Arkansas Blog: Wal-Mart's tax dodge

Wal-Mart Watch happily notes a Wall Street Journal article describing how Wal-Mart set up an operation to reduce its state tax liability. Arkansas isn't specifically mentioned, but since Arkansas law is particularly ripe to manipulation by corporations with multi-state operations, it's hard to imagine they've departed from the loophole exploitation here. Read the release on the jump.

In Wally/Bush/Huck world only poor people pay taxes. Lots and lots of sales taxes.

WAL-MART WATCH NEWS RELEASE

Wal-Mart Tax-Dodging Schemes Exposed

Contact: Nu Wexler at (202) 557-7461

Washington, D.C., Tuesday, October 23, 2007 – Today's Wall Street Journal reports on Wal-Mart's aggressive tax dodging schemes that have enabled the company to pay corporate taxes at half the average state rate for the last decade. These complex tax schemes have attracted the attention of state legislatures around the country, and they're at the heart of a North Carolina lawsuit challenging Wal-Mart's abusive tax shelters. Documents from the North Carolina lawsuit, obtained by the Wall Street Journal, expose Wal-Mart's systematic and legally-questionable attempts to pad its bottom line at the expense of individual state taxpayers.

Excerpts and the full story are below.

* "At least one gathering, according to an internal Ernst & Young calendar, took place in Wal-Mart's headquarters in the 'Tax Shelter Room.'"

* "In 2002, for example, the accounting firm delivered a 37-page proposal laying out a smorgasbord of 27 potential tax strategies, most tailored to a particular state's tax code. It described one of them as 'a very aggressive strategy with considerable risk.'"

* "One of the proposals was accompanied by the following warning: 'Note that in a 'post-Enron' environment and amidst the focus on 'tax haven' operations, this strategy is expected to get more scrutiny by the IRS, as well as some states.'"

* "David Bullington, Wal-Mart's vice president for tax policy, said in a deposition that he began feeling pressure to lower the company's effective tax rate after the current chief financial officer, Thomas Schoewe, was hired in 2000. Mr. Schoewe was familiar with 'some very sophisticated and aggressive tax planning,' Mr. Bullington said, according to a transcript of the deposition, taken by the North Carolina attorney general's office in July. 'And he ride herds [sic] on us all the time that we have the world's highest tax rate of any major company.'"

* "As Ernst & Young worked on its proposals, one high-ranking tax partner sent an email to a colleague addressing a concern often faced by companies: how to describe a tax-driven transaction in a way that won't create problems later on with tax authorities. 'You asked if we have a document that details how the tax savings will work, how much they will save....We really don't have anything like that except for the sales document, partly because we have avoided calling this a 'tax' project, to show that we did not have a tax savings motivation, rather it is a 'domestic restructuring' project,' he wrote."

* "After Wal-Mart hired the firm in 1996 to implement the REIT strategy, an Ernst & Young tax executive urged his team to be discreet, according to a staff memo included in North Carolina court records. 'We don't think there is much the state taxing authorities can do to mitigate these savings to Wal-Mart, however some states might attempt something if they had advance notification,' he wrote. 'We think the best course of action is to keep the project relatively quiet....there just seems to be too many opportunities for it to get out to the press or financial community and we all know they are difficult to control, particularly when we are dealing with a client as well-known as Wal-Mart.'"

***

http://wal-martwatch.c.topica.com/maain5vabCaE4clcCMTb/

Inside Wal-Mart's Bid To Slash State Taxes
Ernst & Young Devises Complex Strategies; California Pushes Back

By JESSE DRUCKER
October 23, 2007; Page A1

In May 2001, Wal-Mart Stores Inc. issued an appeal to big accounting firms: Find us creative new ways to cut our state tax bills.

Ernst & Young LLP swung into action. Senior tax experts at the big accounting firm swapped ideas via email and in a series of meetings. At least one gathering, according to an internal Ernst & Young calendar, took place in Wal-Mart's headquarters in the "Tax Shelter Room."

