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Amazon CEO Jeff Bezos is reportedly paying $165 million for a palatial Beverly Hills mansion, and, according to SEC filings, with that sum the Amazon /zigman2/quotes/210331248/composite AMZN -2.16% founder could have footed the entire 2019 federal tax bill his company is planning to pay this year. He’d have $3 million left over.
Bezos purchased the Warner Estate, originally designed in the 1930s for the Warner Bros. /zigman2/quotes/203165245/composite T -3.77% president Jack Warner, from music mogul David Geffen, the Wall Street Journal reported , citing sources described as familiar with the transaction.
That surpasses the previous highest price paid for a home in California. Last year, media executive Lachlan Murdoch spent $150 million on Chartwell , the Bel-Air mansion famous from the television series “The Beverly Hillbillies.” Lachlan Murdoch is the son of media mogul Rupert Murdoch and co-chairman of News Corp, which owns Dow Jones & Co., publisher of MarketWatch and the Wall Street Journal. (A spokesperson for News Corp declined to comment.)
Amazon owes more than $1 billion in federal income taxes for 2019, according to SEC filings submitted last month . The online retail pioneer so far has paid $162 million on its 2019 bill, with the remaining $914 million owed in 2019 federal income taxes deferred, the filing noted.
An Amazon representative declined to comment on Bezos’s property purchase or the company’s tax rates but referred to a previous company statement on Amazon’s tax bill.
“We follow all applicable federal and state tax laws, and our U.S. taxes are a reflection of our continued investments, compensation of our employees, and the current tax rules,” the company said in a Jan. 31 blog post.
Amazon listed a “summary ” of its 2019 U.S. taxes as including $2.4 billion in other federal taxes, including payroll taxes and customs duties, and more than $1.6 billion in state and local taxes. The company also noted that it remitted nearly $9 billion in sales and use taxes to states and localities in accordance with applicable law.
Deferred taxes represent a forecast of the taxes companies will need to pay. There’s “no guarantee” companies ultimately make tax payments equal to their deferred figures, said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy.
Amazon’s deferred taxes “should eventually get paid, but companies can also defer this for a long time,” said Andrew Schmidt, an accounting professor at North Carolina State University. “Deferred taxes arise because there are differences in the way companies account for assets, liabilities, revenues and expenses for financial reporting purposes compared to tax purposes.”
Bezos’s property-tax rate appears close to Amazon’s effective federal tax rate
In California, property-tax rates are calculated based on a home’s most recent selling price, leading to the inference that Bezos could pay around over $2 million in property taxes this year, as compared with the national average of roughly $3,500, based on calculations by real-estate data provider Attom Data Solutions.
That’s significantly more than the previous owner, Geffen, who reportedly would have paid more than $705,000 in annual property taxes on the Warner Estate, based on an assessed value of the property when he purchased it, according to data from the real-estate website Zillow /zigman2/quotes/205077794/composite ZG -11.57% . Geffen was not immediately available for comment, and a lawyer for Geffen did not respond to a request for comment.
What homeowners ultimately pay in real-estate taxes depends on rates levied by a number of local authorities. Nationwide, the average property-tax rate hovers at around 1.2%. In California, property taxes are pegged at 1% of a home’s assessed value, and a property-tax bill cannot increase more than 2% from one year to the next.
Stephen Whitmore, a spokesman for the Los Angeles County assessor’s office, said property owners in the county might expect to pay roughly another 0.25% of a property’s valuation for various municipal expenses, like improving water systems, area schools and fire departments, he said.
Like California property-tax rate, Amazon’s corporate tax rate is also in the low single digits, according to Gardner, from the Institute on Taxation and Economic Policy. The Trump administration’s 2017 tax overhaul cut the corporate tax rate to 21% from a prior 35% rate.
But Amazon’s effective federal tax rate last year was 1.2%, based on what the company has paid thus far, said Gardner. He arrived at the number by dividing the company’s more than $13 billion in pretax domestic income by the $162 million it’s planning to spend on federal income taxes this year. If factoring in deferred taxes, the effective federal tax rate jumps to 8%.
Amazon shares are up about 15.5% since the start of the year. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -4.44% is up 3% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -4.41% is up 4.6% in that time.