Wal-Mart’s Real Estate Tax Scam Now Illegal by Phil Neuenfeldt, Secretary-Treasurer Wisconsin State AFL-CIO and Jack Norman, Research Director Institute for Wisconsin’s Future               Governor Doyle’s signature makes it law:  The specific real estate gimmick Wal-Mart (and others?) have been using to avoid the Wisconsin corporate income tax is now illegal.              The Legislature closed the tax scam as part of the Budget Adjustment Bill and Governor Doyle signed it into law on May 16.  Doyle wrote that the new law “closes an unacceptable tax loophole used by multinational corporations to shift profits out of the state to avoid paying Wisconsin taxes.”  This shuts down the use of an intricate tax technique that avoids taxes by having one branch of a company pay rent to another, a paperwork maneuver which results in major tax breaks.              It’s a relatively small fix estimated to bring in about $15 million during this biennium, but an important first step in needed corporate tax reform.  The Wisconsin State AFL-CIO and the Institute for Wisconsin’s Future and other coalition allies have pushed to close this loophole. It follows an aggressive campaign to keep the issue of corporate tax avoidance very visible to lawmakers and the public.              There had been some doubt about whether Gov. Doyle would make changes in the legislation sent him because it differed from the proposal Doyle himself had made.  The Legislature’s version went beyond closing the “captive Real Estate Investment Trust” gimmick which Wal-Mart uses.  It also includes restrictions on using deductions for interest—not just rent—to avoid paying taxes, and also extends beyond traditional corporations to include individuals, S-corporations and insurers.               Gov. Doyle noted that there had been some concerns from the business sector about whether the law would prohibit certain “legitimate intra-company loans.”  Doyle said he will make sure that the law is interpreted so as not to interfere with these legitimate transactions. Still undecided is the fate of Wal-Mart’s past use of this tax loophole.  The Department of Revenue is seeking back taxes on almost $105 million in Wal-Mart profits from 1997 through 1999 and the case is before the state’s Tax Appeal Commission.              Corporate tax loopholes force working families and smaller businesses to pay much more than their fair share in taxes to make up the difference. The state needs to take a closer look at Wisconsin’s outdated tax structure which is being gamed by aggressive corporate tax avoidance strategies.    ###   Contact:  Phil Neuenfeldt, Secretary-Treasurer 414-828-1854