Wal-Mart decided to hire Ernst & Young to help devise complex tax strategies to use in at least four big states. The accounting firm, for example, helped Wal-Mart take tax deductions in California for dividends it never actually paid. And in Texas, Ernst & Young advised, the giant retailer could exploit a wrinkle in the tax law involving limited partners from out-of-state -- a maneuver subsequently shut down by the state's legislature.

Big companies hardly ever discuss how outside accountants, lawyers and investment bankers help them cut their tax bills. But Ernst & Young's contributions to Wal-Mart's state-tax minimization project are outlined in a raft of documents filed in recent months in North Carolina state court, where the state's attorney general is challenging a Wal-Mart tax-cutting structure involving real-estate investment trusts. The material, which includes company emails and memos, provides a rare window into accountants' role in generating tax-reduction ideas at one major company.

Companies often assert that tax savings are simply happy byproducts of transactions pursued for other business reasons. But documents from the North Carolina case indicate that Wal-Mart, from the outset, had one primary purpose: cutting its state income taxes. Ernst & Young worked to fulfill that goal. In 2002, for example, the accounting firm delivered a 37-page proposal laying out a smorgasbord of 27 potential tax strategies, most tailored to a particular state's tax code. It described one of them as "a very aggressive strategy with considerable risk."

Lawmakers and law-enforcement officials have taken a keen interest in tax advice provided by the Big Four accounting firms and other consultants. In August, U.S. Senate investigators sent letters to at least 30 companies asking for details of potentially aggressive tax arrangements, including the names of tax professionals and law firms that advised on the deals. In May, four current and former Ernst & Young partners were indicted for their tax-shelter work. Two years ago, KPMG LLP agreed to pay $456 million to settle government charges that it promoted abusive shelters to individual taxpayers.

Publicly traded companies reduced their federal income taxes by about $12 billion in 2004 through potentially abusive tax transactions, according to Internal Revenue Service data. Some experts say companies save far more than that each year through elaborate tax-cutting maneuvers.

A Wal-Mart spokesman, citing ongoing litigation, declined to comment on any of the tax work by Ernst & Young, which also set up the tax maneuver that North Carolina has challenged. In court papers, Bentonville, Ark.-based Wal-Mart has said that some transactions implemented by Ernst & Young were intended to cut taxes, but also to more efficiently manage its real estate and potentially help raise capital. A spokesman for Ernst & Young says the tax deals for Wal-Mart "occurred years ago when such tax structures were not uncommon."

Tax-enforcement authorities often regard complex corporate transactions that serve no business purpose other than to reduce taxes to be improper tax shelters. In recent years, authorities have cracked down on cookie-cutter tax shelters mass marketed by accounting and law firms. But these days, it is common for advisers to help large companies such as Wal-Mart to develop individually tailored tax-cutting strategies, according to people who work on such deals.

Wal-Mart's 2001 letter to accounting firms got right to the point. It began: "Wal-Mart is requesting your proposal(s) for professional tax advice and related implementation services in connection with minimization of state income taxes in the following states: Arizona, California, Florida, Illinois, Indiana, Michigan, Minnesota, and Pennsylvania."

State income-tax rates for corporations average about 6.9%, and come on top of a federal statutory rate of 35%. Tax rates vary from state to state, and some states have no corporate tax at all on certain income. That provides ample opportunity for so-called tax arbitrage, in which companies allocate expenses and revenues between states in order to minimize taxes owed. That practice has been going on for decades. Some such strategies are perfectly legal. The government considers others to be abusive. States often try to crack down, but the tax-enforcement staffs of many states are smaller than the tax departments of some big companies.

Wal-Mart set aside about $526 million for state and local income taxes last year, not including its substantial property-tax bills, according to the company's financial reports. But its various state tax-cutting strategies seem to have had an impact. On average, Wal-Mart has paid taxes at a rate equal to about half of the average statutory state rate over the past decade, according to an analysis of the company's regulatory filings by Standard & Poor's Compustat.

