30 Major Corporations Avoided Federal Income Taxes
D.C. (November 3, 2011)
By Michael Cohn, Accounting Today
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The 280 most profitable U.S. corporations are sheltering half their profits from federal income taxes, and 30 of them paid less than zero in the last three years,
according to a new study.
The study also found that 78 of the corporations paid no federal income tax in at least one of the last three years. The study, by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, expands on a preliminary report in June by the advocacy group that sparked controversy (see 12 Major Corporations Pay Less Than Zero in Taxes).
The average effective tax rate for all 280 companies in the study over the three-year
period was 18.5 percent. For the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent. Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-2010. Thirty companies enjoyed a negative income tax rate over the three year period, despite combined pre-tax profits of $160 billion.
Wells Fargo topped the list of 280 U.S. corporations receiving the most in tax subsidies,
getting nearly $18 billion in tax breaks from the U.S. Treasury in the last three years.
Pepco Holdings had the lowest effective tax rate of all the companies in the study, at
negative 57.6 percent over the three year period.
The study was released at a time when many corporations are lobbying for lower corporate
rates and a tax holiday on repatriated foreign profits.
“Our study provides proof that too many corporations are already being coddled by our tax
system,” said Citizens for Tax Justice director Robert McIntyre, the report’s lead author.
Some companies within sectors fare worse than others, the study found. For example, the report found that FedEx paid a 0.9 percent tax rate over the three-year period, while
its competitor, UPS, paid a 24.1 percent rate.
While retailers and wholesalers in the study generally pay average effective tax rates of about 30 percent, online commerce giant Amazon.com paid a rate of only 7.9 percent on
its $1.8 billion in profits from 2008 to 2010.
Financial services companies received the largest share (16.8 percent) of all federal tax
subsidies over the last three years. More than half of the federal corporate tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas and pipelines.
The top 10 defense contractors saw their combined tax rate decline from 19.3 percent in
2008 to a mere 10.6 percent rate in 2010.
U.S. corporations with significant (10 percent or more of their total worldwide
profits) foreign profits paid tax rates to foreign countries that were almost a
third higher than the taxes they paid to the IRS on their domestic profits.
Most of the corporations do not release their tax returns. Instead the study relied on the
annual reports and 10-K forms filed by the corporations with the Securities and
Exchange Commission, which often include information on the tax liabilities and
benefits claimed on their financial statements. These can differ from the
actual tax returns they file with the IRS, however, and many of the companies
pay other types of taxes, such as state and payroll taxes.