Verizon, AT&T, Target & More Supposedly Running 'Sham' Offices to Dodge Taxes
The Regional Transportation Authority of Chicago recently went public accusing several large corporations of operating fake offices in two small northern Illinois communities in order to avoid paying millions of dollars in taxes to Chicago and Cook County. The most surprising thing about this story is the companies that have been named. They aren't the typical small to medium businesses you would expect, but are actually major US corporations like AT&T, Verizon, Land’s End, Target, Sears Holding and Southwest Airlines.
Here's a quote with more of the details,
It's important to note that these companies are not being accused of doing anything illegal, just abusing the tax system. The real legal fight is between the RTA and the small communities that created these "tax shelter" agreements in the first place. Here's a quote explaining a bit further,
The Regional Transportation Authority released the names of companies or their subsidiaries that it contends have dozens of small offices in Kankakee and Channahon — some upstairs from a cash for gold business and a hair braiding shop — where it says little if any work is done and often nobody so much as answers a knock on the door. And in many cases, according to the RTA, there are no signs on the street or office directories in the buildings that identify these companies as tenants.
"Whatever work they are doing is just enough to create a sham office in order for these sales transactions to be cited to these cities," said Jordan Matyas, the RTA's chief of staff. "In some places you have 20 companies procuring millions of dollars in goods from these offices where there is minimal staff doing minimal work."
The release of the names Wednesday is the latest chapter in a legal battle between the RTA and small communities over tax incentive programs that the agency characterizes as a scam and the communities defend as sound and legal strategies that provide funds they desperately need to provide city services.
The communities say their tax incentive programs are a perfectly legal way to take advantage of the fact that their sales tax rates are lower than those in and around Chicago.
"They have higher taxes and they're blaming us," said Kankakee's assistant city attorney, L. Patrick Power.
Some companies the RTA names, including AT&T, Sears Holdings Corp., and Verizon said they have done nothing wrong and are following Illinois tax laws.
While many of us are probably not surprised to hear a story like this, it is still disconcerting to think some of our biggest US companies can be this shady. Of course, the flip-side argument is that maybe the RTA's tax fees are too high and should be re-evaluated, but not enough info was given in the source of the article to speculate further.
The RTA, which relies on sales tax revenues for much of its funding to oversee three Chicago-area mass transit agencies that provide more than 2 million rides a day, said it needs the money to keep the trains and buses running. The agency also said it is entitled to the funds because the arrangements between Channahon, Kankakee and Sycamore amount to little more than an effort to dodge taxes.
What do you guys think? Is this just business as usual, or something underhanded that should be punished or at least corrected?