While Americans prepare for the IRS to extract its annual pound of flesh next week, some of the most profitable corporations won’t pay any tax at all. In fact, they’ll be getting money back from the IRS.
A new report from the Institute on Taxation and Economic Policy (ITEP) analyzed the profits and tax rates of some of the most profitable Fortune 500 companies using 10-K reports those companies filed with the Securities and Exchange Commission, both for tax year 2017 and for the five years prior. According to ITEP, all 15 of the companies in the study paid negative tax rates in 2017 on a combined $24 billion in total profit. Over the five-year period ITEP studied, those companies paid almost no federal income taxes on a combined $120 billion in total profit.
Amazon, which is led by Jeff Bezos — who became the world’s wealthiest man in 2017 — made $5.4 billion in profits in 2017, but is getting a federal refund of $137 million, courtesy of the taxes working schmucks like us have to pay. Watery beer manufacturer Molson Coors is paying $0 in federal taxes for 2017, despite making $1.5 billion in profit. They’ll be getting a $177 million refund, meaning the company will pay a negative 11.9 percent tax rate. The biggest refund of 2017 goes to Duke Energy, which paid a negative 5.9 percent rate on $4.2 billion in total profits. The North Carolina-based utility company will get a federal refund of $247 million.
However, the real MVP in the corporate tax avoidance game is California-based PG&E Corp., which paid a negative 6.8 percent tax rate in the five-year period between tax years 2013 and 2017, reaping a total of $506 million in federal refunds. International Paper, however, paid the lowest combined tax rate over the last five years, getting $498 million in refunds after paying a negative 16.2 percent tax rate. To compare, the average American pays an average federal tax rate of 13.5 percent on roughly $50,000 in income, and an average of 29.8 percent when factoring in state and local taxes as well as Social Security and Medicare taxes, according to IRS data for the 2015 tax year.
Keep in mind, all of these low corporate tax rates are for the 2017 tax year, meaning the generous corporate tax breaks President Trump signed into law last December won’t even go into effect until next year. This means the 2018 season will be even more profitable for these companies.
Many of these companies were able to skirt paying federal taxes thanks to loopholes already written into law. The bulk of Amazon’s refund, for example, came from the executive stock option tax break, in which companies allow executives to buy company stock for severely discounted rates.
If the executive, like Jeff Bezos, purchases the discounted stock, the company then gets to deduct the difference between what the executive paid and the standard share price for the company’s stock on financial markets. As Forbes’ Janet Novack pointed out, Facebook CEO Mark Zuckerberg was given the option to buy Facebook stock for just six cents a share when Facebook went public in May of 2012, despite the stock selling for $38 per share on the market. Facebook would later qualify for $429 million in refunds as a result of that loophole.
The biggest corporate tax scammers — PG&E Corp., Duke Energy, and International Paper — were able to avoid taxes thanks to a loophole called “accelerated depreciation.” Companies utilizing this scheme, according to ITEP, allow corporations to aggressively write off the cost of capital investments much faster than their gradual decline. The Republican tax bill passed in late 2017 actually expands the scope of accelerated depreciation, meaning ordinary working people will get to continue subsidizing profitable Fortune 500 companies with our taxes.
Read the full ITEP report here for more details on how some of America’s richest corporations are getting away with paying no taxes on billions in profit.
Scott Alden is a freelance contributor covering national politics, education, and environmental issues. He is a proud Toledo University graduate, and lives in the suburbs of Detroit.