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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.
I know a guy who got a dog and called it a company mascot and had his company pay for all the pet supplies. People will try anything, it doesn't make it right.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
and then they'll complain that the schools aren't producing the highly educated people they need to fill jobs, so they need more H1B visas. This same crap has been going on in Silicon Valley for decades.
I'll take them off their hands for $250.
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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Let people set their own valuations, but the valuation is also a public tender for sale at that price.
That is all.
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 you read the article, Apple didn't say that its HQ was worth $200. From SF Chronicle article:
Some claims reflect extreme differences in estimated values. In one appeal filed in 2015, Apple said that a cluster of properties in and around Apple Park
in Cupertino that the assessor valued at $1 billion was worth just $200. In another, property that the assessor valued at $384 million was, in Appleâ(TM)s view, worth $200, according to an appeal application
What are these properties? I don't know. I'd have to look at the appeal. It could be that the dispute is not over the HQ.
Well, there's spam egg sausage and spam, that's not got much spam in it.
What you can and can't get away with.
Everything else is just talk.
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)
And you really think that, if property taxes are abolished, landlords will actually drop the prices correspondingly? And stop spending on non-essentials? The reason people argue that sale taxes are regressive is that the poor are already spending less of their money on non-essentials than wealthier people because most of their money already goes towards essentials. increase sales taxes and for a lot of people the situation doesn't become "oh, guess I have to hold onto my iphone for another year", it becomes "can I afford to eat dinner today".
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
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.
They are the single most "regressive" tax we have
No, sales taxes are far more regressive.
Property tax: poor person lives in cheap house, pays little in property taxes (directly or via rent). Rich person lives in expensive mansion, pays lots in property taxes.
Sales tax: poor person buys a lawnmower, pays sales tax. Rich person hires a lawn service, directly pays $0 in sales tax. The sales tax for the service's much more expensive lawnmower is spread over all of their customers, resulting in less sales tax per customer.
The poor and middle class tend to buy goods, which are subject to sales tax. The wealthy tend to buy services, which are not subject to sales taxes. Sales tax for the goods that are bought by those services is spread over more people, resulting in an overall lower sales tax rate.
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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This is about a property evaluation 2015, three years ago. I find it interesting that the Chronicle article this is based on, and all of the articles parroting the Chronicle, conveniently leave out the result. When reporting on "Apple appealed the county's assessment three years ago", wouldn't it make sense to tell us how the appeal turned out?
I see that the current tax assessment for the Apple headquarters building is $398,600,000. It may be that Apple's value is closer to correct than the number the county initially tried to get them for.
The solution is obvious, the government pays apple $400 for the building and says look you are doubling your money. If anyone complains arrest them for tax fraud.
It is also the county's biggest taxpayer, paying $56 million in the 2017-2018 tax year.
Let's see. Revenue of $229 billion for 2017 $.056 billion/ $229.23 billion = 0.02446% tax rate. Most individuals pay between 20-50% of their income (depending on the country). This is even more loony than the $200 campus. Can I buy your campus for $300 Apple -- you can make a 50% profit!
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I'd eminent domain that shit for $200 and build a homeless shelter there.
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