Just read this WSJ article (paid subscription) on Walmart’s “smart” tax saving strategies.
Using Captive REITs Walmart saved 20% of its State Taxes!
They pay rent for their stores and then save money by not paying state taxes. Here is how it works accoridng to the Wall Street Journal:
One Walmart subsidiary pays the rentto a real estate investment trust or REIT, which is entitled to a tax break if it pays its profits out in dividends. The REIT is 99 owned by another Wal Mart subsidiary, which receives the REIT’s dividends tax-free. And Wal Mart gets to deduct the rent from state taxes as a Business expense, even though the money has stayed within the company!
Its not as if the Walmart is the only villain. there are many who are using such “captive REITs” to save taxes or evade them (?). Such practices have been plugged by the Federal Government but many states still have it. In fact Walmart uses it in 25 states.
By one estimation by S&P Compustat which collects the SEC data filings, Walmart cut its state taxes in half.. and over a four year period, it probably saved 20% of its state taxes!! That is a HUGE one, considering that Walmart’s TOTAL Operating Margin is 5.81%!!
Makes you wonder if the US companies indeed ran businesses ethically. .could they make money??
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