Wal-Mart has switched state income-tax strategies several times over the past 15 years, coming up with new approaches as states attack existing ones, court records show. In the early 1990s, it employed an "intangibles holding company," a unit operating in tax-friendly Delaware into which it transferred ownership of its brand names such as Sam's Club. It then made payments to that unit for use of those brands, deducting them as expenses from its taxable income in other states, according to court records. That strategy fell out of favor after several states successfully challenged Wal-Mart and other companies in court over the maneuver.

About a decade ago, Wal-Mart adopted another approach, following advice from Ernst & Young. Wal-Mart transferred ownership of its stores to various in-house real-estate investment trusts. REITs pay no corporate income tax as long as they pay out at least 90% of their income to shareholders as dividends, which are usually taxed. Wal-Mart paid tax-deductible rent to those REITs. For one four-year period, the setup saved the retailer an estimated $230 million on its tax bill, even though the rent payments never left the company.

That strategy was the focus of a Wall Street Journal article in February4. Since then, at least six states, including New York, Illinois, Maryland and Rhode Island, have passed laws attempting to prohibit the maneuver, which also has been used by banks and other retailers such as AutoZone Inc. The practice is being challenged by tax authorities in at least four other states, court records show.

After Wal-Mart hired the firm in 1996 to implement the REIT strategy, an Ernst & Young tax executive urged his team to be discreet, according to a staff memo included in North Carolina court records. "We don't think there is much the state taxing authorities can do to mitigate these savings to Wal-Mart, however some states might attempt something if they had advance notification," he wrote. "We think the best course of action is to keep the project relatively quiet....there just seems to be too many opportunities for it to get out to the press or financial community and we all know they are difficult to control, particularly when we are dealing with a client as well-known as Wal-Mart."

David Bullington, Wal-Mart's vice president for tax policy, said in a deposition that he began feeling pressure to lower the company's effective tax rate after the current chief financial officer, Thomas Schoewe, was hired in 2000. Mr. Schoewe was familiar with "some very sophisticated and aggressive tax planning," Mr. Bullington said, according to a transcript of the deposition, taken by the North Carolina attorney general's office in July. "And he ride herds [sic] on us all the time that we have the world's highest tax rate of any major company."

Compared with many other large multinational companies, Wal-Mart has a small presence in foreign countries with low tax rates, reducing opportunities to shift income overseas for tax purposes.

The May 2001 invitation to provide advice came from Wal-Mart's then senior director for income tax, Wyman Atwell. Most of the states he named in the letter had provisions in their tax codes that prevented the REIT strategy from easily providing tax benefits, according to several people familiar with the matter.

In addition to advising Wal-Mart on tax issues, Ernst & Young served as its outside auditor, which meant that its accountants had to pass judgment on advice rendered by colleagues who did the tax work. That's permissible for accounting firms, so long as tax-consulting fees aren't contingent on a client's tax savings. Rules instituted in 2005 prohibit accounting firms from pitching certain types of "aggressive" tax structures to audit clients. An Ernst & Young spokesman said the work for Wal-Mart "complied fully with the independence rules at the time regarding tax advice provided to audit clients."

As Ernst & Young worked on its proposals, one high-ranking tax partner sent an email to a colleague addressing a concern often faced by companies: how to describe a tax-driven transaction in a way that won't create problems later on with tax authorities. "You asked if we have a document that details how the tax savings will work, how much they will save....We really don't have anything like that except for the sales document, partly because we have avoided calling this a 'tax' project, to show that we did not have a tax savings motivation, rather it is a 'domestic restructuring' project," he wrote.

That November, Ernst & Young sent Wal-Mart an "engagement letter" to confirm the scope of its work to cut the company's state tax burden. The letter said the accounting firm's fees would be at least $2.5 million, with potential additional fees to be determined later.

California was a key state for Ernst & Young's project. Its tax system is among the most stringent in the country. Many states only tax income from operations within their own borders -- called the separate-reporting method -- which makes it easier for companies to shift taxable income out of reach of tax authorities in those states. But "combined reporting" states such as California total up all profits of a company's domestic or world-wide operations, regardless of what state they're in, then allocate a portion of those profits to their states.

