Limited success won't satisfy tax collectors.

• Position: Economic Outlook - Greg Radford - Interview

A study by the Washington, D.C.-based Multistate Tax Commission found that tax shelters cut North Carolina's corporate tax collections by $301 million--29%--in fiscal 2001. Greg Radford, director of the state Department of Revenue's Corporate, Excise and Insurance Tax Division, is trying to boost collections. In May, a Wake County Superior Court judge ruled in favor of the state's claim that Ohio-based Limited Brands dodged more than $1 million in taxes in North Carolina in 1994. Among the division's upcoming targets: companies that abuse economic-development incentives.

BNC: Why is the state failing to collect so much revenue?

Radford: The study identified various methods of tax sheltering and tax planning that corporate entities have taken advantage of over the last few years to reduce their state tax liabilities. In certain cases, we find them and try to rectify them. Then there are others we have yet to identify. Even when you find the corporations, they have far more resources available than the Department of Revenue has to fight them.

What is the impact on other taxpayers?

There is less revenue available for the state to spend. That requires the General Assembly to make even tougher decisions regarding spending cuts or the need to raise taxes to meet the state's obligations.

What does North Carolina say Limited did wrong?

Limited and its operating affiliates took trademarks they owned and shifted them to holding companies that they had established in Delaware. They then had the trademarks licensed back to the operating companies such as Abercrombie & Fitch and Victoria's Secret, and they paid a royalty to the holding companies every time they sold a product in North Carolina. That royalty is then deducted on the operating companies' returns, and it is not offset by increased tax because the holding companies claim they are in Delaware and that they are not doing business here.

What was the state's position?

That the holding companies are doing business here, which allows North Carolina to tax the apportionable share of their income. It is our opinion that Limited's holding companies do have a physical presence through the use of employees of the operating companies that maintain the trademarks.

Where does that case go from here?

In May, the Wake County Superior Court upheld our position. Limited appealed to the North Carolina Court of Appeals. If this court rules in the department's favor and the taxpayer appeals, it would then go to...