Jon Stewart Takes on Apple's Appearance in Front of Senate Committee

E.Lizardo · May 26, 2013

iChrist said:
FYI, these "mom and pops" were registered as non-profit social welfare groups which are strictly prohibited from getting involved in political campaigns. And they did.

See, everyone loves to play the victim. Even you.

You really should get the facts.For one,most of them have now been approved now that two elections have passed.What a coincidence!
Also you might want to tell the President it was A-OK,cause he looked pretty outraged about it,along with a lot of other liberal Democrats.

And check the questions these people were asked.If you think it's OK to ask(among other outrageous things) the content of someone's prayers in order to approve a tax exemption then you are utterly hopeless.

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bedifferent said:
Those "groups" were registered non-profit social welfare groups they are strictly prohibited from getting involved in political campaigns. They made themselves targets with their "Tea Party" rhetoric while threatening to not pay taxes under Obama. While I don't agree with what the IRS did, they certainly didn't target them without cause. Either way, the investigations will shed light onto what happened, and those responsible will be held accountable. Our POTUS has taken more action in holding those accountable for misdeeds. Aside from Scooter Libby, not many did under our last POTUS (how many pardons did GWB hand out? I lost count).

On topic, this dog and pony show was sad but great entertainment. Dem's and Repub's are all hypocrites. Levin loved the sound of his voice, and McCain has some nerve after the "Keating Five" scandal in the 80's-90's in addition to questionable campaign donations in 2008.

Utterly incorrect.Get the facts.

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bedifferent said:
Exactly. I'd rather see them go after the oil and gas companies, I cannot imagine the tax loopholes they use. Unfortunately they're all in their back pockets, making money off the very system they uphold. They should turn their pointed fingers around as the issue isn't with Apple or any large corporation, it's our tax system. Until that's addressed, this is all a side show.

Loopholes=deductions.
Oil companies get the exact same deductions that GE,Apple,Microsoft and Proctor and Gamble get.
So much misinformation out there.
And there are no subsidies either.Some anti-oil loon decided to rename legal deductions subsidies so it would sound more...eeeeevil.

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PinkyMacGodess said:
I'm not the biggest fan of Obama, but if you would think that he is the first president to be accused of having used, as opposed to proven of using, the IRS as a weapon, you really are as misinformed and ignorant as you portray yourself.

True.I think this will turn out to be much more egregious than what Clinton or Nixon did though.We'll see.

terraphantm · May 26, 2013

Nunyabinez said:
It's hilarious how people get frustrated when someone else LEGALLY pays the minimum tax that they have to according to the tax code. Did you pay more tax than you had to? I'll bet half the people complaining about the Romney's and Apple's of the world are quietly praying that the IRS doesn't look too closely at their taxes to make sure they really paid as much as they were supposed to.

I don't know about most people, but I'm frustrated that he can legally pay that low, while most of us who earn far less are legally required to pay far more. It's the tax code I'm frustrated with, and Mitt Romney is a personification of said tax code

3282868 · May 26, 2013

E.Lizardo said:
You really should get the facts.For one,most of them have now been approved now that two elections have passed.What a coincidence!
Also you might want to tell the President it was A-OK,cause he looked pretty outraged about it,along with a lot of other liberal Democrats.

And check the questions these people were asked.If you think it's OK to ask(among other outrageous things) the content of someone's prayers in order to approve a tax exemption then you are utterly hopeless/

Utterly incorrect.Get the facts.

Loopholes=deductions.
Oil companies get the exact same deductions that GE,Apple,Microsoft and Proctor and Gamble get.
So much misinformation out there.
And there are no subsidies either.Some anti-oil loon decided to rename legal deductions subsidies so it would sound more...eeeeevil.

You seem to enjoy pointing out those who have referenced sources with their facts, yet, I don't see anything but conjecture and rhetoric from you. Please, educate us with facts if you claim we are all so misguided and "utterly incorrect". When I read "liberal Democrat" as opposed to "Democrat" (or "conservative Republican"), you've already lost. I'm fiscally conservative and socially liberal - I don't follow party ideologies as I think for myself and base opinions on the merits of each case (and the facts).

Smith288 · May 26, 2013

bedifferent said:
How so? Explain.

Being born in London, and having lived in nations with healthcare provided with superior education without mortgaging homes or student loans with 29.99% interest rates as their taxes don't pay for a near 50% military budget. Perhaps the U.S. should prioritize their federal tax system to address other needs as well. It should be alarming that we outspend other first world nations in our military, even more so N. Korea 75 to 1.

