In 2015, Delaware registered more than 480 companies a day, providing steady business for in-state lawyers, accountants, and registration companies. Two firms, Corporation Trust Company and Corporation Service Company, act as the registered agent for two-thirds of the businesses. Both said through spokesmen that they comply with all state and federal laws.

Revenue Source

Companies’ registration fees provide more than $1 billion in annual state revenue. Would-be reformers in Delaware tread carefully -- despite the state having registered shell companies controlled by such notorious figures as Viktor Bout, the Russian “Merchant of Death” who authorities believe provided arms to the Taliban, and Luka Bojovic, whom officials linked to the assassination of Serbia’s prime minister. It’s also home to a shell company controlled by a tequila distillery that the Mexican government is investigating for possible ties to cartel leader “El Chapo.”

“We can reform our laws to provide sufficient privacy for businesses without continuing to have secrecy that puts the national security at risk,” said Christine Whitehead, a member Delaware Citizens for Open Government, which has pushed the state to require more transparency.

In neighboring Pennsylvania, governors and lawmakers rail against losing an estimated $500 million a year in revenue to Delaware’s system, but they’ve had little success stemming that tide. Companies can cut their home-state taxes with the “Delaware Loophole” -- forming a passive investment corporation in the state and transferring their intellectual property there, where payments of royalties or interest incur no state tax.

When the U.S. government pushes other countries toward stricter disclosure requirements, foreign leaders frequently cite Delaware as an example of American hypocrisy and an obstacle to improvements. Austrian finance minister Maria Fekter, for instance, rebuffed calls to end bank secrecy in 2013, saying nothing had been done to stop “money laundering in all the islands … or the U.S. in Delaware.”

Delaware surfaced last year in an Australian tax case that revealed Chevron had used one of its 200 Delaware subsidiaries to take out a $2.5 billion loan at an initial interest rate of 1.2 percent and then lent the proceeds to Chevron Australia Holdings Pty Ltd. at 9 percent. The intracompany transactions transformed Chevron’s $1.7 billion Australian profit into interest payments and cut its potential Australian tax bill from $258 million to zero.

Lower Rates

Chevron officials said the loans were legal and the company has paid all required taxes. In testimony to the Australian Senate last year, senior Chevron officials also pointed out that the profit was still subject to federal tax in the U.S. Company filings show that Chevron frequently reduces its U.S. tax bill by using hundreds of millions of dollars’ worth of write-offs, business credits and prior losses -- which are legal and widely used tax strategies. During most of the years at issue in the Australian case, the company’s effective U.S. federal tax rate was lower than Australia’s 30 percent rate, according to calculations compiled by the advocacy group Citizens for Tax Justice.

An Australian court has ordered Chevron to pay back taxes, interest and penalties of more than $300 million. Chevron spokesman Bradley Haynes said the company cannot discuss the case in detail because it’s appealing that decision.