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Amazon CEO Jeff Bezos is reportedly paying $165 million for a palatial Beverly Hills mansion and, according to SEC filings, for that price the Amazon AMZN, -0.70% founder could have footed the 2019 federal tax bill his company is planning to pay this year, and still have $3 million left over.
Bezos purchased the Warner Estate, originally designed in the 1930s for the late Warner Bros. T, -0.16% president Jack Warner, from music mogul David Geffen, The Wall Street Journal reported, citing people 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. But the tech giant so far has only paid $162 million on its 2019 bill, and the company will defer the remaining $914 million it owes in 2019 federal income taxes, the filing notes.
An Amazon spokeswoman 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 custom 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 the law.
Deferred taxes are a forecast that companies commonly use to predict taxes they will have to pay. There’s “no guarantee” companies ultimately pay that deferred sum, said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, a progressive tax think tank
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’ property-tax rate appears close to Amazon’s effective federal tax rate
In California, property-tax rates are calculated based on the home’s most recent sales price, so Bezos could pay around over $2 million in property taxes this year, significantly more than the national average of roughly $3,500 per home based on calculations by real-estate data provider Attom Data Solutions.
That’s significantly more than the previous owner, David Geffen, who reportedly owed more than $705,000 in property taxes on the Warner Estate, based on an assessed value of the property when he purchased it, according to data from real-estate website Zillow ZG, +0.10% ZG, +0.10% (A lawyer for Geffen did not respond to a request for comment.)
That equates to a national property tax rate that hovers at around 1.2%. Geffen was not immediately available for comment.California, property taxes are pegged at 1% of a home’s assessed value, and it cannot increase more than 2% year over year. On top of that amount, homeowners can pay additional real-estate taxes set by local authorities.
Stephen Whitmore, a spokesman for the county assessor’s office, said people may pay another 0.25% for various municipal expenses, like improving water systems, area schools and fire departments, he said.
While the California property-tax rate hovers around the single digits, so does Amazon’s corporate tax rate, according to Gardner. The Trump administration’s 2017 tax legislation cut the corporate income tax rate to 21% from the 35% rate under the Obama administration.
But Amazon’s effective federal-tax rate last year was 1.2%, based on how much the company has paid thus far, Gardner said. He arrived at the number by dividing the company’s more than $13 billion in pre-tax 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 16% from the start of the year. The Dow Jones Industrial Average DJIA, -0.09% is up 3% and the S&P 500 SPX, +0.18% is up 4.5% in that same time.
