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Live Blogging of US Senate Hearing on Apple

12:20 pm – Subcommittee recessed.  More to come @4TaxFairness and online at AmericansForTaxFairness.org

12:07 pm – KEY EXCHANGE:

–McCain: Do you have an unfair advantage compared to smaller domestic companies?

–Cook: No that’s not how we view it.  We pay a 35% rate in the US. We do have a low tax rate outside the US for products sold outside the US. I don’t see this as shifting.

–McCain: Why does AOI exist?

–Cook: AOI was created in 1980. … we built up a significant skill base there. I think it’s important to understand that AOI is a holding company.  It’s not an operating company. So the dividends that go into it have already been taxed.  AOI to me, sir, is nothing more than an efficient setup to manage Apple’s cash that has already been taxed.

–McCain: Where is it a tax residence?

–Cook: It is not in a tax residence.

–McCain: Does that sound logical? … Can you understand there is a perception here of an unfair advantage?

–Cook: I don’t see it as unfair. I’m not an unfair person.

12:06 pm – Cook: “I really would like comprehensive tax reform to pass this year.”

12:05 pm – McCain begins questions to Mr. Cook.

12:04 pm – Apple confirms to Levin question that AOI has earned $30 billion through dividends and no tax return has been filed for it.

12:02 pm – Apple confirms to Levin question that AOI is a holding company.  It’s role is to own Apple subsidiaries.

12:01 pm – Apple confirms to Levin question that no US tax has been applied on AOI balances. It further confirms that Ireland does tax approx. 2 percent of the balance of AOI.

11:58 am – Cook confirms to Levin question AOI [Apple Operations International] is managed and controlled from within the United States. AOI is in Ireland and a key entity that is keeping offshore profits from being taxed.

11:52 am – Oppenheimer: “Apple respectfully suggests that any objective analysis will conclude that this decision was in the best interests of our shareholders.”

11:51 am – Key line by Oppenheimer: “If Apple had used foreign earnings… the funds would have been diminished by the very high U.S. corporate tax rate of 35%.”

11:49 am – Apple CFO Peter Oppenheimer is now offering opening remarks.

11:46 am – Cook on tax reform: “This reform should be revenue neutral.”

11:44 am – Cook: “The tax code has not kept up with the digital age.”

11:43 am – Cook: “Apple paid an effective tax rate of 30.5 percent [in 2012].”

11:38 am – Cook: “We are proud to be an American company.”

11:37 am – TWEET PIC: @TrevorThomasMI Apple CEO Tim Cook testifies right now. http://instagram.com/p/ZlD650PeU1/ 

11:36 am – Apple CEO Tim Cook takes his seat.

11:31 am – Sen. Claire McCaskill: “I love Apple… I am Apple… I use it.  I’m proud of Apple.  …But at the same time we need to make sure we’re receiving enough taxes to fix our roads, bridges, educate our kids… we got to make sure we have a tax structure that supports those goals.”

11:26 am – Recap as we await Apple CEO Tim Cook’s testimony. Answering the general question – WHY HOLD A HEARING TODAY? Via subcommittee release – Sen. Levin: “Our purpose with these hearings is to shine a light on practices that have allowed U.S.-based multinational corporations to amass an estimated $1.9 trillion in profits in offshore tax havens, shielded from U.S. taxes. One study has estimated that offshore earnings stockpiled by S&P 500 companies using these techniques have increased 400 percent in the last decade.”

11:18 am – Sen. McCain: “I agree that a lot of the responsibility lies with Congress.”

11:15 am – HOW CAN A COMPANY REALLY NOT PAY TAXES? The answer from the subcommittee report: “Apple established at the apex of its offshore network an offshore holding company that it says is not tax resident in any nation. That subsidiary, Apple Operations International, has no employees and no physical presence, but keeps its bank accounts and records in the United States and holds its board meetings in California. It was incorporated in Ireland in 1980, and is owned and controlled by the U.S. parent company, Apple Inc.  Ireland asserts tax jurisdiction only over companies that are managed and controlled in Ireland, but the United States bases tax residency on where a company is incorporated. Exploiting the gap between the two nations’ tax laws, Apple Operations International has not filed an income tax return in either country, or any other country, for the past five years.  From 2009 to 2012, it reported income totaling $30 billion.”

11:13 am – MCCAIN STATEMENT: “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders. A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue. It is important to understand Apple’s byzantine tax structure so that we can effectively close the loopholes utilized by many U.S. multinational companies, particularly in this era of sequestration.”  http://1.usa.gov/10fXdRj

11:10 am – LEVIN STATEMENT: “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven. Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed.” http://1.usa.gov/10fXdRj

11:07 am – WHAT IT ALL MEANS?  Here is the tax scheme in sum:  “Apple’s claim that two key offshore companies are not tax residents of Ireland, where they are incorporated, or of the United States, where Apple executives manage and control the companies.  One of those Irish subsidiaries has paid no income taxes to any national tax authority for the past five years.” http://1.usa.gov/10fXdRj

11:05 am – NEW MEMO RELEASED: The subcommittee is releasing a 40-page memorandum with findings and recommendations on offshore profit shifting.