Certainly it's not "free", it's paid with taxes. As a diabetic since 12 (now 36), I take excellent care of myself yet I spend hundreds a month on Blue Cross Blue Shield Excellus in addition to outrageous taxes. I'd rather have my tax dollars spent on more important things than fitting a military system to fight oil and "democracy".

Thanks for the book. But it's because nothing is free. Just more social spending for us that we don't have. But yea.

"Why come you don't have a tattoo?"

Bubba Satori · May 27, 2013

michaeljob said:
John Stewart just wants the traffic

Has he had 50 billion downloads yet?

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mike457 said:
I've just assumed through all this that Apple has the same tax accountants as Mitt Romney!

The same crooks that advised John Heinz about dodging taxes on yachts?

Gasu E. · May 27, 2013

Sayer said:
while the people running the IRS are straight up lying about specifically targeting mom & pop political groups who dared to exercise their 1st ammendment rights is astounding.

Anyone setting up an organization claiming tax-exempt status SHOULD be audited, in order to ensure they are conforming to the purpose for which the tax exemption is allowed. Or do you believe we should just take these organizations at their word?

And regarding the First Amendment-- while the Constitution protects free speech, it is a novel interpretation of the First Amendment to imply that you should receive a tax deduction solely for the act of expressing a political opinion.

Organizations that are illegally exploiting their tax-exempt status in order to act as political organizations are violating the law and should be held accountable. Perhaps you feel there should be exceptions; if so, could you please justify, and explain what those exception should be?

Gasu E. · May 27, 2013

E.Lizardo said:
You really should get the facts.

And check the questions these people were asked.If you think it's OK to ask(among other outrageous things) the content of someone's prayers in order to approve a tax exemption then you are utterly hopeless..

Here's the facts. The questionaire is posted here.

I couldn't find the part about prayer content; but I easily could have missed it. Would you be so kind as to identify the relevant passage? Thanks!

3282868 · May 27, 2013

Smith288 said:
Thanks for the book.

You're welcome, glad I could set you straight.

CalWizrd · May 28, 2013

samiwas said:
...I often pay more than I have to, by not taking all the deductions that I can...

Just out of curiosity... why?

samiwas · May 28, 2013

CalWizrd said:
Just out of curiosity... why?

For a couple of reasons.

Often, the amount that I would reduce my tax liability isn't worth the amount of time it would take me to deal with it. For example, I can legally write off many of my meal and entertainment expenses as I am not an employee of any company (and don't have my own company) and simply work for whoever hires me for the day (it sounds like I stand outside Home Depot, but I assure you that is not the case!), and it often involves travel. Keeping track of all those receipts just isn't worth it. It might even be a several hundred dollars, but not worth my time.

The other reason is that I actually appreciate taxes and what they do. I'm not one of the "government can't be trusted" or "they steal my hard-earned money" types. Thus, I don't try to find every single deduction that I qualify for. Do I like paying taxes? Of course not. But I don't look at them as the legalized theft that some people seem to scream about.

For the past couple of years, I've had my taxes done by a professional instead of doing them myself. So I do lose a little control, and they likely DO go after all those things that I don't stress about. The first year, she was actually mad at me for not saving all my receipts (I still don't).

krravi · May 29, 2013

Gasu E. said:
Anyone setting up an organization claiming tax-exempt status SHOULD be audited, in order to ensure they are conforming to the purpose for which the tax exemption is allowed. Or do you believe we should just take these organizations at their word?

And regarding the First Amendment-- while the Constitution protects free speech, it is a novel interpretation of the First Amendment to imply that you should receive a tax deduction solely for the act of expressing a political opinion.

Organizations that are illegally exploiting their tax-exempt status in order to act as political organizations are violating the law and should be held accountable. Perhaps you feel there should be exceptions; if so, could you please justify, and explain what those exception should be?

Nailed it!

wiz329 · May 30, 2013

Cartaphilus said:
Apple set up its Irish sub in the 1980's by entering into an R&D sharing agreement. Under its terms the Irish sub paid one-half of Apple's R&D costs which were incurred in the U.S. and which contributed to the U.S. economy. In return, the Irish sub received the right to license the product of the R&D, intellectual property, which it sold to sales organizations doing business throughout the world other than in the Americas. An ignorant public and comedians can lash back all it wants, but Apple has absolutely nothing to apologize for. Nor does Congress. There is no fair tax law that can subject profits from operations outside the U.S. to U.S. taxes. Remember, Apple has already paid taxes in all these countries, including their much higher employment taxes and obligations. Unless the profits inure to the benefit of some U.S. domiciled company, which they do not, there is no nexus to the U.S. that justifies American taxation. Since Apple sells twice as much outside the U.S. than inside it, it should be no surprise that its U.S. tax bill is not based on its worldwide GAAP income.

