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Apple Argued That Buildings at Its Headquarters Were Worth $200, Not $1B, To Reduce Its Tax Bill: Report (sfchronicle.com)
Apple argued that buildings it owned around Cupertino, where it is headquartered, were only worth $200 instead of the $1 billion tax assessors deemed in 2015, according to appeals reviewed by the San Francisco Chronicle. From a report: The report characterized the dispute as part of an aggressive strategy by Apple to lower its tax bills. According to the Chronicle, Apple has 489 open appeals in tax disputes over property assessed at $8.5 billion in Santa Clara County, Calif., dating back to 2004. Those appeals include the $1 billion building assessed by tax officials, as well as another $384 million property that Apple also claims is worth $200. Apple is now valued at $1 trillion. It is also the county's biggest taxpayer, paying $56 million in the 2017-2018 tax year.
apply a similar steep discounted valuation, to any apple product, to arrive at its true worth as a product.
rest is hype and manipulation of herd behavior.
apple product user = herd animal with low agency
Apple is clearly making very poor use of the land this lowering it's value to catastrophic levels. I say San Francisco used Eminent domain to take the land and put it to good use (perhaps for public housing). The city will, of course, compensate Apple for the full, fair market value of $200. Heck, I say pay them twice that, an almost unheard of $400 dollars, to cover the expanse of obtaining a new headquarters. I mean, when you put it like that it's a win win
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Are you stupid? You know how much it cost to construct a building. You know how much they paid for the property.
If an individual lies on taxes, they go to jail.
If a corporation lies on taxes, they get rewarded.
I'm a good cook. I'm a fantastic eater. - Steven Brust
If I tried to claim a taxable value of $200 for my house (worth far less than any 7+ digit figure) that would be a pretty quick conviction for tax evasion.
Avoidance is legal, evasion is not. It's like the government and the corporations that own it aren't even trying to pretend they aren't corrupt anymore. This does not end well in any other instance in history, and I can't understand why these people think they will get away with it now.
It would be funny to have the local municipality come in and take the property though eminent domain using Apple's valuation. I am sure the county or state could use the extra office space.
They are the single most "regressive" tax we have, to say nothing of the fact that they're the granddaddy of the logic behind civil asset forfeiture.
I get that the schools and other local services need revenue, but there are better and more moral taxes that can be applied. With modern GIS software, it is perfectly feasible for the state tax agency to build a system that will be able to map taxes owed on income and sales to the right tax authorities so neither the private citizen nor the local government have to do it. They could just impose an extra 3% sales tax and an extra 3-5% income tax and call it a day after abolishing property taxes at the state level.
Tax on the poor? Sure, but the poor pay property taxes too. You think rental owners don't pass that onto their tenants? The renting poor pay a share of property taxes too and have to do so even in bad times. Switching that to sales and income taxes would at least let the poor to reduce that equivalent tax payment when things get really tough (as you can't tax non-existent income and they can stop spending on non-essentials)
What you can and can't get away with.
Everything else is just talk.
That's right. This kind of rule, in effect, would force everyone to grossly overstate the value of everything and pay ludicrous taxes to avoid unnecessary risk of a sudden forced move. However, there may still be a better way to handle this that preserves the idea. For example, if someone makes an offer to buy at twice your valuation or more, you must either sell, or change your valuation to the new offer and pay a few years of back taxes at the new valuation. This would make forced moves always avoidable, but would still provide a reality check between claimed value and market value. In this case, if the real value of a building is $1B and Apple's claiming $200, someone would surely make an offer at $700M or so and then Apple would have to either sell or change the evaluation to $700M and pay several years of back taxes at the $700M price.
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Given a corporate tax of 21% I'm led to believe Apple took in about $280 million in profit last year from the $56 million in taxes. Oh wait they made closer to $10 billion. Maybe they should pay their damn taxes or get the hell out of the US. It's appalling we let corporations get away with this, even more we seem to encourage it. Given Apples ample reserve cash there is absolutely no excuse for this, this should be enough for people to wake up and boycott their products, as if the consumer gouging on excessively marked up products in the first place wasn't enough.
Worst case of balance fallacy I've ever seen. The $200 valuation is plainly ludicrous (most of the windows in any of those buildings would cost over $200 to replace) and the $1B valuation is likely close to correct judging by the work history of the government tax assessors and the cost of other tech megacorp campuses.
"When information is power, privacy is freedom" - Jah-Wren Ryel
No, I'm suggesting the possibility of things like collusion exists. Kickbacks are more the sort of thing you get when dealing with an independent third party (a government official pays the private contractor a little bonus).