11:00 am – TWEET PIC: @TrevorThomasMI Apple CEO Tim Cook is seated http://instagram.com/p/Zk_kcTPeQB/ 

10:55 am – ICYMI – Press release from the Permanent Subcommittee on examination of offshore tax practices by Apple: http://1.usa.gov/10fXdRj

10:53 am – TWEET PIC: @TrevorThomasMI Dun dun dun – testimony by Apple CEO Tim Cook to start shortly http://instagram.com/p/Zk-no8Pee2/ 

10:45 am – Mr. Shay: “The subcommittee is to be applauded for exposing international tax practices that are not easily discernible from public financial statements. …I encourage the subcommittee to pursue reforms in the short term to adequately protect the U.S. tax base.”

10:42 am – Mr. Shay: “Our international tax laws are out of balance”

10:39 am – Mr. Shay is the last witness for panel 1.  Apple CEO Tim Cook, part of panel 2, will be up next.

10:36 am – Stephen E. Shay of Harvard Law School is making his statement to the subcommittee as a witness.

10:33 am – NPR: Apple CEO Faces Senate Panel’s Accusations Of ‘Tax Gimmickry’ – http://n.pr/13HTMXN

10:31 am – REMINDER: APPLE FACT SHEET available here: http://huff.to/14MPZaw

10:25 am – Mr. Harvey points to a statement that he finds troubling where Apple told the media yesterday: “Apple does not use tax gimmicks” – http://huff.to/14MPZaw

10:23 am – J. Richard Harvey makes statement to subcommittee. Mr. Harvey is from Villanova University School of Law.

10:17 am – Sen Levin slams Sen. Rand Paul – Levin in strong tone: “No company should be able to determine how much its going to pay in taxes… using all kinds of gimmicks. They make use of this country.. they don’t have a right – in my book – [to decide] how many taxes they are going to pay.  … it’s not right!”

10:12 am – @TaxJustice Apple’s own SEC filings betray that it put a billion $ in tax havens – this fiscal year alone, http://ow.ly/ldUIB 

10:09 am – You can WATCH THE HEARING LIVE here: http://1.usa.gov/13mxreF

10:03 am – Sen. McCain starting his remarks now.

10:01 am – WOW – FACT OF THE DAY? Sen. Levin: “Apple avoided the payment of $9 billion in U.S. taxes, which works out to avoiding $25 million a day, more than $1 million an hour, in taxes.”

9:58 am – Sen. Levin: “What Apple doesn’t say is that, also in 2012 alone, it shifted $36 billion in sales income away from the US and paid no U.S. tax.”

9:52 am – Sen. Levin: “Again, the intellectual property that generates Apple’s profits was created in the United States, but most of the profits are assigned to Ireland.”

9:50 am – $100 billion not taxed? Check out the chart by Citizens for Tax Justice: http://bit.ly/17YqXd0

9:48 am – Heck of a quote: Sen. Levin: “Are these offshore corporations so totally controlled by Apple Inc. that their identity as separate companies is a sham and a mere instrumentality of the parent, and if so, whether Apple’s claim that AOI and ASI owe no U.S. taxes is a sham as well.”

9:45 am – FULL LEVIN REMARKS – http://1.usa.gov/11UXake

9:42 am – Sen. Levin: “Apple’s tax avoidance strategy comes in two parts: first, it executes a shift of the profit-generating power of its intellectual property to an offshore tax haven, thus directing the resulting income to the tax haven. Next, it uses a number of tactics to ensure that, once this income is offshore, it remains shielded from U.S. taxes, despite provisions of U.S. tax law designed to capture that income as taxable.”

9:34 am – Sen. Levin making opening remarks. “Today the subcommittee will focus on how Apple effectively shifts profits offshore…” Levin said.

9:32 am – Sens. Carl Levin and John McCain are seated.

9:20 am – Team ATF is seated and awaiting the Senate hearing to begin shortly. Please check @4TaxFairness on Twitter for the latest information as well.

9:15 am – FACT SHEET ON APPLE – http://americansfortaxfairness.org/badapple/

OVERALL BACKGROUND: Today the Subcommittee is holdings its second hearing to examine how U.S.-based multinational corporations use loopholes in the tax code. Today’s hearing will focus on how Apple effectively shifts billions of dollars in profits offshore, profits that under one section of the tax code should nonetheless be subject to U.S. taxes.

NEW REPORT BY CTJ – An analysis of Apple Inc.’s financial reports makes clear that Apple has paid almost no income taxes to any country on its $102 billion in offshore cash holdings. That means that this cash hoard reflects profits that were shifted, on paper, out of countries where the profits were actually earned into foreign tax havens – http://bit.ly/17YqXd0

WORTH A READ – The New York Times today – http://nyti.ms/10ICjJi