SACRAMENTO, CA – Consumer Watchdog today called on state and local governments to quit spending taxpayer millions on Scott toilet paper, Kleenex tissues and other products from Kimberly-Clark Corporation. The global company is part of a corporate coalition battling to keep a tax loophole that benefits only out-of-state corporations—to the detriment of California schools, local governments and state services.

In letters to Gov. Jerry Brown and the mayors and executives of 21 cities and some large counties, Consumer Watchdog also urged governments to avoid Chrysler and GM auto and truck purchases. The automakers are also in the coalition of out-of-state corporations eager to evade corporate taxes in California.

The letter to Gov. Brown said in part:

“Every dollar of taxes evaded by large corporations is another dollar taken from our schools, fire and police protection and support for the impoverished and disabled.  We ask you to set an example by avoiding taxpayer-funded purchases from out-of-state companies lobbying to protect a state loophole that lets them pay less than in-state companies.

“A ripe target is toilet paper and other janitorial products made by Kimberly-Clark, whose brands include Scott paper products and Kleenex. The global company is part of a corporate coalition battling against efforts to use the same corporate tax formula for all companies that sell products in California, as almost all other major states do. California’s “take-your-pick” loophole costs the state up to billions of dollars a year. Constituents would both smile and applaud your vow to “Flush Tax-Evader Toilet Paper.”

“We also ask you to avoid taxpayer purchases of Chrysler and GM autos and trucks for public safety and other state uses, as well as cardboard products from International Paper Co. They are in the coalition with Kimberly-Clark formed specifically to lobby against a legislative proposal and likely ballot initiative that would close the tax loophole.

(Click here to see the letter to Gov. Brown. The letters to localities are similarly phrased.)

A Consumer Watchdog analysis of California purchases through a state purchasing coalition in the current fiscal year shows that Kimberly-Clark products account for 20% to 25% of total “janitorial supply” orders, and over $1.6 million of taxpayer spending in a year. Only some counties, cities and state agencies use the purchasing contract, so the statewide total would be several times larger than  $1.6 million. However, the proportion of purchases is likely to be similar statewide, said Consumer Watchdog.

“We want local and state government to flush tax-evader toilet paper,” said Judy Dugan, research director for Consumer Watchdog. “State universities, local police departments and other agencies that buy Kimberly-Clark products are also buying themselves deeper cuts in essential services. There are plenty of better choices on the market.”

The Consumer Watchdog analysis looked at Department of General Services order lists for janitorial supplies during two quarters of 2011. On an annual basis, orders for Kimberly-Clark products would total more than $1.6 million. (see Excel charts for Q1 and Q3 of the 2011-12 fiscal year linked below.) Independent purchases by many cities and counties would likely at least triple the amount. For instance, Los Angeles, San Diego, San Francisco and Sacramento do not list any purchases through the state contract.

Kimberly-Clark sells 122 products to state and local governments through the janitorial supply company Waxie, which has a multi-state contract for cleaning and janitorial supplies under the Western States Contracting Alliance. Purchases included several counties, small cities, state universities, transit and police agencies.

Kimberly-Clark is one of four global corporations in the deceptively named “California Employers Against Higher Taxes” coalition. The group was formed to fight elimination of an “alternative” corporate tax calculation that benefits out-of-state companies. The loophole costs California up to billions of dollars a year at a time when schools, protective services and aid to the disabled are being slashed.

Two other members of the pro-loophole group, Chrysler and General Motors, recently lost out on a large state contract for nearly 2,000 police cruisers and utility vehicles, for the California Highway Patrol and other agencies. The contract, worth close to $50 million over two years, went to Ford, which is not part of the pro-loophole coalition.

Click here to see Consumer Watchdog’s news release on the police cruiser contract.

“The state’s large contract for Ford vehicles sets a good precedent for putting taxpayer money in the right hands-a major automaker willing to pay its fair share of California taxes,” said Dugan.

The fourth member of the coalition is International Paper, which makes cardboard products including the boxes in which California produce is shipped. Its products, usually unbranded and sold through middlemen, are hard to track. A fifth member, Proctor and Gamble, dropped out of the coalition following public protests against its products.

