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Why Megacorporations Are Crying the Blues

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SAN MATEO COUNTY, CALIFORNIA – August 24, 2018

Many American corporations understate the value of their assets to save on taxes. For example, the Corporation "Apple", which is now trying to return from the budget about 85 million dollars, which is more than all its payments to the district for the whole year.

Apple and Genentech are headquartered in California, in the San Francisco Bay area. Prices and property taxes are so high that recently the locals began to massively leave for cheaper places.

Megacorporations also suffer from taxes on buildings, land and other property, but are not going to move  anywhere. They have their own special ways to solve the problem. Through endless complaints and lawsuits they seek tax compensation and reduced payments, in every way underestimating the value of taxable property.

In the Bay Area, Genentech and Apple are particularly aggressive in opposing tax assessors — elected officials who determine the value of property for tax purposes. Both companies are leading years-long efforts to recoup tens of millions of dollars they say they’ve overpaid in taxes on buildings, land, lab equipment, computers and other items.

In San Mateo County, Genentech has 653 unresolved appeals before the county tax assessment appeals board, which hears disputes brought by taxpayers that disagree with the assessor’s appraisal of their property, according to the county counsel’s office. No other large employer even comes close; the next is BioMed Realty, a real estate investment trust, with 34 appeals. United Airlines, which pays the most property taxes in the county, has 12. Facebook and biotech firm Gilead Sciences, both with headquarters in the county, have none.

San Mateo County believes Genentech should be paying taxes on $33 billion worth of property, but Genentech says its properties are worth much less, around $14 billion, according to the county counsel’s office. The difference, $19 billion, amounts to $190 million in taxes that Genentech, if it wins all of its appeals, could get back from county coffers.

Statewide, the vast majority of assessment appeals — which are handled at the county level — are resolved within two years, the statute of limitations under state law. But some of Genentech’s cases date back to 2000, and carry over each year at the request of the company, or because litigation arising from the appeals has not been resolved. Genentech routinely files appeals listing its properties at roughly 50 percent of the assessed value, according to documents compiled by the county counsel’s office.

In Santa Clara County, Apple is the leading appealer of tax assessments, with 489 open cases dating back to 2004, disputing $8.5 billion in property value, according to the assessor’s office. Apple is largest taxpayer in the county, paying $56 million in tax year 2017-18.

In Santa Clara County, more than half of the $76 billion in disputed assessments stems from property belonging to 10 large tech companies, including Apple, Google, Applied Materials and Sun Microsystems.

Applied Materials, for instance, has 94 appeals totaling $6.1 billion in disputed value. Google has 132 appeals covering $2.7 billion in disputed value.

Some claims reflect extreme differences in estimated values. In one appeal filed in 2015, Apple said that a cluster of properties in and around Apple Park in Cupertino that the assessor valued at $1 billion was worth just $200. In another, property that the assessor valued at $384 million was, in Apple’s view, worth $200, according to an appeal application.

The megacorporations have enough resources and money to hire attorneys and expert witnesses to eventually wear down county governments by appealing, appealing, appealing.

In result this practice forces local governments to hold millions of dollars in limbo that would otherwise go to taxpayer-funded programs like schools, roads and special districts, in case they have to issue refunds to the companies.

So, because of that one might ask: if corporations do this with relatively obvious things, like the cost of buildings, land and equipment, what about the more serious and subtle things, like accounting?

It’s not a secret that for Apple, active tax evasion is generally a normal practice and part of the corporate culture. Previously, Apple has been caught partaking in the massive use of offshore schemes:

https://www.usatoday.com/story/news/world/2017/11/07/paradise-papers-apple-shifted-billions-offshore-avoid-tax/839565001/

https://www.nixonwilliams.com/free-resources/contractor-tax/offshore-tax-avoidance-schemes

I hate to admit it, but it seems that a very significant part of the praised efficiency of American corporations is tax optimization of this kind.

Author: USA Really