Ernst & Young dreamed up a novel way to sidestep combined-reporting requirements in California. It used an unusual type of dividend to transfer income from one subsidiary to another in such a way that the second unit wouldn't be taxed.

Here's how it worked: When REITs pay dividends to their shareholders, they can deduct those payments from their taxable income. The federal government permits REITs to take deductions for dividends before they're actually paid -- a provision intended to give them extra time to make payments. Such dividends are called "consent dividends" because the recipients must consent to record the unpaid dividends as taxable income.

Ernst & Young argued that California law permitted REITs to deduct such consent dividends, but that the state law didn't also require recipients of the consent dividends to count them as taxable income, according to one person who worked on the transactions. The accounting firm proposed a strategy in which the Wal-Mart REIT would claim a tax deduction for paying consent dividends to its parent, but the unit receiving the dividends wouldn't record them as income for tax purposes. The bottom line: Wal-Mart could reduce its taxable income in California by an amount equal to the total consent dividend payments it recorded, thereby cutting its tax bill.

Two years later, California's Franchise Tax Board, the state's income-tax agency, put the strategy on its list of "Abusive Tax Shelters." Wal-Mart's Mr. Bullington said in his deposition that California tax authorities have protested various tax benefits taken by the retailer since 1998. California also is in litigation with a big bank, City National Corp., over a similar strategy.

In Texas, Ernst & Young helped Wal-Mart set up a somewhat more common tax-cutting vehicle. Under Texas law at the time, a limited partner from out of state was exempt from Texas's corporate franchise tax. As a result, scores of companies, including Wal-Mart, reorganized their Texas operations into limited partnerships. The general partner, which was subject to state taxation, was typically a subsidiary based in Texas. But the limited partner, often owning as much as 99.9% of the entity, would be based in Delaware or another tax-friendly state. The result: up to 99.9% of the profits of the Texas operation would flow to that out-of-state limited partner, making that income tax-free.

Texas's state legislature eliminated that exemption when it revamped its tax laws earlier this year.

Wal-Mart also agreed to buy other complex tax shelters from Ernst & Young to cut taxes in Arizona and Michigan, the court documents show. One Ernst & Young document said Wal-Mart would cut its state income taxes by about $18 million, although that document didn't make clear the time period or the states included in that figure.

In August 2002, Ernst & Young proffered the new list of 27 additional tax-cutting approaches. It isn't clear if Wal-Mart adopted any of them. One of the proposals was accompanied by the following warning: "Note that in a 'post-Enron' environment and amidst the focus on 'tax haven' operations, this strategy is expected to get more scrutiny by the IRS, as well as some states."

As for Wal-Mart's "Tax Shelter Room," North Carolina officials asked Mr. Bullington about the odd name. In his deposition, the Wal-Mart vice president said the moniker was "a bit of a pun," stemming from the conference room's use by tax-department employees to conduct safety drills for natural disasters such as tornadoes.

Wal-Mart, he said, no longer has a room by that name.

Comments

Well, it's OK when Wal-Mart redistributes our wealth, isn't it? Taking from the pockets of the public to increase the earnings of the stockholders is part of the American Way.

Posted by: Roland-in-Waiting | October 23, 2007 12:34 PM

Does anybody here believe Wal-Mart is the only corporate giant that plots strategy to lower its tax obligation? I don't. That's not to say I approve of some of those strategies, however.

Having said that, I want to tell you about the woman who cleans my house (and several others) every week. She just left here, and later this afternoon, she'll report to work at her "real job," the one she's had at Wal-Mart for the past two years.

It's the best job she's EVER had, I often hear this poorly educated, low-skilled, native born Caucasian, single-parent mom with two kids telling my dear sweet sainted spouse. She's paid $10 an hour, and has at least the semblance of a health insurance plan for herself and her two kids. Her manager and supervisor work hard to provide flexibility in her hours so she can clean houses and still get in 35 to 39 hours at Wal-Mart every week.

