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2009-04-09
Hillsborough, OR. Wal-Mart Scores Millions in Welfare From Oregon Taxpayers

What does a Wal-Mart supercenter have to do with a renewable energy tax credit? Answer: Nothing. Yet the world's richest retailer has bought itself a tax credit that will be worth millions -- at Oregon taxpayer expense. Taking advantage of corporate welfare is nothing new for Wal-Mart, whose employees are heavy users of Medicaid health care, earned income tax credits, and other forms of tax-supported subsidies. Over the years, Wal-Mart has taken advantage of tax increment financing, job credits, and every conceiveable state, federal and local subsidy available. The company has also used complicated tax laws to avoid paying state income taxes by transferring income to related companies. But this Oregon case involving Wal-Mart has left city and state officials looking foolish. According to the Beaverton Valley Times, Wal-Mart just got a windfall at taxpayer's expense by buying a tax credit from Solar World, a German company that makes photovoltaic solar panels. The city of Hillsborough, Oregon was able to attract this large solar production plant, and its 1,000 jobs, by offering a candy store of tax-subsidized incentives to the manufacturer. But some of the profits ended up in Wal-Mart hands instead, because of a bizarre arrangement that allows manufacturers to sell their tax credits to companies who are doing nothing valuable for the environment, like Wal-Mart. According to the Valley Times, Solar World was given an $11 million renewable energy tax credit. Solar World was then allowed to turn around and sell that credit to Wal-Mart for only $7.3 million. The full $11 million value of the credit was 51% more than what Wal-Mart paid for it. Wal-Mart is now free to use the full credit to reduce its corporate income taxes on profits owed to the state, earned at Wal-Mart's 32 locations across Oregon. Wal-Mart can claim this $11 million tax credit over the span of five years. Oregon taxpayers lose out on $11 million in income taxes the corporation would have paid, and Wal-Mart makes $3.7 million for merely buying up the credit. Under Oregon law, nonprofits and businesses can apply for this Business Energy Tax Credit, or BETC. The credit is known as "Betsy," and it proved to be a sweet deal for Wal-Mart. Solar World was able to apply for a Betsy to pay for the costs of sustainable buildings, renewable energy or other 'green' projects. Betsy pays for as much as 50% of towards the first $22 million in project costs. Solar World told the Valley Times that this tax credit "really put us over the edge. It was a key factor" in attracting the company to Hillsborough. Even after the public found out that this renewable tax credit ended up in the pocket of Wal-Mart, the state of Oregon allowed Solar World to apply for more Betsy credits, which have already been approved by the state for another $19.4 million. SolarWorld is now free to sell these credits too, for a total subsidy of nearly $30 million. The Solar World company is taking over a 480,000 s.f. plant that was never occupied, and adding 210,000 s.f. to the footprint. Wal-Mart's only connection to the project is the fact that it had $7.3 million to buy up another company's credit. It's called 'taking credit where no credit is due.'

What you can do: This financing credit was designed to stimulate the development of renewable energy, and to attract jobs to Oregon. It was never intended to write down costs for retailers like Wal-Mart, whose fixation with 'green' has nothing to do with energy. One critic of the Wal-Mart deal told the Valley Times, "The BETC is a financing scheme for people with money to make money. There's this whole industry of lawyers and wealthy individuals that sells the tax credits." For Solar World, the tax credit had more value as a commodity to sell -- than as a tax break, because Solar World only pays the state minimum tax of $10 per year. The tax credit was worth little to the company -- except if they sold it. "A tax credit's only good for those people who have a tax liability," explained a representative of the Oregon Department of Energy. It is puzzling why the state would offer a huge tax break to a company that already pays no taxes -- but the real incentive is in the provision which allows the manufacturer to turn around and sell the credit to a company that imports cheap products from China as its mainstay -- nothing at all to do with renewable energy. The state law allows this "pass through" of the credit, which ends up have to be subsidized by state taxpayers, who may not appreciate the fact that Wal-Mart is the wealthiest retailer in the world, and should be able to operate its stores without corporate welfare. But the Betsy credit that Wal-Mart bought becomes just one more advantage the big company has over smaller retailers or grocers, who could never have come up with $7.3 million to buy the credit. When SolarWorld sold its credit, the state allowed them to recoup only part of the credit in cash from the buyer. In this case, SolarWorld collected $7.3 million for its $11 million tax credit, or two-thirds of the value of the credit. Wal-Mart, however, can use the entire $11 million tax break. The federal government also has an energy tax credit that companies can claim -- but it must all be used in the year it is claimed, and the federal credit, more sensibly, cannot be transferred to another party. Some Oregon lawmakers will cringe as they learn that Wal-Mart was the big winner here for doing nothing related to renewable energy. Lawmakers have discussed reducing the level of tax breaks available through Besty, but the Wal-Mart deal is already done. Solar World already scored its own coup when it bought the empty semiconductor plant, which received $794 million in upgrades by its original owner, and which gave up plans for a semiconductor plant. Instead the plant owners sold it to Solar World for only $40 million two years ago. The intricate tax scheme allowed Wal-Mart to skim off $3.7 million in profit at taxpayers' expense. Readers are urged to email Oregon Governor Ted Kulongoski at http://www.oregon.gov/Gov/contact_us.shtml with the following message: "Dear Governor Kulongoski, When a super-wealthy corporation like Wal-Mart, owned by billionaires, is able to use the BETC renewable energy credit to make several million off of Oregon taxpayers, its time to rethink the Betsy program, and its usefulness. Instead of allowing companies to sell these tax credits, just give the company investing in renewables a direct cash payment, and don't force them to convert it into a transferable tax credit. This Wal-Mart Windfall has made your Administration, and state taxpayers, look like chumps. Wal-Mart did nothing to deserve this credit, and in fact have wasted hundreds of acres on energy-inefficient single-story buildings that encourage automobile dependent shopping, and undermine the smart growth principles of compact, downtown development. You should ask Wal-Mart to sell the credit back to Solar World, give Solar World the $7.3 million, and save state taxpayers $3.7 million in revenues. If Wal-Mart is a good corporate citizens, they will give the windfall back to you. If they don't, maybe Oregon shoppers will find the energy to shop elsewhere."










 
 
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