Darden has acknowledged it operates REITs in a similar manner to other companies that experts say have used them to cut taxes.
The REITs then pay dividends back to Darden in Florida, where the company avoids increased taxes from that income by canceling it out with the expenses of renting restaurants in other states. It can do that by filing a single, combined tax return in Florida for itself and its various subsidiaries.
The strategy is a "completely circular shifting of income," said Michael Mazerov, a senior fellow with the Center on Budget and Policy Priorities in Washington, D.C. The liberal-leaning research group encourages states to crack down on corporate tax shelters.
Darden says its strategy does not cost Florida anything because its REITs don't own any restaurants in this state. Florida levies sales tax on commercial rent — including rent paid from one company subsidiary to another — which experts say would offset any corporate-income tax savings gained through a rental REIT.
Experts say the use of REITs doesn't affect federal income taxes, because the federal government taxes dividends paid to corporate owners.
Captive REITs are one of a number of so-called "tax planning" methods that experts say have contributed to erosion of corporate taxes around the country. From 1992 to 2009, state corporate income taxes fell from 4.4 percent of total corporate profits to 3.07 percent, according to the Center for Business and Economic Research at the University of Tennessee.
Darden made $407 million in profit from continuing operations last year, after an income-tax expense of $136.6 million. The vast majority of that tax bill was in federal taxes.
The company has steadily whittled its tax rate over the years. Annual reports show that its effective income-tax rate — the rate at which it actually pays state and federal income taxes, after factoring in credits and other deductions — has dropped from 35.5 percent to 25.1 percent over the past decade.
The company says the decrease is primarily because of federal wage-related credits and hiring incentives, as well as deductions for charitable giving.
This spring, the company got a break from the Florida Legislature allowing it to extend the life of corporate-income tax credits associated with an incentive package it got to stay in Orange County and build its new corporate headquarters here. Darden said it had been unable to realize the full value of those tax credits so far, because it wasn't paying enough in Florida corporate income taxes.
"Darden's goal is to grow as a business, and we have a fiduciary responsibility to our shareholders to manage our resources responsibly as we execute our formula for growth," the company said in an email. "One of the many ways we do that is by working to achieve a low effective tax rate. By doing so, we are able to reinvest in that growth; in turn creating more jobs, more opportunities for our employees and more value for our shareholders."'
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