Casting aside the disgruntled, whining employees that will ALWAYS be found at Wal-Mart and in every other American work place, my guess is that the great majority of the 1.9 million people who work for Wal-Mart would have stories to tell that are similar to my housekeeper's. To the best of my knowledge, nobody held a gun to the heads of theses workers. All of them applied for work at Wal-Mart, voluntarily, and probably feel blessed to have their job.

In 2005, Wal-Mart commissioned Global Insight to undertake an independent research effort to analyze the company's social and economic impact. The goal of that research was to independently and credibly document Wal-Mart's national and local impacts in terms of jobs, wages, prices, consumer buying power, productivity, and gross domestic product.

That report found that the existence of Wal-Mart between 1985 and 2004 resulted in a 3.1% cumulative reduction in consumer prices by 2004. This translated into consumer savings amounting to $263 billion in 2004-$895 per person and $2,330 per household.

During 2007, Wal-Mart asked Global Insight to update portions of this work. The new study, titled The Price Impact of Wal-Mart: An Update Through 2006, looks at Wal-Mart's cumulative price impact and total cost savings as of 2006.

The findings continue to support the claim that an economy without Wal-Mart would have meant higher prices for consumers. It also concludes that the reduction in the price level due to the presence of Wal-Mart translates directly into consumer savings amounting to $287 billion in 2006-$957 per person and $2,500 per household.

I guess that's why I see Wal-Mart's number one critic (my next door neighbor) in Wal-Mart with a basket full of merchandise every time I walk into the store. It's not like he doesn't have many other discount options in town that he could be shopping. Obviously, his critical mouth and his stingy wallet reside in different places.

Posted by: durangokid | October 23, 2007 12:42 PM

I used to work for Wal-Mart PR, and I would appreciate it if you gave me credit for writing those paragraphs about the Global Insight research.

Just kidding that it was me. But I did used to work for Big Corporate, and I funded studies to support my company, and I wrote crap just like that. But even in my wildest dreams (this being a few years back) I never considered that someone would repeat them ad infinitum in the blogosphere.

ANY study conducted by Wal-Mart, it being a corporation in the business of making a profit, is done for ONE thing: to increase Wal-Mart's profit.

Posted by: Roland-in-Waiting | October 23, 2007 12:54 PM

Then having had experience with crap studies of this kind, Roland, perhaps you can fund or produce some crap that refutes the crap above. Here's something else I'll repeat ad infinitum for the entertainment of the blogosphere:

Wal-Mart: Sales Growth Will Slow for Next 3 Years
By The Associated Press
10/23/2007 11:40:33 AM

Wal-Mart Stores Inc. of Bentonville said Tuesday that it expects slower sales growth over the next three years and it also plans to spend less on new stores and to lower other costs.

Chief Financial Officer Tom Schoewe told investors and analysts at a conference that sales growth will slow this fiscal year to 9 percent from nearly 12 percent the year before and then be between 5 and 8 percent the next two years. Wal-Mart's fiscal year runs through January.

Schoewe said Wal-Mart is focused on using the tremendous cash flow generated by its U.S. and international stores more efficiently, including building fewer giant Supercenter stores and managing corporate costs better.

Wal-Mart's annual square footage growth will decline from 8.8 percent last year to around 6 percent this year and between 5 and 6 percent in the next two years, Schoewe said.

In terms of Supercenters, the flagship of Wal-Mart's U.S. business, Schoewe said the retailer will build around 190 to 200 this year and about 170 a year in the future, compared to a historical standard of around 280 a year.

Posted by: durangokid | October 23, 2007 01:09 PM

"..too many opportunities for it to get out to the press or financial community and we all know they are difficult to control..."

Not impossible to control, just difficult.

Posted by: eLwood | October 23, 2007 01:09 PM

durang,
When we see an "impact statement" on the number of good paying American manufacturing jobs WM has outsourced, the subsequent reduction in the standard of living resulting from good job loss then I will buy into your fluffy report.

All that report is saying is don't regulate or tax us. Their mission is profit. Nothing more, nothing less.

Posted by: eLwood | October 23, 2007 01:18 PM

Well stated, durango.

