Wal-Mart's Fascinating Accounting

From Al Norman at Huffington Post, via Universal Hub and Blue Mass. Group:

Wal-Mart's financial self-dealing allows it to pay rent to itself through a maze of eight corporate subsidiaries created in November of 1996, including Real Estate Investment Trusts (REITs). The rent appears as an expense on state tax forms, and is thus deducted from its taxable revenues.

Under the agreement with itself, Wal-Mart pays 2.5% of gross sales monthly as rent to its own REIT, which then wires the money quarterly to Wal-Mart Property Company in the form of a dividend, which is then paid to Wal-Mart Stores as a tax-exempt "dividends received." All of these transactions are handled through a "cash management agreement" between all the parties. Neither the REIT nor the Property Company ever had any employees.

The REITs don't pay taxes, as long as they pay 90% of their income out in dividends to shareholders. In Wal-Mart's case, the REITs are owned by Wal-Mart subsidiaries which are registered in Delaware, a state that has no corporate income tax.

If I ever buy a home, someone remind me to create a subsidiary of myself in Delaware, and then rent my own home to myself from that subsidiary. It's actually a brilliant plan.

Governor Patrick tried to close the loophole that allows this in '07, so (according to Sprawl Busters - admittedly not a neutral party) Wal-Mart paid $208,678 to Beacon Hill lobbyists last year, "five times what the company spent the previous year.".

The Blue Mass. Group post also mentions that MA House Speaker Sal DiMasi "is not a big fan of combined reporting or of the other loophole-closures in the Gov's bill," apparently in fear that they will make for a less welcoming business climate.