Remember that Apple did not sell or transfer IP to its Irish sub, as is common, and part of the tax management strategy employed by Microsoft; Ireland earned its right to charge royalties on Apple R&D by taking the risk of paying for R&D that may never have produced anything worthwhile. Apple famously flirted with bankruptcy after Ireland had been paying R&D expenses for years. That Apple recovered and generated billions in sales outside the Americas was fortunate for Apple and fortunate for its Irish sub.

Uniformed, uneducated, and unsophisticated senators, comedians, and posters can criticize Apple all they like, but it doesn't make them right.

This clears up much of the issue in my mind. However, I'm still a little foggy on a couple points regarding the tax structure

What's the deal with the whole "tax resident" part of the issue? I watched the first 2/3 of the hearing, and it seemed to me that Levin had at least something of a point, even if he was way off base with much of his argument (not to mention his demeanor). Apple pays all local taxes on products that it sells in Europe and Asia; for products in the US, however, it must also pay corporate income tax on the profits at the end of the day. Levin's argument (and correct me if I'm wrong here) was that Apple isn't paying that second tax to anyone because the conflicting definitions of tax residency in the US and Ireland allows it to not have a technical tax residency ANYWHERE, thus not paying any income taxes to anyone on the profits accrued from sales in Europe and Asia. However, later in the hearing, he seemed to indicate that Apple was paying a very small tax (around 2%) on this income to the Irish government.

Obviously there is some complexity here, and I don't fully understand the structure. However, it seems to be the case that the US government considers AOI and ASI to be a resident in Ireland, but Ireland considers AOI and ASI a tax resident in the US (or at least, not a tax resident of Ireland), due to them being functionally managed and controlled by offices in the US. Thus, the result is that Apple doesn't pay any income taxes on profits accrued outside the Americas. If this is correct (and I'm not sure it is), it certainly doesn't seem "right" to me that a company have no tax residence whatsoever.

Cartaphilus · May 30, 2013

Here's a link that gives some idea of how Ireland taxes companies: http://www.revenue.ie/en/tax/ct/basis-charge.html

You'll see that a resident company pays tax on its worldwide profits, which puts a bit of a damper on companies locating there. If the decision-makers don't reside in Ireland, though, the company isn't resident, but tax treaties can set a rate by agreement. Once Ireland determined that the sub is not resident in Ireland, where it is incorporated, where it conducts its activities, and where its workforce resides, it's up to some other country to assert tax jurisdiction if it can. The decision-makers reside in the U.S., but U.S. tax law doesn't consider that fact in determining a company's tax residence. Accordingly, it is a company without a tax residence--but that was up to Ireland, and its leniency doesn't create or destroy any right in any other country to levy a tax.

Taxes are paid by Apple on the profits of sales in all countries, but, naturally, only on profits net of royalties which, for sales outside of the Americas, are paid to the Irish sub. Until those royalties are paid as dividends to the parent, though, there is no U.S. tax. The income from the invested dividends are subject to U.S. tax, which Apple pays.

As a matter of historic interest, Ireland gives a 25% tax credit on R&D expenditures. Perhaps that was the genesis of the Irish sub in 1980. Obviously, that benefit was eventually swamped by the income generated by the quid pro quo, the patents, but no one saw that coming 33 years ago. I don't think Apple was clever, particularly, and certainly not nefarious, I think they were just lucky. Certainly the U.S. Congress didn't create the benefit, nor was Apple anywhere close to being rich and powerful in 1980.

wiz329 · May 31, 2013

Cartaphilus said:
Here's a link that gives some idea of how Ireland taxes companies: http://www.revenue.ie/en/tax/ct/basis-charge.html

You'll see that a resident company pays tax on its worldwide profits, which puts a bit of a damper on companies locating there. If the decision-makers don't reside in Ireland, though, the company isn't resident, but tax treaties can set a rate by agreement. Once Ireland determined that the sub is not resident in Ireland, where it is incorporated, where it conducts its activities, and where its workforce resides, it's up to some other country to assert tax jurisdiction if it can. The decision-makers reside in the U.S., but U.S. tax law doesn't consider that fact in determining a company's tax residence. Accordingly, it is a company without a tax residence--but that was up to Ireland, and its leniency doesn't create or destroy any right in any other country to levy a tax.

Taxes are paid by Apple on the profits of sales in all countries, but, naturally, only on profits net of royalties which, for sales outside of the Americas, are paid to the Irish sub. Until those royalties are paid as dividends to the parent, though, there is no U.S. tax. The income from the invested dividends are subject to U.S. tax, which Apple pays.