"I used to work for Wal-Mart PR, and I would appreciate it if you gave me credit for writing those paragraphs about the Global Insight research.

Posted by: Roland-in-Waiting [TypeKey Profile Page] | October 23, 2007 12:54 PM"

I dare you to make your claims public, roland. I'm sure Max would be ecstatic to print your claims. If you helped fabricate claims, it shouldn't be difficult to prove. Michael Moore will make a movie about your bravery. I bet you won't because you're probably lying.

Posted by: Anonymous | October 23, 2007 02:55 PM

eLwood, the only report I'd like you to buy into is my housekeeper's fluffy report that Wal-Mart has given her the best job she's ever had. Her standard of living has never been so high. She actually bought an $80,000 house last spring. Yes, there are actually people like this. I'm happy for her if nobody else is.

Of course, Wal-Mart's mission is profit. And saving every tax dollar it can, just like every other corporation. Tell us something we don't know. I hate the outsourcing, too, and as I stated in the opening paragraph of the first post, don't care for the tax-saving strategies, either.

But what are guys like you and me gonna do about it, except blogbitch endlessly on, and depend on Hillary and Miss Blank and Mark to come to the rescue (wink, wink). Ross Perot warned us about outsourcing and the sucking sound that goes with it. That's why I voted for him way back when (no wink, no wink).

Posted by: durangokid | October 23, 2007 02:58 PM

I'm thrilled for your housekeeper, Durango. I also cringe for her since her house payments probably devour half her take-home pay from Wal Mart. I can see why she has to clean houses to make ends meet -- not that it's necessarily a bad thing. As long as she can feed and clothe her kids, keep her car filled with gas and make ends meet, and she doesn't get sick or have an accident or experience any of the millions of mishaps that can befall anyone, that's great, but it's also neither here nor there.
It may also be the best job she ever had but that doesn't make it a great job. The flexibilty of her supervisors is a large part of the equation. Not all are like that, at Wal-Mart or anywhere else.
You said she has "at least the semblance of a health insurance plan for herself and her two kids." That "semblance" translates to piss poor unless she can afford the premiums for the better plans.
But your statement that W-M saves the average shopper $957 a year, or the average household $2500? Pure BS.
The individual savings figure you quoted would average nearly $20 a week. Think about it. If a person spent a $100 at W-M, she would spend $120 somewhere else? Not that I can see, and locally I'm limited to Wal-Mart as a "discounter". There is some variation in prices but overall the averages are about the same, except that I stock up on groceries when a store has a sale -- ten pounds of fryer breasts when they are 99 cents a pound for example. Wal-Mart doesn't have such sales, not around here at least.
If such "savings" are available, perhaps you can give me specifics of the Wal-Mart comparisons. Seems to me that part of the comparisons might be to such places are the local convenience store. That's the only way the 20% figure makes sense. Until I see those specifics, I remind you of this saying: "There are lies, damned lies and statistics."

Posted by: Doigotta | October 23, 2007 07:43 PM

"But your statement that W-M saves the average shopper $957 a year, or the average household $2500? Pure BS." -- Diogotta

Not my statement, lady friend. That statement is from Global Insights. Your quarrel is with them, not me. Perhaps you can disprove their numbers. I cannot. As for Wal-Mart price comparisons, I know this sounds terrible, but I have no idea what things cost there or anywhere else. I just swipe the card, sign the ticket, and get the hell out of the stores as fast as I can. I enter stores only when sent there by you-know-who.

Last I heard, the housekeeper takes in a little over $500 from her domestic most weeks. I believe she told the sainted one that her house payment is about $560 a month, so she seems safe, at least for now. Like you, I hope she has no illness or other major disruptions in her back-breaking work load.

Her health insurance: "piss poor" by your and my standards, perhaps, but far better than the 45-47 million Americans who have no insurance at all.

Posted by: durangokid | October 23, 2007 09:21 PM

The estimate was based on how much less consumers on the whole have to spend because Wal-Mart has driven prices down even at other stores, which is obviously true if you remember how revolutionary discounting is compared to what it replaced.

