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April 16, 2015 08:51 AM UTC

Fighting Overseas Tax Havens to Help Colorado's Schools

  • 9 Comments
  • by: Jason Salzman

(Promoted by Colorado Pols)

overseas

It’s gotten to the point where everyone in Colorado wants politicians to find a way, somehow, to tax the money big corporations hide to avoid paying taxes, and then to use the tax revenue from these hidden profits on education. Okay, not everyone wants this but, seriously, most of us do.

But how to do it in a way that’s got a prayer of untying the knot of legal restrictions (TABOR) and divided government?

Democrats in the state legislature may have hit on a way to get this done.

Standing inside the Capitol on the eve of Tax Day, state lawmakers unveiled legislation that would stop Colorado corporations from hiding profits in overseas tax havens, like the Cayman Islands. Closing this tax loophole would generate a tidy $150 million in tax revenue annually that would go to education.

“There are some corporations that don’t pay their taxes, like the rest of us do,” said Rep. Mike Foote at the April 14 news conference, as you can see in a Denver Business Journal video here.

“They do get a chance to use our roads, to take advantage of educated folks to work in their businesses, courts for dispute resolution and so forth. But they don’t pay for the use. It’s not fair to the state of Colorado. It’s not fair to the rest of us. And this bill will address that lack of fairness by closing loopholes that some corporations use by funneling their money offshore in order not to have to pay taxes on it.”

The bill, sponsored by Foote and Rep. Brittany Pettersen of Lakewood, would not only have to clear the legislature but also be approved by voters in November. So it has a long way to go.

But similar bills became law in Montana and Oregon, picking up bipartisan support along the way, according to the bill’s sponsors.

So you’d think a bill like this would have a chance here in Colorado, where the public is overwhelmingly in favor of such measures, according to a polls.

The Denver Post’s Joey Bunch reported that the legislation is opposed by The Colorado Association of Commerce and Industry:

“We understand the intent to eliminate the shifting of income to tax havens to avoid Colorado taxes,” said Loren Furman, CACI’s senior vice president for state and federal relations. “But, there are many instances where legitimate business is conducted in these countries, and that income may not have been subject to Colorado tax.

It’s really hard to see why this is a concern, given that the focus is collecting taxes from normal business operations, especially if you look at how the bill would work. Ed Sealover at the Denver Business Journal explained:

Colorado law currently requires companies doing business here to pay taxes on the portion of national income that the corporation generates in this state. But that equation gets more complicated with companies that off-shore some of their business by setting up subsidiaries in tax-friendly countries, transferring intellectual properties to those subsidiaries and have the subsidiaries sell that property — such as, say, a logo — back to the main corporation for a cost that sometimes can be as large as the overall profit that corporation makes in the U.S., Foote said.

HB 1346 would force those companies to combine their offshore income with their American income to determine the amount of taxes they must pay to Colorado, a change that could raise another $100 million to $150 million for the state, Pettersen said. If it passes, the bill then would authorize a statewide ballot initiative seeking to keep money coming in from that source and put it to the State Education Fund rather than be forced to refund it to voters for being in excess of the revenue cap imposed on the state by the Taxpayer’s Bill of Rights.

So will people believe The Colorado Association of Commerce and Industry? Or will they believe Pettersen when she says, “Big corporations shouldn’t leave the rest of us on the hook because they know how to game the system and avoid paying their fair share.”

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9 thoughts on “Fighting Overseas Tax Havens to Help Colorado’s Schools”

  2. CACI’s right — the amount of non-banking wholesale and retail trade between Colorado corporations and the Cayman Islands has got to be at least $1.95!  

    Thus this legislation is just another attempt by big govenment libs to reach into the pockets of honest, hardworking CEO’s just trying to make a buck or a billion!

    Moddy, you’re welcome 😉

    2. …and in the other corner Mark Hillman ran a guest editorial in The Wray Gazette last week blaming ObamaCare for destroying our public school funding.  Who’d have thunk? Shouldn’t that be a reason for Repubs to celebrate O-Care?  (I can’t link to the Gazette article as they don’t offer a digital version, but the editorial is also on Mark’s homepage linked above).

      I understand math so I understand why the state party let’s these kinds of weekly guest columns go unchecked.  But, there is a great story to be told that never meets the printed page in the 51st state. 

  3. And this is why we can’t have nice toys, and why tax codes suck – because some people spend too much time trying to circumvent their societal duty.

    A good effort, and one that tries to mimic other state’s statutes in order to make it a bit easier on compliance. But it doesn’t cover all tax haven situations, only those havens where obscurity is king. As noted, some corporations pay large royalties to their overseas subsidiaries for Intellectual Property, and then shelter that income from taxation by hosting those subsidiaries in low tax countries; Apple’s arrangement with a subsidiary in Ireland has been the most prominent recent example, and Ireland is not listed as a tax haven (because it has decent disclosure?). Hopefully arrangements like theirs would be covered under the “included corporations” provisions of the bill instead…

  4. Yet these august bodies( state legislatures)  slather over skipped internet sales tax avoided, ( REGRESSIVE ) by on line purchases

    This country began with centuries of tariffs.

    Ireland was a repository of multi national shift of profits, Apple, Microsoft ( & and was held up as a model of free trade) until the locals got wise and began undoing the damage.

    1. thought I’d better provide link to rant from memory in case anyone cares… (Ireland)

      Among the most criticized parts of the Irish tax code is a complex corporate structure whereby a multinational can channel untaxed revenues to an Irish subsidiary, which then pays the money to another company registered in Ireland that is tax resident elsewhere — usually in a tax haven such as Bermuda.

  5. Noble Energy Gives Itself a 7.7 Million Tax Break

    Tax day is coming. Wouldn’t you love to be able to “suggest” your own tax payment? For example, if you owed $ 73 million, and you felt like, hey, 65 million would be easier on your wallet, wouldn’t it be nice if you had friendly county commissioners who would just let you set your own tax rate? Noble Energy has just such a sweetheart deal with the Weld County Commissioners. In 2012, which was still at the height of the oil and gas boom in Greeley, they owed 73.3 million in taxes. 

    However, since they are only now paying the taxes, and oil and gas revenues have gone down, they feel like maybe they should only pay about 66 million. So the reduction is NOT due to reduced gas prices for the fiscal year 2011-2012

     This will be a terrible blow for AIMS Community College and several other entities in the Weld county area….AIMs will lose almost a million dollars in revenue, which will come out of its funds available for this year’s students. Noble also has an abysmal safety record –. Noble equipment caused 4 of the 10 most recent oil and gas spills in the last two weeks.

    Taxpayers will “absorb” the health costs of those leaks. No relief in sight for us, though.

    Greeley Tribune April 14, 2015 Trenton Sperry, reporter. 

    This almost made it to a diary – but will post here to get it up close to tax day and tax topics.

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