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Wal-Mart presses claim to recover $28 million in overpaid taxes


In December 2015, Wal-Mart filed a complaint in U.S. District Court against the then-commonwealth Treasury secretary challenging the legality of the alternate minimum tax, known as Act 72.

By The Star Staff


Despite the confirmation of the commonwealth debt adjustment plan, Wal-Mart refuses to settle a claim to recover $28.3 million from the government for overpayment of income taxes during the 2016 tax year after the megastore successfully challenged the imposition of an alternate minimum tax (AMT).


The Financial Oversight and Management Board said Treasury Department records show such a credit of $28.3 million has been applied to 2017 tax year liabilities.


On Dec. 4, 2015, Wal-Mart filed a complaint in U.S. District Court against the then-commonwealth Treasury secretary challenging the legality of the AMT, known as Act 72.


In essence, Act 72 increased the tax rate applicable to the AMT’s component of the purchases of tangible property from a related party or home office. Act 72 increased the maximum tax rate to 6.5% of the gross value of such purchases if the taxpayer’s gross receipts derived from a trade or business in Puerto Rico were $2.75 billion or more.


“This augmented rate was applicable to a single taxpayer in Puerto Rico: Wal-Mart,” the store said in a filing in the commonwealth’s Title III bankruptcy process.


As acknowledged by then-Treasury Secretary Juan Zaragoza Gómez, “the top tax rate under the tangible property component of [the AMT] is a Wal-Mart tax only.”


The amendments to the Puerto Rico Internal Code introduced by Act 72 were effective for taxable years commencing after Dec. 31, 2014.


Wal-Mart paid the commonwealth over $45 million for ATM taxes during the taxable year ended on Jan. 31, 2016. Those taxes were paid through estimated tax payments made by Wal-Mart for that taxable year.


Wal-Mart then challenged the validity of Act 72 before the Puerto Rico District Court, as a violation of the Commerce Clause and the Equal Protection Clause of the Fourteenth Amendment of the U.S. Constitution and sought to enjoin the Treasury Department from applying the ATM tax as amended by Act 72.


The District Court granted the complaint and issued an injunction against the Treasury secretary enjoining application of the AMT tax. The decision was affirmed by the Appeals Court.


By the time of the appeal to the First Circuit, Congress had approved the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). In its decision, the Court of Appeals ruled that “PROMESA’s stay provision does not apply to this case.”


Act 72’s amendments were effective for taxable years commencing after Dec. 31, 2014. Wal-Mart’s taxable year runs from Feb. 1 to Jan. 31. Accordingly, the unconstitutional AMT was imposed for the first time in Wal-Mart’s Corporation Income Tax Return for the taxable year ended Jan. 31, 2016.


In its motion, Wal-Mart is disputing claims that it completely used its income tax overpayment.


“The Fiscal Board’s Omnibus Objection lacks merit. Wal-Mart’s Proof of Claim no. 160793 should not be expunged from this proceeding,” Wal-Mart said. “Wal-Mart accepted AD 16-11, which allowed Wal-Mart to credit the income tax overpayment resulting from the invalidation of the AMT as amended Act 72 to taxable years commencing after January 1, 2016 and thereafter ‘until such excess is exhausted.’”


The retail giant has asked to be heard at a May 18 omnibus hearing in U.S. District Court.

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