Apple 2.0
Guess which senator asked Apple the smartest questions?
May 22, 2013: 1:13 PM ETTo the surprise of many, it was the Tea Party candidate from Wisconsin.
Click to view video.
FORTUNE -- Sen. Ron Johnson -- not to be confused with the Ron Johnson who created the Genius Bar -- gets a lot of heat from liberals in his home state for his positions on abortion (he's against it), same sex marriage (ditto), global warming (caused by sun spots) and the Violence Against Women Act (unconstitutional).
There's even a Tumbler page where Jonson's constituents can explore his views on everything from gun control to social security.
It's called Our Dumb Senator.
But at the Senate subcommittee hearing on Apple's (AAPL) taxes Tuesday, the Tea Party candidate from Wisconsin was anything but dumb. In fact, he asked smarter questions that elicited more information about Apple's operations than all the other senators combined. (See C-Span clip below.)
It helped, perhaps, that his background is in business (accountant, night-school MBA program, CEO of a plastics manufacturer) not law or politics.
But if he'd been a little more probing and little less pro-business, he might not have missed an opening as big as Irish loophole. He was quizzing Phillip Bullock, Apple's chief tax guy, about the Internal Revenue Service:
Johnson: "My guess is you have full-time IRS agents stationed in your operation basically doing a full-time audit nonstop, is that pretty accurate?"
Bullock: "That's correct..."
Johnson: "And they're looking at all this corporate structure, they're looking at all the transfer prices, and they're basically giving you the nod and saying you're following tax law?"
Bullock: "They look at it in detail, yes."
Johnson: "OK."
Wait a minute! The IRS hardly gave Apple "the nod." A follow-up question might have elicited the fact (spelled out in the company's annual report) that Apple is in an ongoing battle with the IRS over "certain undistributed foreign earnings" -- the very issue at the heart of the hearings.
Apple's Form 10-K for fiscal 2012 goes on to say:
"The Internal Revenue Service (the "IRS") has completed its field audit of the Company's federal income tax returns for the years 2004 through 2006 and proposed certain adjustments. The Company has contested certain of these adjustments through the IRS Appeals Office. The IRS is currently examining the years 2007 through 2009. All IRS audit issues for years prior to 2004 have been resolved. In addition, the Company is subject to audits by state, local, and foreign tax authorities. Management believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty."
Sen. Johnson's portion of the Apple hearings:
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