S-Corp to a C-Corp now paying $0 state tax?

[AZ-Tax]

Her state tax obligation dropped from $2.26 million for 2009 to zero for 2010 because of a change in the corporate structure of ABC Supply said Scott Bianchini, ABC tax director. The company paid taxes of $373,671 for the second half of 2010, the records show.

Bianchini explained that before 2010, ABC Supply was an "S" corporation, meaning the profits and the tax obligation flowed to Hendricks as the owner of the firm. In 2010, the company changed its structure so the profits and the tax obligation stay with the company.

http://www.jsonline.com/business/beloit-billionaire-pays-zero-in-2010-state-income-tax-bill-ep5js3j-155853835.html

[Gary2]

Two significant quotes from the article:

... the company paid Wisconsin income taxes of more than $1 million last year ...

So basically the tax bill transferred from the individual tax return to the corporate tax return - no surprise there. There's no indication as to whether the effective tax rate on Ms. Hendricks's share of corporate profits went up or down.

And:

He [Scott Bianchini, ABC tax director] added that there were other reasons Hendricks paid zero state income taxes in 2010.

In other words, there's more to this than meets the eye, and neither Mr. Bianchini nor Ms. Hendricks are getting into the details.

There's no doubt that anomalies such as this occur, but I wish the news media spent the time and expertise into a more productive analysis than merely grabbing headlines. This particular anomaly seems to be a one-time event - perhaps the conversion back to C corp freed up some losses? (I'm not up on the ramifications of such conversions.) The recent article about Zuckerberg's potential for living well off of tax-free munis, for all its flaws, was more useful.

[AZ-Tax]

Now Yahoo picked up on it

http://news.yahoo.com/big-paychecks-tiny-tax-burdens-21-000-wealthy-100029578--abc-news-politics.html