"In a time of great need, when our families and our nation are finding it necessary to tighten our belts, and be more responsible with how we spend our money, we can’t afford to waste taxpayer dollars. And we especially can’t afford to let companies game the system."
N.C. Tax Negotiations Yield $427 million, End Business Disputes
N.C. Tax Collectors brought in a Christmas bonus of $427million for the state in December.
That's how much the N.C. Department of Revenue recouped through a program aimed at settling tax disputes with corporations and businesses. The agency estimated it could bring in $150 million when it started the program in August but ended up with an extra $277 million beyond what was factored into the state budget.
"It couldn't have come at a better time," Revenue Secretary Ken Lay said.
The bonus collections will more than wipe out what was a shortfall of $110million at the end of November, compared to projections.
But the good news may not linger. Barry Boardman, the legislature's chief economist, said revenues in December still appear to fall behind what was budgeted.
"I'm not seeing any big turn toward the positive," Boardman said.
The Revenue Department last summer started the corporate tax resolution program. It included waiving penalties for those who settled and 400 corporate taxpayers who were disputing their tax bills. Of those, 300 tried the program, and 236 cases were settled by Dec. 15. Some cases were new; some covered more than a decade.
"We kind of exceeded our wildest dreams," said Linda Millsaps, the department's chief operating officer.
The agency targeted businesses whose disputes involved the state franchise tax, tax reporting for multiple components of the same company and credit card companies contesting how much of their operation was in North Carolina.
Officials said they could not name the corporations involved because state law prohibits departmental disclosure of taxpayer information. Those that chose not to participate remain in the normal dispute resolution process. .
Lay described the negotiations as a business-to-business dialogue in which each side offered its view of the tax debt and the evidence to back it up. A few companies got a tax refund.
The credit card company disputes involved whether the companies maintained enough of a presence in North Carolina to pay state tax, such as offering a credit card in the name of a North Carolina company. Some cases involved the franchise tax, a tax on what a company is worth as opposed to what it makes, and what should be counted toward that value.
Other cases centered on "combined reporting," and whether a company's various appendages can pay taxes separately or whether it has to file as one corporation. Wal-Mart is among the companies that have fought North Carolina in the courts over combined reporting. Officials would not say whether Wal-Mart was among those who settled.
The department did not start out with a grand total of what it thought the companies should pay and bargained down to the $427 million, Lay said. The discussions focused on the method of tax that was in dispute instead of the dollar figure - the rules of the game, rather than the points.
An incentive for the companies was that they didn't just settle a money dispute, they reached an agreement on the guidelines for paying future taxes. The Revenue Department doesn't have to expend the resources to fight legal battles over dozens of tax bills.
"The corporations win," Lay said, "and we win."
Individual taxpayers who don't have a corporation's bullpen of lawyers may wonder why they don't get a chance to settle quarrels over their tax bills.
They do, Lay and Millsaps said. The agency operates several programs that offer individuals the opportunity to settle their tax disputes. The programs typically require that the applicants have a history of paying their taxes.
"I don't know that they're doing anything different (for businesses)," said Elaine Mejia, director of the N.C. Budget & Tax Center, which advocates on behalf of low income families.
Lay said individual taxpayers should not feel they have been "left out in the cold."
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Sources: Politico, WRAL, wraMcClatchy Newspapers, Charlotte Observer, Google Maps
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