Bill targets Wal-Mart 'tax evasion scheme'

By David Milstead, Rocky Mountain News (Contact)

Tuesday, April 22, 2008

Rep. Claire Levy, D-Boulder, introduced a tax bill designed to stop Wal-Mart and other companies from deducting real-estate expenses they're paying to themselves.

Levy calls the technique an illegal tax evasion scheme.

The tactic, revealed by The Wall Street Journal in February 2007, involves Wal-Mart giving its stores and land to a real estate investment trust, which it then pays rent to. REITs pay no corporate taxes if they pay out most of their income to shareholders.

Another Wal-Mart subsidiary owns the REIT and gets the income. The rent is then deducted on state income taxes as a business expense.

"They've concocted a scheme that allows them to launder their own money and evade their fair share of state taxes," Levy said.

Her bill gives the state Department of Revenue greater power to discover and block the transactions.

In a prepared statement, Wal-Mart Corporate Communications Director Daphne Moore called the tax position "lawful arrangements . . . known to state departments of revenue for many years."

"While there is a tax benefit . . . it makes sense to have properties administered by a separate professional real estate office, rather than by individual store managers," she said. "Anything Wal-Mart can do to lawfully reduce its costs enables the company to pass those savings on to customers in the form of lower prices."