Posted by: Anonymous | October 23, 2007 10:33 PM

WalMart's Property Tax dodging in Texas may have already been covered, sorry if i missed it..but here is article from Ft Worth Star Telegram a few weeks ago:
Study: Wal-Mart aggressively fights tax assessments
By BARRY SHLACHTER
Star-Telegram Staff Writer
Correction: Wal-Mart saved about $420,000 in property taxes on its distribution center in Cleburne after it protested preliminary appraisals from 2003 to 2005. The company also saved about $200,000 in taxes for a Supercenter on Clifford Street in Fort Worth after protesting appraisals in 2006 and 2007. The savings were detailed in a report by Good Jobs First, a research group, but they were challenged in this article by county appraisers. The appraisers now say that upon further review, the numbers are accurate.

A study released Wednesday by a nonprofit research group describes Wal-Mart as aggressively and persistently challenging property-tax assessments across the country -- after winning permission to build sprawling supercenters by arguing that they would enhance a local community's economy.

"Our findings ... suggest that the company treats property taxes the same way it treats suppliers and workers," the Washington-based Good Jobs First report said. "But in this case, entire communities are affected."

Texas tax appraisers randomly contacted said Wal-Mart might have been very hard-nosed 15 years ago but said they wouldn't rank it among the national retail chains most eager to carry a tax dispute to court. Wal-Mart itself called the report misleading and flawed.

Greg LeRoy, executive director of Good Jobs First, said in a teleconference with reporters that a random sampling of 10 percent of Wal-Mart supercenters and all of its distribution centers did not attempt to prove that the nation's largest retailer was more aggressive than competitors. But the Bentonville, Ark.-based chain's impact is more significant because it is so much bigger than its nearest rival, he said.

The report singled out Texas as a major focus of Wal-Mart's attention because it is the chain's biggest domestic market. Protests were filed for 83 percent of its stores, the highest percentage in the country, the group said.

And Tarrant County "accounts for a disproportionately large share of the total tax savings" -- $2.4 million of $6.3 million in reductions in Texas from 2003 through 2007, it added.

The group estimated that Wal-Mart, which has annual revenues of $350 billion, saved $30 million a year with its appraisal protests -- or $40,000 per store -- and is successful only about half the time. But Philip Mattera, the research director, speculated that the company might be trying to show local appraisers just how tough they are, creating a deterrent against future large appraisal increases.

Report questioned

Wal-Mart spokesman John Simley called the report misleading and riddled with errors. Several tax appraisers contacted across Texas said the mammoth retailer could be aggressive but no more than other national chains.

"The main charge is that we have a systematic policy challenging assessments," Simley said. "We do not. We do review our assessments every year. It's just good business. We have a duty to challenge assessments that are incorrect by applying standard methodology. And in many cases we are right."

He also said it was troubling that Good Jobs First did not disclose who funded the story. LeRoy said a charitable foundation that was neither connected to unions nor rival retailers provided underwriting on condition that it be kept anonymous.

Expected challenges

John Marshall, Tarrant County's chief appraiser, said the findings presented on some stores were incorrect, claiming that appraisals were lowered when they were not. In one case, a store on Clifford Street had not been completed the year Good Jobs First said the value was reduced.

Moreover, Marshall said, it would be wrong to say Wal-Mart stood out as pushier when challenging a tax appraisal than other retailers.

"They do come in and argue -- like everybody," he said. "Other than mom-and-pop convenience stores, almost all commercial property appraisals are challenged every year, either by in-house tax agents or outside consultants. Wal-Mart is not overly aggressive. They bring in data about comparable stores they want to be equalized. We haven't found them to be unreasonable.

"Sears and Home Depot are much more aggressive and dogmatic than Wal-Mart," he added. Other appraisers cited Walgreens and J.C. Penney as chains that regularly appeal.

Questioning the numbers

Good Jobs First said that Wal-Mart's distribution center in Cleburne saved $419,000 from 2003 to 2007 after protesting.

