California based Twitter makes plans to sidestep the IRS

Even though California based Twitter hasn't made any money this year, it is doing some major tax planning. Just as Apple and Facebook have made moves to sidestep the IRS, Twitter is taking steps to move out of the country to save on taxes. These plans are being made seemingly alongside plans for an initial public offering (IPO) that could make the company and its shareholders rich.

As many California businesses already know, the state has the highest taxation in the nation. After the IRS takes its 35 percent, the state takes its share as well. According to the Tax Foundation's 2014 edition of the State Business Tax Climate Index, California is the worst state for businesses when it comes to taxes. This would certainly cut into any profits that are bound to be made from Twitter's IPO.

So, in order to combat this, the company is moving a portion of its business, and a good amount of its money, to Ireland. The corporate tax rate there is only 12.5 percent and currently, that money can only be taxed by the United States if it is brought back into the country, which may never happen. The way the Irish system is currently set up, it's possible for companies to either defer or pay lower taxes.

There are rumblings that Ireland will change its current structure, but until then, companies such as Twitter, Apple and Facebook are taking advantage of the lenient laws. Unlike some companies, Twitter is mainly comprised of intellectual property, so moving its business out of the country isn't as difficult as it would be for other companies. Having a good, and legal, tax plan can such as this can save a company a substantial amount of money, and there seems to be nothing the IRS can do about it -- at least for now.

Source: Forbes, How Twitter Hopes To Reduce Its Tax Bill (In 140 Characters Or Less), Kelly Phillips Erb, Oct. 19, 2013

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