A Boulder Democrat has filed a bill that would close a loophole in the state's tax code allowing large corporations to conceal transactions aimed at evading tax liability.
The measure, sponsored by Rep. Claire Levy, is a response to the use of real estate investment trusts to transfer money overseas without paying income taxes on it.
Levy pointed to misuse of the REIT device by several large corporations during a news conference announcing her bill today.
“These companies are abusing the public trust,” Levy said. “By sending their Colorado profits overseas and back through a series of shell corporations, they avoid paying their fair share of taxes. This bill is a way to create transparency. It permits the Department of Revenue to look at corporate transactions and make sure they have real economic purposes and are not intended only to avoid or reduce tax liability."
According to a recent Wall Street Journal report the Wal-Mart Corporation used REIT loopholes in state tax codes to avoid paying more than $350 million in state taxes between 1998 and 2001.
The real estate investment trust used by Wal-Mart and other companies to shield profit from state taxes is called a "captive" real estate trust because it is totally owned by one entity and/or executives or other organizations affiliated with that entity.
Traditional real estate investment trusts, which are authorized by the federal income tax code as a means for small investors to pool money to make large-capital real estate investments, are not affected by Levy's bill.
Levy also pointed out that her bill will not raise any state tax rate.
“This bill does not create a new tax," she said. "These are taxes that are rightfully owed. The people of Colorado pay taxes; so should corporations.”
A press release issued by the House Democratic Caucus said Levy's measure "implements the long-standing policy in Colorado that corporate profits earned in the state are subject to state tax."