A recent article published in the New York Times, highlights how Apple is taking advantage of Nevada’s 0% corporate tax rate.
Apple has created a subsidiary for their $100 billion in cash that invests in bonds and other low risk financial instruments. All the interest earned, $2.5 billion since 2006, has been shielded from state income tax because it is a Nevada subsidiary. By creating this Nevada subsidiary, Apple has saved $221 million by not having to pay California’s onerous 8.84% corporate tax. There are many other technology corporations headquartered in California that have billions in cash that could do the same as Apple. Cisco Systems Inc. has over $35 billion in investments, Google $34 billion, and Intel $5 billion just to name a few. These corporations could save millions of dollars each year if they would just relocate some employees to Nevada a couple hundred miles away and shield their investment income from California state tax.
I have always lamented over how Nevada doesn’t get more businesses to relocate here when there is no corporate and personal income tax as well as low property taxes compared to say Texas, another state with no income tax. More motivation should be that home prices are significantly lower in all parts of Nevada compared to California. Sure, our school systems have extremely low graduation rates, but when it comes to saving millions of dollars, money trumps all. Corporate CEOs and their employees should gladly move to our great state at the prospect of saving millions of dollars personally and for their businesses.
I’m sure tax savings, in addition to savings from cheaper land, labor and electricity, was a factor in this decision. I’m guessing Apple’s income from ITunes and portions of their business is now being sourced in Nevada, potentially saving millions a year in future taxes. Let’s hope this is the start of a trend of companies wising up to the high costs of doing business in California!
As a member of the class of 2012 Leadership Reno/Sparks, I invite you to join us for a fund-raising event benefitting the Sparks Senior Center.
Come join us for a great opportunity to appreciate the offerings of two of Reno’s most popular riverfront businesses while supporting the community.
Each year, as part of the program, the Leadership Reno Sparks class adopts a project in support of community members in need. The 2012’s class project is to make physical improvements to the Sparks Senior Citizens Center. The class is providing the planning and physical labor for the remodel and is hosting a fundraiser to help cover the costs. Come enjoy the summer weather on the riverfront and enjoy the delicious offerings of Campo and the Ole Bridge Pub. The cost is $30, and you will enjoy appetizers, specialty drinks and cocktails, a silent auction, and raffle prizes.Thursday, June 28th 5:00pm to 8:00pm Campo & Ole Bridge Pub, 50 North Sierra Street Click HERE to register
Leadership Reno Sparks is an annual program offered by the Reno-Sparks-Northern Nevada Chamber of Commerce. It is one of three programs offered by the Chamber to help foster and develop leaders in our community.
The mission of Leadership Reno Sparks is to “identity and develop current and future leaders though a comprehensive program designed to increase knowledge and awareness of the issues and challenges facing this community.” The program prides itself on the quality and diversity of its members who are committed to improving our community through education, awareness, and involvement.
As I’m staring at an article in Business Week, I keep searching for the article to explain why my company wants to pay for something we already have. The “cloud” is by definition just a network of computers and the reason they came up with the name is because of the original diagram shape of the internet (a cloud). In the cloud are networks, applications, data, servers, etc…the usual stuff, which I already have.
Supposedly there are armed guards guarding these database centers where your cloud is located. Ok, that’s a step up from the glass windows and wooden doors at the office. Security covered.
The expertise consists of IT managers making sure you get the right amount of speed and continuous accessibility of your information.
The opportunity costs could add up. As accountants, we think of everything to make the cloud have superior cost effectiveness over a server. The cost of the server, say $5,000-$10,000 a year depending if you buy a new one, the IT personnel hired, the relevant costs of your business growing out of your current server, the rent space, carrying costs and the electricity overhead of the server.
But in order to take advantage of these opportunity costs you would have to do a lot of service analysis. How much accessibility will you need? When will your accessibility needs change? What services do you require? In accounting there’s busy season and then there’s really busy season, so calling up the cloud and saying you are going to increase your accessibility requirements and pay more the next couple of months isn’t the easiest estimate. If estimating sales variability and growth at the drop of a hat were that easy then we’d all be working alongside guys named Professor X and Obi-Wan Kenobi.
The cloud is having all your information online, in real time, freely secure and accessible all within reach. But that distance is only as far as your nearest wi-fi connection, and that’s what it truly boils down to. Sure wi-fi and Internet hot spots are popping up exponentially but they just aren’t everywhere yet. Until they do I look forward to the days without a cloud in the sky.
So you think you have financial issues? Just listen to what Nina Olson, National Taxpayer Advocate, has to say about the IRS. In her annual report to Congress she suggested that the IRS’s increasing workload and declining resources are the most serious problems facing taxpayers. So how does she connect the dots to conclude that this is a “taxpayer” problem?
She reasons that the resulting inadequate taxpayer service, erosion of taxpayer rights and reduced taxpayer compliance are causing harm to the taxpayers. That’s how! I don’t know. Seems to me like an IRS problem rather than a taxpayer problem. But, then again, doesn’t the taxpayer always get stuck with the tab?
But wait. Maybe there is a solution that doesn’t stick the taxpayer with the bill. It turns out that increasing funding for the IRS might actually be a good investment. Current inadequate funding contributes to many of the problems facing today’s IRS. When the federal individual income tax was first enacted in 1913, it applied only to high-income taxpayers, which totaled about 358,000 people. That total today stands at 141.2 million with one tax return for about every two people in the United States. And believe me, the returns are a lot more complicated now than they were almost 100 years ago.
It seems that as the collection agency for the U.S. government, the IRS does a pretty good job. On a budget of $12.1 billion, the IRS collected $2.42 trillion in fiscal year 2011. That is to say that for every $1 that Congress appropriated for the IRS, it collected about $200. Now with the current “tax gap” at about 15%, every household is paying an annual “noncompliance surtax” of about $2,700 to enable the federal government to raise the same amount of money it would have collected if all taxpayers had reported their income and paid their taxes in full.
While I doubt that appropriating an extra $1 would produce the same collection rate when applied to the last 15% of noncompliance, I’ll bet it would provide an attractive return on the investment.