N.C. judge rejects Wal-Mart's tricky tax scheme

Some good news for tax justice out of North Carolina: A Wake County court has rejected retail giant Wal-Mart's efforts to get a $30 million tax refund from the state. In a ruling made public Friday, Judge Clarence Horton Jr. agreed with the state Department of Revenue that the company was using tax shelters to hide its actual earnings.

"This isn't just a victory for the Department of Revenue, it is really a victory for every North Carolina taxpayer," department spokesperson Kim Brooks told the Raleigh News & Observer.

Wal-Mart filed suit against North Carolina in March 2006 after the state refused to let it get away with a scheme involving a real estate investment trust and a REIT holding company. Wal-Mart used the complex corporate structure to pay rent to itself, and then deducted the rent from its state taxes. Last year the Wall Street Journal reported that the so-called "captive REIT" strategy cut the company's state taxes by about 20 percent over a four-year period.

For more on the case and its implications, check out the WSJ's Law Blog and The Street. To read Judge Horton's findings, click here [PDF].