As a matter of historic interest, Ireland gives a 25% tax credit on R&D expenditures. Perhaps that was the genesis of the Irish sub in 1980. Obviously, that benefit was eventually swamped by the income generated by the quid pro quo, the patents, but no one saw that coming 33 years ago. I don't think Apple was clever, particularly, and certainly not nefarious, I think they were just lucky. Certainly the U.S. Congress didn't create the benefit, nor was Apple anywhere close to being rich and powerful in 1980.

So -- to make sure I understand you correctly:

Some of Apple Inc's expeditures include royalties paid to AOI (or AEI, whichever one), which are essentially all profits earned on sales outside of the Americas. Thus they are not taxable income under US jurisdiction since they are expenditures.

The royalities collected by AEI and AOI as a result of the cost-sharing agreement of R&D are then not taxable by the US government since AOI and AEI are incorporated in Ireland. However, AOI and AEI (and the royalties, or profits) are also not taxed as normal Irish corporations since the decision makers are US residents. Instead, "tax treaties can set a rate by agreement." What exactly do you mean by this? Does this mean Ireland and the subsidiaries negotiate a tax rate to pay on income as though they were a tax resident?

What it then ultimately comes down to is that the US has no claim really on the AOI profits, because they weren't shifted overseas -- they were already there to begin with through international sales. Thus, how Ireland wants to tax them on this income is their perogative.

mrxak · May 31, 2013

Michael Goff said:
Except that somebody who doesn't have the money won't win because they won't get their message out there as well. It's just how it is. If you see one person with 400 ads and another with 40, you'll remember the guy with 400 because they had 400 ads.

It's never as simple as that. in the recent election, Romney outspent Obama considerably in battleground states like Florida, Iowa, Michigan, Minnesota, New Mexico, Ohio, Pennsylvania, Virginia, and Wisconsin. Romney lost them all. Money isn't everything in politics. I won't deny its role, especially with candidates who are relatively unknown, but you can't equate corporate lobbying with simple bribery, and the voters ultimately decide for themselves no matter how many ads they've seen.

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diazj3 said:
Of course they do! what do you think Citizens United is all about?

Your naiveté is just lovable... and sad.

Your simplistic view is sad. The world is a lot more complex than whatever you learned from a bumper sticker that one time.

Michael Goff · May 31, 2013

mrxak said:
It's never as simple as that. in the recent election, Romney outspent Obama considerably in battleground states like Florida, Iowa, Michigan, Minnesota, New Mexico, Ohio, Pennsylvania, Virginia, and Wisconsin. Romney lost them all. Money isn't everything in politics. I won't deny its role, especially with candidates who are relatively unknown, but you can't equate corporate lobbying with simple bribery, and the voters ultimately decide for themselves no matter how many ads they've seen.

Not all politicians are lucky enough to have somebody like Romney to go against.

Cartaphilus · May 31, 2013

wiz329 said:
So -- to make sure I understand you correctly:

Some of Apple Inc's expeditures include royalties paid to AOI (or AEI, whichever one), which are essentially all profits earned on sales outside of the Americas. Thus they are not taxable income under US jurisdiction since they are expenditures.

The royalities collected by AEI and AOI as a result of the cost-sharing agreement of R&D are then not taxable by the US government since AOI and AEI are incorporated in Ireland. However, AOI and AEI (and the royalties, or profits) are also not taxed as normal Irish corporations since the decision makers are US residents. Instead, "tax treaties can set a rate by agreement." What exactly do you mean by this? Does this mean Ireland and the subsidiaries negotiate a tax rate to pay on income as though they were a tax resident?

What it then ultimately comes down to is that the US has no claim really on the AOI profits, because they weren't shifted overseas -- they were already there to begin with through international sales. Thus, how Ireland wants to tax them on this income is their perogative.

Actually, Apple, Inc., the parent company, doesn't pay royalties to its Irish subs; the Irish sub receives royalties from other subsidiaries that sell Apple products outside the Americas, as provided by the R&D sharing agreement. The U.S., which has a territorial system of taxing corporations, wouldn't tax activities in Ireland even if they weren't incorporated there--as long as the activity is overseas, and the income isn't earned or paid to a U.S. based company, there is no U.S. tax. (Ireland doesn't care about place of incorporation either if the company is managed from elsewhere.)

There is a tax treaty between the U.S. and Ireland, and these can make exceptions to tax policy to avoid double taxation or evasion. Here's the text and cover memos: http://www.irs.gov/pub/irs-trty/ireland.pdf. It doesn't appear to affect the Apple subs, except for interest income from the funds. I believe this must be where that 2% tax figure Levin mentioned comes from.

In the end, unless and until the U.S. changes to a residential system for corporations, it is, as you say, up to Ireland to tax or not.

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Jon Stewart Takes on Apple's Appearance in Front of Senate Committee

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