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IRS going after companies for ‘stateless income taxes

If the Internal Revenue Service gets their way, the way that multinational corporate giants like Apple and Google pay taxes will be changing dramatically. IRS Deputy Chief Counsel Erik Corwin spoke at a gathering of tax attorneys in the nation’s capital recently, and pointed out the currently legal process by which some corporate entities are taking advantage of ambiguities in the law to avoid payment of taxes on profits to any country.  

Corwin spoke of the difficulty in enforcing tax liabilities for companies that structure themselves in such a way as to either create “stateless income” (income/profits which are not taxed) or end up with a “tax efficient repatriation.” Corwin noted, though, that these businesses are not breaking any laws, just taking advantage of loopholes that exist in the nation’s tax laws

Legal pundits and tax experts interpreting Corwin’s remarks think that he is setting the stage for a new IRS approach to the issue of stateless income and the way in which the IRS collects taxes on American corporations doing business overseas. Most posit that Corwin’s speech is the result of government (and taxpayer) outrage at the findings of the Senate Permanent Subcommittee on Investigations about the impact stateless income has on the U.S. economy.

The Subcommittee found that Apple alone avoided more than $9 billion in federal taxes in 2012 alone by taking advantage of tax loopholes. Furthermore, American companies currently have roughly $1.5 trillion worth of profits sheltered in foreign banking institutions to avoid tax liability. With the U.S. economy still in “recovery mode” following the “great recession” of the past several years, it is more important than ever before that the country collect taxes due by corporations, particularly those that don’t use legal tax advantages to create American jobs.   

Source: Reuters News, “IRS Pursuing Crackdown on ‘Stateless Income’ Tax Loophole,” Patrick Temple-West, July 24, 2013. 

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