Big Profits, Tiny Taxes || Part 3
Originally published Nov. 20, 2019
Launched in 2000 as a partnership between American and British telecom giants, Verizon Wireless became one of the biggest cell phone companies in the United States, earning hundreds of millions of dollars a year in profits in Florida alone.
Verizon Wireless didn’t pay corporate income tax itself in Florida. That’s because the company’s corporate owners – Verizon Communications Inc. and Vodafone Group Plc – set their wireless business up in such a way that its profits passed up to them instead.
But when Florida tried to tax those owners, one of them – Vodafone – argued Florida couldn’t make it pay, according to litigation records.
The strategy allowed Vodafone to save at least $23 million in Florida income taxes through 2014, when Vodafone sold off its stake in Verizon Wireless and Verizon Communications became the sole owner.
Other companies have used similar “pass-through” businesses to siphon profits out of Florida without paying corporate income tax on them, according to separate litigation records. They include a Boston-based private equity firm, a big commercial real estate investor, and the investment arm of the Canada Pension Plan.
About 38 states around the country have passed laws that prevent corporations from passing tax-free profits out of a state this way, according to Bruce Ely, a tax attorney at the law firm Bradley Arant Boult Cummings in Birmingham, Ala.
Florida has not.
“I’m always befuddled as to why all the states don’t do that,” Ely said. “That’s a no-brainer.”
Read the rest of the story here.
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