Segal Cohen & Landis Reviews ‘Stateless Income’

According to Forbes and Reuters, companies such as Apple, Google, Starbucks and H-P are avoiding paying U.S. taxes by putting income in pockets around the world. Many of these companies state they are not doing anything illegal and are simply taking advantage of breaks offered by governments to create jobs and business.

However, this is not how the IRS and foreign governments see it. The G20, a group of leading world economies made up of 19 countries plus the European Union, ­­­­­expressed its hopes for a fundamental reassessment of the rules on taxing multinational corporations. On July 19, 2013 the Organization for Economic Co-operation and Development, which advises the G20 on  tax and economic policy released an action plan that addressed loopholes used by companies  such as Apple and Google to avoid billions of dollars in taxes.

Not long after the G20 voiced its concerns, the IRS made clear that it would be looking into the issue as well.  Erik Corwin, an IRS deputy chief counsel, said that they would be looking into cases of which “most involving consequences of complex restructurings designed either to create stateless income or to affect a tax efficient repatriation.”  He later went on to say in a speech to tax lawyers in Washington …“those are a family of cases that are in the pipeline and being looked at.”

It’s no wonder so many organizations are sitting up and taking notice considering that U.S. companies are said to have more than $1.5 trillion sitting off shore. Most companies claim that they keep the money there to avoid the taxes they would otherwise face in the U.S. This tactic has not gone unnoticed by U.S. Treasury Secretary Jack Lew stating “we must address the persistent issue of ‘stateless income,’ which undermines confidence in our tax system at all levels.”

How the G20 and U.S. government go about addressing the issue of ‘stateless income’ will be interesting to watch. Now that the war has been declared on ‘stateless income’ it will be interesting to see how companies such as Google and Apple react. One thing is for sure, Segal Cohen & Landis will continue to keep an eye on this fight.

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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