Historically, there has been a lot of elections fraud; that doesn't mean every election is stolen, even if it looks like it might have been, but it sure as hell means you don't trust the board of elections, voting machine manufacturers, political parties, or anyone else to act in good faith. The same is true when a state wants to tax somebody on a property they value at a really high number and there is a dispute over whether it's actually a fair market assessment: show me why that's fair if you want me to believe it.
It's not one-way, either. Do you know what my tax assessment is? $1,000 on land, $2,000 on my house. The city is artificially lowering cost-of-living in my area by dishonestly assessing our property. Because of certain state laws, I'm actually able to go back and force the city to not charge me property tax for another few decades if they try to raise this, too--which is good, because plenty of my neighbors are too poor to afford sudden water bill and property tax hikes, and they have a defense against that sort of thing if the city tries to run them out.
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You shouldn't trust anything, the government doesn't even trust themselves; that's why there is an appeal process. I just find it funny that you won't trust the government yet you are willing to entertain the idea that a building that cost $5B to build is worth $200 on the real estate market.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
Commercial buildings are depreciated over 39 years. That is, the building's construction cost is a business expense, and thus tax deductible (you don't pay tax on the money you spent on expenses). But because it's a purchase that's used for so long, you're not allowed to deduct the whole thing in a single year. Instead, you take the building's construction cost, and divide it (depreciate it) over 39 years, and use that as your annual tax deduction.
If Apple says the building is only worth $200, then their tax deduction for building depreciation over the next 39 years can only be a maximum of $5.13 per year. So either they pay the property tax on a $1 billion building (which at Prop 13's 1% cap and utilities of about 1% works out to about $20 million/yr in taxes), or they lose an annual tax deduction of ($1 billion) / (39 years) = $25.6 million (which at the 35% corporate tax rate would be $8.96 million/yr).
I suspect what's going on is some accountant did this math and decided it would be cheaper to give up building depreciation in exchange for a lower tax assessment. But now their gig has been discovered and they're at risk of both losing the building depreciation tax deduction, while having it assessed at its full value for property taxes. If that's not what they're doing, and they're audaciously depreciating the building by $25.6 million on this year's taxes while simultaneously claiming it's only worth $200 for property tax assessment, then this is simple. They've legally admitted to the IRS that the building is worth $1 billion. Claiming to the assessor that it's only worth $200 constitutes fraud and possibly perjury.
It isn't about being right, it is about being legal.
Morality and Legality are only loosely correlated.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Actually, it isn't entirely insane, assuming this is talking about the Infinite Loop campus. Apple does not own the land under the building. It is owned by Sobrato, the development company on the corner. Apple merely has a 100-year lease on it. So if Apple decided to sell the buildings, absent some agreement by the landowner to allow the lease to be transferred, they would not be able to do so. Arguably, then, the buildings have zero value beyond what the landowner is willing to give them for them.
And even if the landowner agreed to a lease transfer, the buildings would still only have value if somebody else wants them as-is. The problem is, IL1's lobby area had serious mold problems fifteen years ago, particularly on the upper floors. I can't imagine it has gotten any better since then. If Apple ever left, there's a nonzero chance that the next company would decide to tear those buildings down rather than fix them.
It could well be that the expected amount of money that they could get for transferring the lease would not significantly exceed the amount of money they would have to spend bulldozing the old campus to make it ready for whatever company would take it over.
Mind you, I do think that $200 is a gross underestimate, but if the city valued it at a billion dollars, that's a laughable overestimate. There's no way you'd get anywhere close to that for a bunch of forty-year-old buildings, no matter how much history they might have.
And given that the original 100-year lease is almost halfway up, and at the end of that 100 years, the buildings potentially become a giant teardown liability unless the lessee is willing to move them somewhere else, the value of those buildings is at least arguably going to go *negative* at some point.
So really, the only reasonable way to value the property is to determine how much Apple would have to pay to move the employees that are currently in the Loop to other, rented office space, multiplied over the expected remaining life of the building — maybe ten years on the high side. If we assume that they stopped doubling and tripling up in IL offices after Apple Park opened, that's probably only a couple of thousand people. And assume that any new space would be high-density, open plan office space at 175 square feet per employee. Assuming about $4 per square foot per month times ten years, that's about $168 million. At $8 per square foot for demolition times 850,000 square feet, the buildings themselves are a $6.8 million liability, so its value is really closer to $160 million. Seems like a much more plausible number than a billion, which would basically require assuming that Apple will continue using those buildings as-is for the remainder of the hundred-year lease.
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