Audit Notes: Amazon’s shell company, The Lens, Plain Dealer cuts

Reuters unwinds how the online retail giant avoided taxes via Luxembourg

Reuters has a nice investigation into Amazon’s vigorous tax avoidance, and this time it’s not about sales taxes.

The wire service traces why the IRS wants the company to cough up $1.5 billion in back taxes Amazon attempted to shield itself from in Luxembourg. It’s complicated, but the scheme basically involves Amazon transferring its intellectual property to a shell company it created in the tax haven:

Michael McIntyre, a tax expert at Wayne State University in Michigan, said that while Amazon’s arrangement, and others like it, looked like commercial transactions, they actually only served to reduce taxes.

“The IRS shouldn’t be happy about this,” he said. “It sounds like they’re not”…

Shay, the Harvard professor who contributed to a recent Congressional committee investigating tax avoidance, said the fact the Luxembourg unit charged a much higher price than it paid for the right to license Amazon intellectual property could open the company to an investigation into whether it is engaging in abusive transfer pricing.

— Speaking of the IRS, at long last it is beginning to clear out its backlog of news startups who have applied for nonprofit tax status.

SF Public Press got its approval in September after a 32-month wait. Now New Orleans’s The Lens says that after 26 months, it has finally gotten its 501(c)(3) application approved. That’s critical, as I wrote a year ago, because it will make it easier for The Lens to raise money to support its investigative journalism.

The designation opens up more funding opportunities for The Lens; some foundations choose to grant money only to official 501(c)(3) organizations. It also streamlines the process for individual donations, which are tax-deductible.

It comes at a good time, too, as Advance Publications has slashed the Times-Picayune’s newsroom and fired or lost many of its best reporters.

— Advance continues to roll out its model across the country. The Cleveland Plain Dealer is next, with one-third of its already-diminished newsroom on the chopping block, along, presumably, with several days of its print edition.

The New Republic’s Alec MacGillis asks what will the inevitable void opened up by the Plain Dealer’s retrenchment:

It’s really getting to the point where we have to ask: If a tree—or a union or a company or a corrupt local official—falls in Ohio or Michigan or anywhere else outside the well-covered coastal precincts, will anybody hear it? And if not, what is to be done?

As I see it, part of the solution is going to have to come from outside these cities—from the national media capitals. Even as coverage has been withering in the provinces, it’s been expanding in the Acela Corridor, where the likes of Bloomberg, Reuters, Politico and the National Journal/Atlantic empire are vying to provide the most granular coverage of the Beltway and Wall Street. This coverage is surely nearing the saturation point, especially given how much of the real business and political action is happening out in Real America. Which means that the big Beltway players may start to realize that their competitive advantage will lie in doing a better job of covering Cleveland and Columbus and Lansing and Austin and Tallahassee and Chicago. Heck, they might even hire some of those laid off local reporters who know the lay of the land, and where the bodies are buried, and whether a governor’s claims about anti-union legislation hold up to scrutiny.

I’d like to think MacGillis is right, but I’m not optimistic. And even if he is, the institutional clout of a good local newsroom is never going to be matched by a few out-of-towners.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,