Click here to see Consumer Watchdog’s analysis of federal tax evasion by members of the  pro-loophole coalition.

The two efforts to close the loophole are legislation by Assembly leader John Perez (AB1500) and a ballot initiative sponsored by tech multimillionaire Thomas Steyer, who fought successfully in 2010 against Proposition 23, which would have benefited oil companies. The proposals would shift California to the corporate tax system used in other major states–a single tax calculation that is primarily dependent on the amount of sales a company made in California.

Consumer Watchdog, a nonprofit, nonpartisan consumer advocacy group, does not support any particular proposal to fix the loophole as long as it stops the gaming of the state tax code.

Here are links to quarterly lists in xlsx format of janitorial purchases through state purchasing contracts.

Q1, 2011-2012

Q3

Cities and counties to which letters are being faxed include: Los Angeles, Long Beach, Los Angeles County, San Diego, San Diego County, San Francisco, San Jose, Irvine, Santa Ana, Anaheim, Orange County, Sacramento, Riverside, Fresno, Oakland, Bakersfield, Stockton, Fremont, San Bernardino, Modesto, Oxnard, Fontana, Chula Vista and Santa Monica.

State, Cities Urged to Bar All Taxpayer Purchases From Chrysler, GM, Other Tax Dodgers While They Refuse to Pay Fair Share

The state’s award of a contract for up to 1,900 Ford vehicles for the California Highway Patrol and other state agencies is a snub to GM and Chrysler, which eagerly sought the prestigious contract.

Consumer Watchdog applauded the tentative award, noting that of the Big 3 U.S. automakers, only Ford is not in a coalition battling to keep a California tax loophole that benefits large out-of-state corporations to the tune of at least $1 billion a year.

The nonprofit, nonpartisan Consumer Watchdog calls on the state and major cities, which it will be contacting, to bar all non-safety-related purchases of Chrysler and GM products until they cease their campaign and pledge willingness to pay the same tax rate that in-state corporations pay.

“Taxpayers shouldn’t be paying millions to automakers that are happy to starve California schools, police departments and disabled people of funding,” said Judy Dugan, research director for Consumer Watchdog. “What’s good for the CHP should be fine for other police departments and government agencies.”

Even with substantial state discounts, the contract for up to 1,800 Taurus-based police patrol cars and 100 Explorer-based police utility vehicles would likely be worth more than $50 million over time. Dealer prices listed online for the civilian models of the patrol car range from about $30,000 to $32,500, without costly additions like bulletproof doors.

The state is sharply cutting back its civilian auto fleet and the CHP has scaled back as well, but wear and tear force the CHP and other public safety agencies to replace vehicles at about 100,000 miles.

The state’s current tax loophole allows many out-of state companies with major sales in California to pay a lower tax rate than in-state companies, depriving the state of $1 billion or more a year, according to the state legislative analyst. Closing the loophole would help restore essential services axed in the current budget crisis, said Consumer Watchdog.

Two other major corporations, Kimberly-Clark (Scott, Kleenex, Huggies products) and International Paper have joined GM and Chrysler in the deceptively titled “California Employers Against Higher Taxes.”

Chrysler more than doubled its state lobbying expenses in the first quarter of this year, to $32,500, as it added two corporate tax reform bills, AB1500 and AB1501, to its lobbying list reported to the Secretary of State.  The larger General Motors spent more than $86,000 on state lobbying in the first quarter, and added the same legislation to its lobbying list. If a separately proposed ballot initiative to close the tax loophole qualifies for the ballot, the four companies are expected to up the ante on spending.

“The state and cities of California owe taxpayers the respect of shunning companies that are driving the state further into a hole of debt,” said Dugan. “The CHP contract is a great start. Other agencies should quickly and publicly pledge to stay away from the tax dodgers at Chrysler and GM.”

