Enter your email address and start getting breaking law firm and legal news right now!
Delaware is Home to More Companies Than Residents
Google, Apple, Bank of America and JPMorgan Chase have one thing in common; the same legal address. Their address is not found in Silicon Valley or on Wall Street either. They are all technically based in a building in Wilmington, Delaware along with some 285,000 other businesses. The companies only have a dropbox at their Delaware address in order to use it as a method to reduce their tax bills each year. A little more than half of the public companies in the United States are incorporated in the state of Delaware because of its friendly corporate tax laws. In fact, the state boasts more companies than residents. As of the last count, there are over 945,000 companies that have an address in the state and only some 897,000 residents in the state.
Delaware is not the only place in the United States where companies can have an address in order to lower their tax bills. Another common spot is that of Cheyenne, Wyoming, where some 2,000 companies are registered at a single address. Shell companies are legal in the United States but can be a front for illegal business in a corporate-friendly environment. Shell companies are companies that do not exist but do not have assets or significant business activity. Shell companies are used by major corporations in an effort to reduce their tax bills.
Over the past three years, 30 of the most profitable companies in America did not pay income tax, according to a report from Citizens for Tax Justice. From 2008 to 2010, 300 companies paid an average tax rate of 18.5 percent, which is less than the official corporate tax rate of 35 percent. One of the most common methods companies use to reduce paying taxes on profit is by depositing their profit in overseas bank accounts.
Peter Oppenheimer, the CFO for Apple, said in March that the company was not planning to repatriate its overseas earnings because the company would be hit with ‘significant tax consequences.’ Apple was paying an international tax rate of three percent at the time for its overseas money. Apple’s overseas money accounts for roughly two-thirds of its earnings. Apple, Google and other companies asked Congress for a tax holiday on repatriated overseas profits. This would have created a $1 trillion boon for those companies. Facebook was able to structure its initial public offering so that it did not have to pay federal and state income tax on any earnings from 2011 in another example of how companies are finding ways around paying income taxes in the United States.
Delaware is Home to More Companies Than Residents by Jim Vassallo