But Jim Hudspeth, Johnson County's chief appraiser, said there was no Wal-Mart protest other than a technical filing over the scheduling of an appointment.

Moreover, the tax appraisal went up every year from 2003 though 2006, until dropping the next year over a decline in inventory value -- without an appeal from Wal-Mart. Hudspeth suggested that the study might have mistaken a drop in the school-tax rate that saved the chain about $400,000.

A consulting firm that handles appraisals for small counties said there's been less court action from Wal-Mart.

"They're not as aggressive as they used to be," said Dennis Deeger of Austin-based Capital Appraiser Group, which appraises Wal-Mart distribution centers on behalf of smaller counties, then handles protests.

"They are proactive, but we can't take offense at that," Deeger said. "About 15 years ago, they took me to court in Palestine, not since. They are probably a bit more aggressive than AutoZone, but there's nothing wrong with a taxpayer, whether it's a homeowner or a chain, doing it. Even litigating is their right."

Standard procedure

In Kaufman County, the appraiser finds little difference between the chains.

"I expect to hear from Wal-Mart, have protests from them," said Richard Mohundro, the county's chief appraiser. "Pretty much all of these big-box people either have a good in-house staff or hire agents who are very motivated to get the value down. For instance, with Brookshires [supermarkets], I get a protest every year, and we sit down and haggle every year on their three stores, and that's the way it is."

Barry Shlachter, 817-390-7718
bshlacther@star-telegram.

Posted by: Sanford | October 23, 2007 10:48 PM

Nothing wrong with paying less tax as long as you do it legally.

Property tax, income tax, whatever,

Seems like corporate executives like to relocate to Texas or Florida before they cash in their chips. If you had a $2M or more bonanza coming your way, wouldn't you consider saving $100,000 or more in state tax by moving to your vacation home in Destin or Dallas or someplace like that?

Posted by: Don Keyhotay | October 23, 2007 11:11 PM

That's the way it is up here Donkey. B4 Tyson, Hunt or WM exec's bail out they're suddenly from Texas. Last time I checked it required 3 days to become a resident of Texas.
Sales tax there is a bitch.

Posted by: eLwood | October 24, 2007 12:44 AM

I hate to burst your bubble Max, but the rich pay far, far, far more taxes then the poor.

Top 5% pay 53.25% of all income taxes. The top 10% pay 64.89%. The top 25% pay 82.9%. The top 50% pay 96.03%. The bottom 50%? They pay a paltry 3.97% of all income taxes. The top 1% is paying more than ten times the federal income taxes than the bottom 50%!

Posted by: mpan18 | October 24, 2007 11:08 AM

mpan18: Here now, lets not be poking holes in these bubblicious feel-good arguments by citing facts.

Posted by: Don Keyhotay | October 24, 2007 05:15 PM

I apologize. I repeatedly overlooked the word "cumulative" in my road to ranting last night. Apparently the figures relate to years 1985 through 2006 for a cumulative savings over those years of $957 -- $46 bucks a year.
I won't quibble with that figure. Maybe it's a reasonable claim. Note, however, my earlier comment regarding statistics.
In any case, I still have to question whether or not Wal-Mart's crushing of local businesses is worth $47 a year. And yes, I must admit my part in the Wal-Mart revolution. I was as rabid a "saver" of money as anyone. Far later than I should have, I realized that if you are spending money, you are not saving money. Housing, utilities, food, a few other essentials -- OK. Another plastic toy or a new pretty that hits the garbage can in a few months -- dumb.

Don't know about your neck of the woods, eLwood, but various combined state and local sales taxes around Pine Bluff are at 11% or more. That's pretty hefty compared to Texas' combined sales taxes limited to 8.25% last time I checked.

Posted by: Doigotta | October 24, 2007 07:29 PM

I have read a post about Wal Mart (in Spanish) that is very useful to understand the all thing: The title is "Wal-Mart, square dumping": http://crisiscapitalista.blogspot.com/2008/04/walt-mart-el-modelo.html

Posted by: Enrique | July 2, 2008 11:12 AM

Arkansas Blog

Wal-Mart's tax dodge

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