Resources:

State announcement of tentative award (no other bidders protested the award during the protest period)

Bid pricing list from the state’s request for proposals

Consumer Watchdog’s previous press release on the tax evasion history of the corporate coalition (from which founding member Proctor and Gamble has since departed)

Out of State Corporations Fighting to Keep Tax Loophole Are Top U.S. Tax Dodgers, Says Consumer Watchdog

Companies With Major Sales in California Can Game Current System to Pay Lower Taxes Than Many In-State Businesses

Three of the five global corporations behind a coalition aimed at protecting $1 billion a year in California tax loopholes are among the nation’s top tax evaders, said Consumer Watchdog. They are:



• International Paper Co., whose outlandish deductions and credits gained through Congressional earmarks left it with less-than-zero federal taxes on $198 million dollars in 2010 profit. The company’s refund of $249 million exceeded its profits.
• Procter and Gamble, described by Fortune Magazine as in a class with GE when it comes to tax manipulation. It structured more than $6 billion in sell-offs since 2002 to avoid billions in federal tax and hundreds of millions in state taxes.
• GM, which is still partly owned by taxpayers and paid only $570 million in federal taxes on a net profit of $9 billion-a 6% corporate tax rate. That made it one of the lowest-taxed among high-profit corporations, according to Forbes Magazine.

The other two members of the deceptively named “California Employers Against Higher Taxes” are bailout recipient Chrysler and Kimberly Clark, which Wisconsin researchers found was evading state taxes. (See details on all members below)

“The real business of this coalition is to protect global corporations’ unfair and lucrative tax loopholes that deprive Californians of good schools and services,” said Judy Dugan, research director of Consumer Watchdog. “It’s especially galling coming from tax evaders or automakers that abandoned their plants and employees in California, took billions in taxpayer bailout money and in Chrysler’s case, kept $4 billion of it as a gift.”

The out-of-state coalition was recently organized to fight proposed legislation that would eliminate a two-tiered system in California, passed in 2009 over consumer objections, that allows national corporations to pick which California tax calculation they use. By picking one or the other based on how much profit they made in California, companies can evade millions of dollars in state corporate taxes. A 2009 study by the state legislative analysts’ office found the system unfair to many in-state companies, confusing and subject to corporate gaming.

LAO report

“It’s like letting children pick which parent they’ll obey, or companies to pick which regulator will oversee them,” said Dugan. “Obviously they’ll go for the most lenient.”

The current legislative plan (Perez, AB1500) would shift California to the system used in all major states–a single tax calculation that is primarily dependent on the amount of sales a company made in California. Consumer Watchdog said it does not support any particular proposal to fix the loophole, as long as it stops the gaming of the state tax code.

The aim of the “California Employers” is obvious in their corporate histories:

International Paper: A study by the Institute for Policy Studies found that in 2010 the company paid zero taxes on $198 million in profits, and in fact ended up with a $249 million credit. At the same time, CEO John Faraci got a 75% pay hike to $12.3 million. The company’s tax deductions came from two subsidiaries in tax havens and from large deductions and credits for its longtime use of a waste byproduct at paper mills, known as “black liquor,” for fuel. The company lobbied heavily for this boondoggle, even though it did not reduce International Paper’s use of fossil fuels. Conservationist and environmental groups cried foul, but the company prevailed. While the company has several locations in California, they are mostly low-paid box-making facilities and warehouses. It is trying to sell but could also close a pulp plant with higher-paying industrial jobs in Port Hueneme.

Bloomberg on “black liquor” earmark

IPS study

Chrysler: The automaker took $13 billion in federal taxpayer bailout money in 2009. It kept $4 billion as a gift in its Chapter 11 bankruptcy proceedings. Another $3.5 billion that was counted as Chrysler payback was actually a loan to the Italian company Fiat in a complicated deal. Most galling, Chrysler’s bankruptcy deal gave it a free pass on liability for defects in pre-2009 vehicles. For instance, a California family badly injured in fire that destroyed their Jeep vehicle was banned from seeking any accountability for or damages from Chrysler. Chrysler’s only significant presence in California is its franchise auto dealers, many of which were shut down by the company in its bankruptcy. Chrysler’s auto assembly plant in Los Angeles, which once made 40,000 vehicles a year, closed in 1971.

