Delaware Has One Billion Reasons Not To Change Its Laws Of Incorporation

Tyler Durden's picture

In the wake of the release of the Panama Papers, which exposed financial dealings of some of the world's wealthiest people, much has been made in the media and on the U.S. presidential campaign trail about making sure everyone is paying their "fair share", and emphatically calling for improving transparency around how corporations and individuals handle their money.

One topic that will only continue to receive attention as this topic moves along, is the state of Delaware and its perceived status as a U.S. tax shelter. According to Bloomberg, the state has about 1.1 million business entities, and one single building located at Wilmington's 1209 Orange Street is the home address of 285,000 companies including Alphabet (Google), Ford Motor Co., and Wal-Mart.

Incidentally, a few shady characters have been linked to having ties to shell companies in Delaware, "El Chapo" being one of them. Oh, and then there's a few more people of note, such as presidential candidates Hillary Clinton and Donald Trump, each of whom have businesses incorporated in the state

Delaware offers companies an easy and inexpensive path to incorporating, and is known for its very business friendly statutes and court system. It's also a potential magnet for those who are perhaps looking to game the income tax system by setting up a shell corporation there. Recall that Chevron was served a $269 million tax bill for structuring inter-company loans between an Australian company, and one that incorporated in Delaware. The loans were issued with ridiculous interest rates in order to lower taxable income.

As pressure from mounts from the outside asking Delaware to reform some of its laws around incorporation and business in general, there is one good reason why the state will choose to leave everything at the status quo if at all possible.

Actually make that one billion good reasons to do so. In 2015, Delaware registerd more than 480 companies a day, leading to registration fees provide more than $1 billion in annual state revenue.

 

In spite of a lot of rhetoric, there is little little chance that Delaware is motivated enough to make any meaningful changes regarding how the state chooses to do business, save one thing of course:

"There's little indication that'll change. I would not hold my breath waiting unless the Panama Papers and U.S. corporations can be directly linked to terrorist financing. U.S. policy could change and change quickly." said J. Richard Harvey, a former tax official at the IRS and Treasury Department.

And in case that something does change and Delaware is not longer America's favorite onshore tax shelter, there is always Nevada, and one very specific corporation that is more than willing to help any US (or international) clients with their tax sheltering needs: Rothschild, whose Andrew Penney is always looking for new business.

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krispkritter's picture

There are two addresses in need of 'errant' drone strikes(Rothschilds).  Kind of ironic one is on 'Liberty Street'.

localsavage's picture

Is that a hooker standing in front of the building?  .....Talk about one stop shopping.

DontGive's picture

Come in for the incorporation - get a free handjob as a door prize.

Frankie Carbone's picture

I can't believe that you have not been upvoted at least 100 times for this comment. Touche. 

LetThemEatRand's picture

Where's Biden from again?  Oh, right.

nmewn's picture

Zactly.

He may have been born in Scranton but for thirty six years he was Delawares main man in the Senate.

People are gonna come around to my analogy of .gov just being the largest criminal gang on the block at some point.

Prolly very soon ;-)

css1971's picture

Everyone else is doing it. Why shouldn't I? = End of the nation.

Decline and fall ahead.

N0TaREALmerican's picture
N0TaREALmerican (not verified) css1971 Apr 27, 2016 6:09 PM

Yeah,  but it could take 100 years before we're invaded by barbarians (I'm assuming nobody is counting the Chinese billionaires as barbarians, but on ZH...).

 

lincolnsteffens's picture

Delaware is where "government agencies" hide the fact that they are for profit private corporations. The STATE OF DELAWARE is the corporation that houses private corporations to conceal the identities of the owners. The matrix is so complex and well hidden you will never get a glimpse of who runs it and how.

Now, shut up and don't violate the civil laws of the private corporations that threaten you and keep you paying for your own slavery.

Don't think you are a slave? How many months of the year do you work to pay the illegal "individual personal" taxes to the Federal "Government" that by the law of the Constitution is forbidden to directly tax your labor.

fleur de lis's picture

So when can your average car dealership, grocer, family restaurant, etc. get to sign up for the tax breaks?

By the way, what are the Delaware stats on health, education, employment, crime, etc.? Because for all the big dogs using the state to save incalculable heaps of money, you'd like to think that at least the general population of the state is living reasonably well.

N0TaREALmerican's picture
N0TaREALmerican (not verified) Apr 27, 2016 6:06 PM

Don't forget South Dakota...

SmittyinLA's picture

Delaware threats will come from bigger hoes.

A billion in "registration fees" leaves plenty of "toll revenues" to undercut by another state, of course there's the Delaware corporate code, that can be copied for free.

.....and with out Biden.

asteroids's picture

I wonder what happens if these offices in Deleware or Nevada have unfortunate accidents with fire....

Ralph Spoilsport's picture

Nobody has mentioned the Nightlife and Entertainment scene in Wilmington yet. Probably because it's 20 minutes North on I-95 in Philadelphia. Or, you could go hang with the U of D college kids 20 minutes the other way in Newark. They have a strict noise ordinance they just passed set at 42 dB. The Newark City Council and the Newark cops regularly fart louder than that. 

(U of D Class of 75, Deer Park Riot - March 1974)

http://www.newarkpostonline.com/news/article_3b708cbf-5082-5ede-aab1-a0d...

DonFromWyoming's picture

The Tyler(s) may understand the minutiae of Wall Street, but they obviously have zero understanding of state laws regarding incorporation and how they have no relationship to taxes.  Delaware has a corporate tax rate of 8.7%.  Several states have no corporate tax.  Delaware is not an "onshore tax shelter".  Period.  Maybe repeated enough times Tyler will get it.

JLee2027's picture

8.7% only applies if you incorporate in Delaware and do business in Delaware. Generally, if you incorporate in Delaware and do business in another state, your state corp taxes are ZERO.

DonFromWyoming's picture

Your Delaware state taxes are zero if you do no business there regardless of where you incorporate, but your corporation will pay the taxes to the state(s) where you do business. The key phrase there is "where you do business". Quill v N. Dakota (1992) is the case law that defines that phrase. https://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota

The point of my post that Tyler doesn't seem to grok is that taxes have nothing to do with where a company is incorporated.

 

JLee2027's picture

And the state taxes in Texas are how much?

JailBanksters's picture

And all those are small business corporations, yes small, so they don't pay ANY federal tax at all. Instead it's shareholders must "volunteer" how much profit they have made to the private Banking Cabal Collection Agency, and pay tax on that.

quietdude's picture

I lived in Delaware for 40 plus years. The fees gathered keep the property taxes and cost of living down. Delaware is an OK place to live, just stay out of Wilmington. Aside from a few banks and other businesses the place is a shithole.