Wal-Mart Loses NC Tax-Shelter Case

Wal-Mart has lost, at the summary judgment stage, its $33.5 million tax refund suit claiming that North Carolina had wrongfully treated its tax-reduction strategy of transferring ownership of its stores to 99%-owned Delaware-based REITs and then deducting rental payments to the REITs for North Carolina income tax purposes.  The judge noted:

[Wal-Mart does] not deny the facts demonstrating the circular journey taken by the "rents" paid by these plaintiffs, but contend[s] that on each leg of the journey [Wal-Mart was] only taking advantage of a lawful deduction afforded them by then-existing tax law. Such a piecemeal approach exalts form over substance, however.

• Wal-Mart Stores, Inc. v. Hinton, No 06-CVS-3928 (N.C. Super. Ct. 12/31/07) (order)
• Wal-Mart Stores, Inc. v. Hinton, No 06-CVS-3928 (N.C. Super. Ct. 12/31/07) (findings)
• Bloomberg:  Wal-Mart May Appeal $33.5 Million North Carolina Court Decision, by Michael Nol & Ryan Flinn
• Reuters:  North Carolina Judge Rules Against Wal-Mart
• TheStreet.com:  Wal-Mart Loses North Carolina Tax Battle
• Wall Street Journal:  Judge Rules Against Wal-Mart Over Its Tax-Shelter Dispute, by Jesse Drucker
• Wall Street Journal Law Blog: Wal-Mart Loses Tax-Shelter Case, by Peter Lattman