Liability cancellation

Fiat loan

Procter and Gamble: The global corporation is also a giant in tax avoidance. It evaded $2 billion in U.S. federal taxes and hundreds of millions in state taxes since 2002 through complex manipulation of its more than $6 billion in sell-offs of brands. The buyers also evaded taxes at least temporarily and perhaps permanently. Procter and Gamble has subsidiaries and some plants in California, but its U.S. jobs are concentrated near its Ohio corporate headquarters.

Tax evasion:

GM: Taxpayers shoveled nearly $60 billion into bailing out General Motors, and are still on the hook for up to $27 million, depending on the future price of GM stock. And in 2011, GM paid only $570 million in federal taxes on a net profit of $9 billion-a 6% corporate tax rate. Taxpayers also still own at least a quarter of the company, which puts its opposition to fair taxation in California in a darker light. As for being a “California Employer,” GM exited its last auto plant in the state, a joint venture with Toyota in Fremont, in 2009.

Kimberly Clark: State researchers in Wisconsin found that Dallas-based Kimberly Clark paid Wisconsin state taxes in only three of the 10 years from 2000 through 2009, despite a large corporate presence in the state. At the same time, its CEO pay soared 339%, from $2.6 million to $12.4 million. The current tax system makes it easier for the Kleenex giant to do the same in California.

Wisconsin

While this might not have been on everybody’s radar, the IRS kicked down a huge decision for California same-sex couples. But PLR-149319-09 (PDF) has some big importance to California registered domestic partners and same-sex married couple. Long story short, the IRS is now recognizing California’s community property rules. And that’s big. Really big.

Let’s start from the beginning. I’m no accountant, but bear with me as I try to recall my tax class in law school.  Basically, California, like many Western states, has a default rule for marriage that any property acquired (other than through inheritance) is treated as “community property” between the two married spouses.  For California same-gender couples that got married in 2008, these community property rules apply unless you have opted out through contract (a “pre-nup”).  Also, in 2006 and 2007, the legislature passed, and the Governor signed, two pieces of legislation that granted registered domestic partnerships the same rights and responsibilities of marriage, with community property first being excluded for tax purposes in 2006, and then being completely folded in to the RDP in 2007.  

Of course, the problem here is that under the so-called “Defense of Marriage” Act, the federal government was not supposed to recognize any marriage not between a man and a woman. Thus, we had a real pickle on our hands. Under California property law, the property was community property, half belonged to both partners.  But how that property got there was anybody’s guess.  Just off the top of my head, there are a number of ways the federal government could have handled the issue:

1) Ignored community property between same gender couples entirely. Sure, it would cause conflicts with state tax issues, but who cares, according to the Yes on 8 folks, this is a future of civilization thing here.

2) Acknowledge the community property, treating  it as a gift between two unrelated partners for federal tax purposes. This would have been very bad for same-gender couples. Basically, couples would have had to pay gift tax on any difference in income over $13,000 (or so, depending on what the gift tax is that year). That would get pricy fast.

3) Acknowledge the community property, but treat it as earned jointly. Basically, each partner, for tax purposes, earned half of the income. This would be far more favorable and basically treat community property the same for all couples.

I’ll let you read PLR-149319-09 (PDF) on your own if you’d like to, but long story short, the IRS went for #3.  Once they went over the law, it seems obvious, but these things rarely are obvious before hand. And that’s the case here.  The IRS first relied on past precedent to first say that the federal goverment defers to the states to determine property law  (U.S. v. Mitchell) and then to say that California community property law determines who owns what for California couples (US v Malcolm).  Finally, the IRS simply stated that once California treated property as community property, the IRS would do so as well.

