Pittsfield Council Questions 'Loophole' for Big Box Retailers
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The council heard a petition from Ward 6 Councilor John Krol asking that Walmart come before them to explain a significant reduction in tax revenue to the city from the 2011 to 2012 fiscal years.
Tax Assessor Paula King was called before the council, and explained that the reduction in tax revenue from the Hubbard Avenue retail location came as a result of a change in the way the store files for taxes with the commonwealth. Before 2003, King said, the Walmart was classified as a corporation, which exempted it from paying personal property taxes on such things as inventory and refrigeration units, the latter of which they did not have at that time. From 2003 to 2011, Walmart was filed under a different type of ownership known as a "foreign limited partnership."
"At some point, Massachusetts state law had changed so that when limited partnerships file their federal income tax in that manner, it allows them to become classified for personal property purposes as a business corporation," King told the Council. This then entitles the company to the exemption on inventory and refrigeration systems.
"So on this personal property tax side ... through a stroke of a pen, they saved something like 88 percent from their personal property taxes, to the tune of about $187,000?" Krol asked the assessor.
King affirmed that this is basically the case; because of the way that Walmart is now filing federal income tax, it is legally entitled to this exemption. North Adams also lost tax revenue from its Walmart store.
Krol said in light of the explanation from the assessor, "I don't think we'll have much of a point bringing Walmart to the City Council. We know how they did it, and what they did, the question now is how in the commonwealth of Massachusetts are we allowing big box stores to have what is essentially a significant exemption that's provided for corporations."
He suggested that the council vote "to send a letter to our state delegation, to have this conversation with the Department of Revenue, and to understand ways that perhaps we can find a way to designate the big box stores specifically at a higher tax rate."
"I think that big box stores, and the benefit for Pittsfield, is negligible," Krol said, referring also to what he called the "very unpopular" plan to place such a retailer on the William Stanley site.
Councilor Christopher Connell asked King if there might be other, medium-sized stores that on hearing this might look into changing their form of ownership to take advantage of reductions in personal property, "and we could have a continued eroding of the taxes, and as a result puts more burden on the residential and commercial sides."
King said that other stores she checked on, including most of the other retailers located at the Berkshire Crossing shopping complex, are already incorporated this way, as Walmart was when it first came here.
Councilor Barry Clairmont said he would support the greatly revised petition, for the sake of having further discussion, but expressed skepticism about how far it would really go.
"As a certified public accountant, I can tell you that Walmart has a team of accountants that make decisions for them as to why they're going to be the type of entity that they are, and I can also tell you that the personal property tax is not the overriding decision behind their form of ownership."
Clairmont said that because of the way Walmart and other retailers are classified currently, "The state is now collecting revenue of this inventory, albeit at a rate of a little less than 10 percent of what we would collect it at. The state now has that money going into their coffers, so for them to have the discussion to send it back to us is not in their best interest."
Krol amended his original petition to ask the council to send a letter to the state delegation "voicing our concerns about what I would deem this particular loophole for Walmart."
The motion was approved by unanimous vote of the council.
Tags: taxes, Walmart,
