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  1. #1
    DD's Collector Faded's Avatar


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    Sep 2006
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    The Delaware Loophole

    For those who don't know what this is, please follow this link or read on a bit before posting:

    http://www.wgal.com/video/21503696/index.html

    The Delaware "Holding Company" Tax Loophole or commonly referred as The Delaware Loophole is a legal method for companies in the United States, which later down the road gives them the right to not pay the state taxes that are given to businesses in the United States.

    How does it work?
    “Delaware Holding Company” is a term commonly used to refer to
    subsidiaries–often established in Delaware and Nevada--set up for the primary
    purpose of avoiding state taxes.
    • Often Delaware Holding Companies employ no one, produce nothing, and
    have one shareholder–the parent corporation that established it.
    • The parent corp. transfers ownership of trademarks, logos, etc. to the
    subsidiary. The parent then pays a fee to the subsidiary for the rights to use the
    trademarks. These fees transfer profits earned in Maryland and other states to
    the out of state subsidiary, where the income won’t be taxed.
    • Corporate tax avoidance costs the state as much as $200 million a year or more
    in lost revenues. This amounts to nearly $3 billion a year in Maryland-earned
    profits that are not taxed here.
    From http://www.marylandpolicy.org/html/rese ... er2004.pdf

    Basically, what it's allowing corporations in these corporate tax states, is allowing them not to pay their state tax because when they "sell over" these rights to the state without a corporate tax, all income made in the state without corporate tax isn't taxed whatsoever.

    Personally, I think it's retarded because of the fact that states are losing money such as Pennsylvania and the 600M that was lost because of this in I think 2008, it says in the video, but we know we can't stop something like this considering if we try doing something about it, big corporations like K-Mart, Wal-Mart, etc. will probably feel threatened because they can't do what they were doing, and will end up moving their businesses out of the state.

    I know people on other parts of the world, won't probably give a shit about this considering it isn't affecting them or anything, but I'd like to hear some input to this situation considering it is legal and all, do you think that this loophole should be legal or should be closed? I don't want this or plan on this being a VS. thread considering it is one topic, but I'd just like to hear some feedback from what some of the users who are into debating have to say about a method such as this one.
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  2. #2
    Dedicated Member Kahgro's Avatar
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    Re: The Delaware Loophole

    I need to start a company in Delaware!


    This has to be corrected. The fact that it's called a loophole implies it's an exploitation of the law.
    Quote Originally Posted by Kahgro
    Quote Originally Posted by Noob
    Son of a bitch!
    You called?
    OMG! What a Chomp!

  3. #3
    DD's Collector Faded's Avatar


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    Sep 2006
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    Re: The Delaware Loophole

    Quote Originally Posted by Kahgro
    I need to start a company in Delaware!


    This has to be corrected. The fact that it's called a loophole implies it's an exploitation of the law.
    Exactly but the problem in this though that it's tried being passed before and it failed which is kinda bad D:
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