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Editorial

The Right Choice For Our Community At FJA

f the disagreement among those
who care about Frankel Jewish
Academy (FJA) were only about the
school's governance, curriculum and
interpretation of its bylaws and mission,
then it would be no greater than the
periodic friction that can be found in
many school board rooms.
While the disagreement would be
uncomfortable, with the accompany-
ing doses of hurt feelings, mistrust
and threats of financial retaliation,
ultimately, the focus would be on the
product – what's best for the students
– and parents would decide if the value
being received is worth the investment
in tuition and time.
By any reasonable measure, Frankel
Jewish Academy's product has been
and continues to be very good. Its
students are knowledgeable, curious
Zionists who are poised to be the future
leaders of our community. Though only
in existence for 13 years, it's hard to
imagine a time when our community

didn't have a high school of this caliber
providing an option for those who oth-
erwise wouldn't be sending their sons
and daughters to one of our Orthodox
day schools.
But the internal discord at Frankel
Jewish Academy in West Bloomfield,
festering for more than two years, espe-
cially as to who is qualified to teach
Judaic studies, overlooks a fundamental
fact: the Detroit Jewish community and
its Federation was the school's midwife.
From strategy and planning to physi-
cal plant and unprecedented funding,
there would be no Frankel Jewish
Academy without the community's
hechsher – seal of approval. Coupled
to this was a belief that the new school
would be additive and not undermine
another beneficiary of the community's
vision and dollars by encroaching on its
modern Orthodox legacy – Southfield's
Yeshivat Akiva, whose high school has
lost some would-be Akiva ninth-graders
to the newer Academy.

So, while the parties at FJA continue
to confront each other without any dis-
cernible progress on the most pressing
aspects of their disagreement (one side
has sought judicial intervention from
the Oakland County Circuit Court), they
also are choosing to erode the very
fiber of our community's uniqueness –
its ability to think and act as one for the
good of all.
This disagreement is infecting the
broader Jewish community, pushing
some of our community's best and
brightest leaders into opposing corners
while straining, if not shattering, friend-
ships. If peace isn't made soon, it runs
the risk of permanently sapping the uni-
fying strength of Federation and diluting
its Annual Campaign message.
Founding headmaster Lee Buckman
shared his vision for the school in an
Aug. 25, 2000, Jewish News cover
story. Rabbi Buckman said he saw his
role as a "catalyst for building a com-
munity that shares a common vision

and is willing to enter into conversation
with each other. I believe that disagree-
ment is actually a way to build com-
munity, because if you're not willing to
engage in debate with other people,
essentially what you're doing is denying
the legitimacy of their position."
The College of Cardinals is sealed into
the Sistine Chapel and not allowed to
leave until it selects a new pope. A simi-
larly secluded venue should be secured
by our community, with the parties
involved in the FJA dispute locked
inside. They shouldn't be allowed to exit
until they hammer out an accommoda-
tion that also takes into account the
community's overall best interests.
Many of their parents and grandpar-
ents were pioneers in building and shap-
ing a Detroit Jewish community that
could choose peace over war and the
common good over self-interest. It's time
for them to make the right choice.

❑

See related stories beginning on page 1.

Guest Column

The Case For Closing Tax Loopholes

a

ecently, the Senate Permanent
Subcommittee on Investigations,
which I chair, held the latest in a
series of hearings to examine how U.S.-
based multinational corporations use
loopholes in the tax code to avoid paying
U.S. taxes. An earlier hearing examined
tax avoidance strategies at Microsoft
and Hewlett-Packard; our recent hearing
looked at Apple.
Our purpose with these hearings is
to shine a light on practices that have
allowed U.S.-based multinational corpora-
tions to amass an estimated $1.9 trillion
in profits in offshore tax havens, shielded
from U.S. taxes.
Corporate income tax revenue has
accounted for a smaller and smaller share
of federal receipts, and today is down to
about 9 percent of federal revenue. The
average U.S. corporation pays an effec-
tive tax rate of 15 percent, less than half
the statutory rate of 35 percent. A recent
study found that 30 of the largest U.S. mul-
tinationals, with more than $160 billion
in profits, paid nothing in federal income
taxes over a recent three-year period.
These offshore tax practices deepen
the federal deficit and increase the tax
burden on American families. Our hear-
ing helped our Senate colleagues, and the
American people, understand the depth of
our offshore tax loophole problem and the
damage it does to our fiscal and economic
health.

Apple's products are justifiably well
known and used throughout the world.
What may not be so well known is
that Apple also has a highly
developed tax avoidance
system — a system through
which it has amassed more
than $100 billion in offshore
cash in a tax haven.
The secret to Apple's
business success isn't in the
aluminum and steel and glass
of my iPhone and other Apple
products. Its profits depend
on the ideas that bring those
elements together in such
an elegant package. That
intangible genius is intellectual property
that is nurtured and developed here in
the United States. The key to offshore
tax avoidance is transferring the profit-
generating potential of that valuable
intellectual property offshore so that the
profits are directed not to the United
States, but to an offshore tax haven.
Some of Apple's techniques are staples
of international tax avoidance. But
others are unique. Apple has sought the
Holy Grail of tax avoidance, offshore
corporations that it argues are not, for tax
purposes, resident in any nation.
Apple Inc. has created three offshore
corporations, entities that receive tens of
billions of dollars in income, but which
have no tax residence — not in Ireland,

where they are incorporated, and not
in the United States, where the Apple
executives who run them are located.
Apple has arranged matters so
it can claim that these ghost
companies, for tax purposes,
exist nowhere. One has paid
no corporate income tax to any
nation for the last five years;
another pays tax to Ireland
equivalent to a fraction of 1
percent of its total income.
Apple's claim that its Irish
subsidiaries are not tax resident
in any nation is a key element
in its strategy to avoid taxes on
its offshore income. But how
did that income end up offshore to begin
with? That brings us to a second, more
common arrangement for shifting income
away from the United States to a low-tax
jurisdiction.
Many U.S. companies, including Apple,
shift intellectual property rights — that
is, the rights to market products based
on their innovative ideas — to offshore
affiliates. That shift directs the income
associated with that intellectual property
— taxable income that would otherwise
flow to the United States where the
intellectual property was developed — to
the affiliates' home jurisdiction, which is
typically a tax haven.
Apple set up such an arrangement
with its Irish subsidiaries through what's

known as a cost-sharing agreement. The
cost-sharing agreement enables Apple to
shift profits generated by its intellectual
property in most of the world to Apple
subsidiaries in Ireland, where Apple has
an arrangement that has allowed it since
2003 to pay a 2 percent tax rate or less.
The offshore tax avoidance tactics
spotlighted by the Subcommittee do real
harm. They disadvantage domestic U.S.
companies that can't reduce their tax bills
using offshore tax gimmicks. They offload
Apple's tax burden onto other taxpayers
— in particular, onto working families
and small businesses. The lost tax revenue
feeds a budget deficit that has reached
troubling proportions and has helped
lead the ill-advised sequestration now
threatening our economic recovery.
Because of those cuts, children across
the country won't get early education
from Head Start. Needy seniors will go
without meals. Fighter jets sit idle on
tarmacs because our military lacks the
funding to keep pilots trained.
Closing these kinds of unjustified loop-
holes could provide hundreds of billions
of dollars to reduce the deficit and avert
damaging budget cuts to our defense, our
schools, our roads, the safety of our food
supply and other important priorities.

❑

Carl Levin is a senior U.S. senator from

Michigan and chairman of the Permanent

Subcommittee on Investigations.

June 27 • 2013

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