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The Change of Corporate Domicile, Tax Planning and Legal Environment
Lawrence Henry Bajor,
Bowling Green State University
ABSTRACT. This paper empirically evaluates the practitioner anecdotal evidence that good state and local tax planning dictates a Delaware or Nevada domicile for corporations. It examines a sample of 142 active COMPUSTAT companies changing corporate domicile during the period 2000 through 2006. It finds that the incidence of corporations selecting a Delaware or Nevada domicile to be significantly greater than that which would be expected by chance. It also determines that Delaware is chosen with greater frequency than other states which would provide an identical tax benefit. It suggests that when tax planning and other administrative motivations present themselves they are preferred to tax benefits alone. These results support the hypothesis that taxpayers act with self-interest. This study contributes to the literature on state and local tax planning.
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