When Caterpiller announced it was joining other big corporations like Boeing and moving its headquarters to downtown Chicago, Crain’s reported that it took some analysts by surprise.
Aides to Gov. Bruce Rauner say they heard about the move “this morning” and the administration was “not involved” in the decision. With Cat apparently moving existing jobs to Chicago rather than creating new ones, the company would be ineligible for Edge payroll tax credits under changes to the incentive program adopted by Rauner.
City Hall isn’t yet commenting on whether it was aware of the decision, but companies almost always notify the city when they’re setting up shop in town.
Mayor Rahm Emanuel did release a statement, saying:
“Chicago’s unparalleled talent and status as a global transportation hub give a global company like Caterpillar the tools they need to thrive for generations to come. Chicago’s strengths benefit companies throughout the region, and we look forward to working with Caterpillar as they prepare to make this move towards their future.”
The city’s main incentive program is tax-increment financing. But most of the downtown area no longer is included in a TIF district, and giving tax breaks to a company that already has publicly announced its intention to move would be politically difficult.
The Edge payroll tax credit allows giant corporations in Illinois to keep the state income tax it collects. But it is supposed to be contingent on so-called job creation.
Moving 300 executive jobs form Peoria to Chicago doesn’t qualify.
Lot of major corporations are moving their headquarters to downtown Chicago. The execs like the lakefront condos and city restaurants and bars.
Peoria doesn’t provide that.
Caterpiller wasn’t worried about losing that tax benefit. It had other plans to cheat on their taxes.
Yesterday the feds raided Caterpiller headquarters as part of an investigation of tax evasion.
The investigation appears to stem from revelations about the company’s tax strategy as outlined in a 2009 federal wrongful termination lawsuit brought by Daniel Schlicksup. The lawsuit alleged the company shifted profits overseas and to offshore shell companies to avoid paying more than $2 billion in U.S. taxes. Schlicksup settled the suit in 2012.
Two billion.
Caterpiller’s recently fired its CEO, Doug Oberhelman.
A friend tells me that Oberhelman was at Monmouth College’s few years ago pontificating on how horribly run the state was. Mostly it was about how greedy pensioners were.
The Peoria Journal Star reported yesterday:
In the February filing, the company included the following statement on legal proceedings: “On January 8, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requests documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries).”
The statement continued: “The Company has received additional subpoenas relating to this investigation requesting additional documents and information relating to, among other things, the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL and related structures. The Company is cooperating with this investigation.”
In his complaint against Caterpillar, Schlicksup alleged the company sold and shipped spare parts globally from its warehouse in Morton while attributing at least $5.6 billion of profits from those sales to a unit in Geneva, Switzerland. This scheme, which operated from 2000 to 2009, was known as the “Swiss structure.” Caterpillar SARL is based in Geneva.
A different strategy, the “Bermuda structure,” allegedly involved shell companies that had no business operations returning profits to the United States without paying taxes on them.
Greedy pensioners.
Karen Lewis is our guest today on Hitting Left with the Klonsky Brothers.
