    Default Re: 1209 North Orange Street

    rosoft makes its home in Redmond, Washington. It has 40,224 employees and 79 physical sites here. Since 1997,

    So, tax the hell out of Microsoft! Of course, those 40,224 jobs might disappear. . . .

    R.I.P. Cyrano and Roxanne.

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