Tax Break for Cargill Salt
In a hotly disputed case stretching back to 2003, Cargill Salt, a giant Minneapolis agribusiness company was recently awarded a $100 million tax break by the IRS. Back in 2003, the company sold 16,500 acres of industrial salt ponds in the South Bay to two government agencies for wetlands restoration purposes. The issue of contention was the selling price.
The selling price of $100 million was grossly underpriced in the opinion of Cargill Salt, which maintained the actual value of the property should have been $232 million. The balance, according to the company, was meant to be a donation to the public. Hence Cargill Salt sought a tax deduction for the difference of $132 million.
The area concerned was a massive 16,500 acre piece of land with a distinctive red and orange hue stretching from Hayward to San Jose to Redwood City along the West Coast. This particular area has been used for about a century to dry up salt used for roads, medicine and food. But, properly restored, its potential for wildlife conservation did not escape the attention of biologists and nature lovers. Hence, in a deal brokered by Sen. Dianne Feinstein (D – Calif.), Cargill Salt sold the salt ponds to the US Fish and Wildlife Service and the state Department of Fish and Game in 2003 for $100 million.
However controversy soon began to swirl around the project, in particular pertaining to the value of the land.
The US Fish and Wildlife Service hired an appraiser who valued the land at $243 million. On top of the disputed value, the appraisal also stated that under the Clean Water Act, the ponds probably could not be filled or developed. This further reduced the value of the land. In addition, the salt making rights to the ponds was calculated at $3,000 per acre but the appraisal set a cost of $20,000 mitigation value per acre. This meant that developers could buy the land at $20,000 per acre and develop it as wetlands to offset for environmental damage caused by their projects in other places.
Further complicating the issue was the fact that the valuation of $243 million was based in part on a withdrawn airport runway project by the San Francisco International Airport hence casting more doubt on the accuracy of the valuation.
The appraisal set the value of the land at $243 million, just $2 million more than what Cargill Salt claimed it was worth. After their own calculations, IRS auditors concluded that the land was worth $200 million and the agency agreed to give Cargill a tax break of $100 million. Although this is less than the $132 million claimed by Cargill, the company feels largely justified.
The actual value of the land is of great importance as it will determine values of future land sales around the same area. The final valuation and eventual tax break given to Cargill came as a disappointment to environmentalists hoping to buy stretches of nearby land for conservation as they felt that the land was over-valued, thus potentially jeopardizing their chances of acquiring land at a reasonable price.
Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.
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