Now, in practical terms, what does this mean? Well, say you are a couple where one partner earns substantially more than the other.  You’ll have noticed that your California tax bills went down with community property. Now the same will apply to the federal government. For example, say “Adam” earns $50,000 as a public school teacher.  His husband “Bill” earns $150,000 as a investment hot-shot or something.  (No comment on our society’s priorities there.) Under this new law, each would report income of $100,000. For a variety of reasons in the tax code, that’s going to be advantageous. Now, I’m not a tax lawyer, and this isn’t specific advice.  If this is something that might apply, ask whomever prepares your taxes or some other tax professional.

There is one wrinkle in here. Technically, the IRS “private letter ruling” specifically addresses registered domestic partnerships, and uses that language. However, the ruling is entirely directed at the concept of community property, which applies in the same way for the 2008 marriages.  In theory, it should be handled the same way, but theory often gets you audited by the IRS.

Portions XPosted 8/3/2008 11:23 AM PDT on MyDesert.com

According to one of my activist friends, a former deacon of a religious extremist church in Utah, who attends an evangelical megachurch in the Coachella Valley in order to monitor its adherence to the tax code as it applies to its tax exempt status, churches across America today began ‘100 Days of Prayer’ against Marriage Equality and cajolled their members and attendees to vote in favor of Proposition 8 and defeat gay marriage at the polls in November.

Proposition 8 is an amendment to the California State Constitution that would ban Marriage Equality and would dictate that marriage is only between ‘a man and a woman.’ Prop 8 is another in a long line of attempts by out-of-state religious extremist organizations that attempts to further the religious extremist agenda as a step towards fomenting theocracy rather than democracy in the United States of America:

(Proposition 8) (a)mends the California Constitution to provide that only marriage between a man and a woman is valid or recognized in California. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: The measure would have no fiscal effect on state or local governments. This is because there would be no change to the manner in which marriages are currently recognized by the state. (Initiative 07-0068.) (Full Text)

From the pulpit of the church, directly in violation of the principles of the separation of church and state, church leaders discussed the impending vote on Prop 8 and advised members to not only ‘pray’ for the success of the proposition, but to also vote for Prop 8.  My friend advises that in churchspeak, this use of the term ‘pray’ means ‘send money.’

More below the flip…

The Internal Revenue Service (IRS) has investigated churches that in violation of their tax-exempt status exhort attendees to vote particular ways.  Recently, those investigations have been suspiciously limited to more mainstream, more liberal churches.  It is not against the law for, say, a minister, priest, or rabbi to state how he or she will vote, but it is against the law to encourage attendees to vote in a particular manner.  The most extreme penalty for the latter action is removal of tax-exempt status.

In 2005, the IRS began to investigate All Saints Church in Pasadena, CA and its guest minister, George Regas.  According to National Public Radio, Regas issued a sermon from the pulpit about a hypthetical conversation between Jesus, Pres. George W. Bush, and Sen. John Kerry. For that effort, someone filed a complaint with the IRS, and the IRS threatened to remove the tax exempt status of the church, claiming that Regas’ sermon constituted an endorsement of Kerry. The IRS renewed its investigation in 2006.  However, All Saints Church refused to comply with the investigation.  Finally, in September 2007, the IRS bowed to public pressure and to the church and terminated its investigation.  In response, Rector Ed Bacon demanded that the IRS apologize and that the IRS be investigated.

In an attempt to strengthen democracy and to prevent institution of theocracy in America, more and more progressives and activists are attending religious extremist churches in order to monitor potentially illegal activities.

Americans United: for Separation of Church and State indicates that the greatest threat to the separation of church and state is the so-called ‘Religious Right:’

The single greatest threat to church-state separation in America is the movement known as the Religious Right. Organizations and leaders representing this religio-political crusade seek to impose a fundamentalist Christian viewpoint on all Americans through government action.

Americans United, as part of our educational responsibility, regularly monitors the agenda and activities of the Religious Right. We share our research with journalists, elected officials and all Americans who care about church-state separation, democracy and pluralism.

BlueBeaumontBoyz wonders how quickly the IRS will begin an investigation into churches’ endorsement of Prop 8 from pulpits across America.

Next time, my friend promises not funble his video/audio recorder and promises to provide the smoking gun.  Kudos to those who are working to preserve democracy in America!