Verizon Faces More Allegations on Tax Evasion

By Josh Long

Verizon Communications is continuing to face allegations that it’s not paying its fair share of taxes despite ranking as one of the largest and most profitable companies in America.

A report released today and prepared by Citizens for Tax Justice and Good Jobs First  claims that Verizon received federal tax subsidies of $12.3 billion between 2008 and 2011 and paid an effective federal tax rate of negative 2.9 percent.

“All in all, Verizon is one of the country’s most aggressive corporate tax dodgers,” claims the report, “Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies.”

New York-based Verizon asserts the report like a similar one released earlier this month is a gross misrepresentation of the facts.

“This is a rehash of the same inaccurate and politically motivated statements that union-orchestrated front groups like the CTJ have been making for some time. The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes,” Robert Varettoni, a Verizon spokesman, told us. “As stated in our 10Ks, Verizon has paid more than $7.5 billion over the past five years in state and federal income taxes alone. This amount does not include other taxes, such as property taxes, taxes on gross receipts, payroll taxes and right-of-way fees.”

A Biased Agenda?

Representatives of Verizon also reiterate the company has paid $1.79 billion in taxes on earnings of $5.25 billion over the 2008-2010 period. And in a letter this summer addressed to AFL-CIO President Richard Trumka, Verizon Chief Communications Officer Peter Thonis wrote that the company had a federal tax liability of $2.2 billion last year and “paid $430 million in state and federal taxes, net of refunds.”

“Deferred taxes  resulting from the bonus depreciation provision enacted by President Bush in 2008 and extended by President Obama through 2012  are a main reason for the timing difference between our federal tax obligations and our federal tax payments,” Thonis explained.

Verizon reps also maintain that the recent tax reports are clearly biased at a time when Verizon is negotiating with the unions  the Communications Workers of America and International Brotherhood of Electrical Workers  over a new contract that would cover about 45,000 employees and replace an agreement that expired over the summer. Eight of the 13 board members with Citizens for Tax Justice are executives in national unions, said Varettoni, including CWA President Larry Cohen.

Verizon Dodging Taxes?

But the CTJ and Good Jobs First report portrays the telecommunications giant as a master in the art of dodging state and federal taxes and comes on the heels of an earlier report this month that claims Verizon paid no federal income taxes in 2009 and 2010.

“This is a company that doesn’t contribute very much to support the United States government,” said Robert McIntire, director of Citizens for Tax Justice and one of the lead authors of the report, during a call Tuesday with the press hosted by the CWA, which represents about 35,000 Verizon workers.

The latest report also declares Verizon only handed over $866 million in corporate income taxes over three years when it should have paid $2.3 billion while managing to avoid $1.5 billion in taxes on the sale of landline assets by exploiting a tax loophole called the “Reverse Morris Trust.” Another finding: Verizon and its joint venture with Vodafone Group Plc, Verizon Wireless, also benefited from $180 million in special tax breaks and grants in 13 states thanks to an aggressive policy of seeking state and local tax subsidies through abatements, credits and exemptions.

Philip Mattera, research director of Good Jobs First, said Verizon also negotiated $460 million in subsidies to build a data center in upstate New York but Verizon scrapped that plan after acquiring Terremark. The report also alleges that Verizon seeks to reduce local tax payments by challenging property tax assessments. In Massachusetts, for example, the company filed hundreds of appeals and imposed a surcharge on customers to make up for the additional taxes it had to pay after losing, Mattera said.

Varettoni said many companies  including Disney, Viacom and P&G  take advantage of the 14-year-old Reverse Morris Trust tax provision, which allows a spun-off company to acquire or merge with a smaller entity without impacting the tax-free status of the spinoff.

“Similarly, when we build out call centers and create jobs in locations, we of course consider tax subsidies offered by the states/municipalities to attract jobs to their jurisdiction,” Varettoni said. “Also, it is not out of the ordinary for either individuals or corporations (who have a fiduciary obligation to shareholders to make sure they are not being unfairly taxed) to challenge property tax assessments if they think the value a local municipality puts on their property is incorrect  that is why the law provides a challenge mechanism.”

Based in Washington, D.C., Citizens for Tax Justice is a public interest research and advocacy organization focusing on local, state and federal tax policies. Good Jobs First is a Washington, D.C.-based organization that describes itself as “the nation’s leading resource for grass roots groups and public officials seeking to make economic development subsidies more accountable and effective.”