How Corporate Tax Dodgers Avoid Paying Their Fair Share—or Any Share At All

by Deidre Fuller, published April 10, 2015, mirrored from Common Dreams

Bernie Sanders declares: ‘At a time when we have massive wealth and income inequality, and when corporate profits are soaring, it is an outrage that many large, profitable corporations paid nothing in federal income taxes last year.’

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Among its findings, Citizens for Tax Justice reveals that not only did media giant Time Warner pay nothing in federal income taxes last year, it received a rebate of $26 million from the IRS even though it made $4.3 billion in U.S. profits. (Photo: Zhu/flickr/cc)

Pointing to egregious examples of Fortune 500 corporations “manipulating the tax system to avoid paying even a dime in tax on billions of dollars in U.S. profits,” a new report from Citizens for Tax Justice makes a sharp case for corporate tax reform.

The 15 companies cited in the CTJ analysis represent a range of sectors within the U.S. economy, from toy maker Mattel to financial services corporation Prudential to broadcaster CBS to media giant Time Warner.

All told, the report reveals that the 15 companies paid no federal income tax on $23 billion in profits in 2014, and they paid almost no federal income tax on $107 billion in profits over the past five years. All but two received federal tax rebates in 2014, and almost all paid “exceedingly low” rates over five years.

“These 15 corporations’ tax situations shed light on the widespread nature of corporate tax avoidance,” Citizens for Tax Justice declared.

As Chuck Collins noted in an op-ed published at Common Dreams on Friday, America’s wealthiest individuals and companies are notorious for finding ways to minimize their tax burdens—including by hiding their money offshore.

“Global Financial Integrity, a financial watchdog agency, estimates that global corporations and wealthy individuals are hiding a total of over $21 trillion,” Collins wrote.

But corporate tax avoidance goes beyond offshoring. CTJ’s analysis shows that many businesses are exploiting tax breaks that “are, by and large, perfectly legal, and often have been on the books for decades.”

For example, the report explains:

Jetblue, PG&E, PEPCO Holdings, and Ryder used accelerated depreciation, a tax break that allows companies to write off the cost of their capital investments much faster than these investments wear out, to dramatically reduce their tax rates. CTJ has estimated that closing the accelerated depreciation loophole could raise more than $428 billion over the next decade.

Despite that potential revenue, both Congress and President Barack Obama have supported expanding the scope of the accelerated depreciation tax break in recent years.

But such loopholes have found strident critics in Congress, too. A major plank of the Congressional Progressive Caucus’s budget proposal, unveiled last month, is that corporations pay their fair share of taxes.

And on Thursday, Sen. Bernie Sanders (I-Vt.) blasted the tax dodgers in a press release.

“At a time when we have massive wealth and income inequality, and when corporate profits are soaring, it is an outrage that many large, profitable corporations not only paid nothing in federal income taxes last year, but actually received a rebate from the IRS last year,” Sanders said.

Echoing CTJ’s call to overhaul the corporate tax code, the senator continued: “Instead of balancing the budget on the backs of the elderly, the children, the sick and the poor, as the Republicans in Congress have proposed, we need a tax system that demands that large, profitable corporations and the wealthy start paying their fair share in taxes.”

It’s unclear, however, when that reform will happen.

As The Hill reported in March: “Serious tax reform discussions are now into their fifth year. With a presidential race already heating up, many say those talks will likely spill into at least year seven before the tax code can be overhauled.”


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Excerpt from Citizens for Tax Justice (CTJ) website:

This CTJ report illustrates how profitable Fortune 500 companies in a range of sectors of the U.S. economy have been remarkably successful in manipulating the tax system to avoid paying even a dime in tax on billions of dollars in U.S. profits. These 15 corporations’ tax situations shed light on the widespread nature of corporate tax avoidance.  As a group, the 15 companies paid no federal income tax on $23 billion in profits in 2014, and they paid almost no federal income tax on $107 billion in profits over the past five years. All but two received federal tax rebates in 2014, and almost all paid exceedingly low rates over five years.

Companies Represent Diverse Economic Sectors

The companies profiled here represent a range of segments of the U.S. economy:

  • Broadcaster CBS Corporation enjoyed $1.8 billion in U.S. profits last year, and received a federal income tax rebate of $235 million.
  • Doll-maker Mattel, which has paid zero federal income taxes over the past five years, received a tax rebate of $46 million in 2014.
  • The financial services corporation Prudential avoided all federal income taxes on its $3.5 billion in U.S. profits in 2014.
  • Ryder System, which provides truck rentals and services, paid a negative 0.3 percent federal income tax rate in 2014 and over the past five years a negative 0.5 percent rate.
  • California-based utility PG&E had negative tax rates both in 2014 and over the five-year period.

All 15 companies’ effective federal income tax rates for 2014 and the five-year period between 2010 and 2014 are shown in the table below:

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Companies’ Low Taxes Stem from a Variety of Legal Tax Breaks

While recent policy discourse has focused on multinational corporations that use offshore tax havens to minimize their tax liability, the companies profiled here appear to be using a diverse array of other tax breaks to zero out their federal income taxes:[i]

Jetblue, PG&E,  PEPCO Holdings and Ryder used accelerated depreciation, a tax break that allows companies to write off the cost of their capital investments much faster than these investments wear out, to dramatically reduce their tax rates. CTJ has estimated that closing the accelerated depreciation loophole could raise more than $428 billion over the next decade.[ii] Both Congress and President Barack Obama, however, have supported expanding the scope of this tax break in recent years.

Priceline relied heavily on a single tax break — writing off the value of executive stock options for tax purposes — to zero out its tax liability not just in 2014 but in 2013, 2012 and 2011 as well. In addition, the company admits that this tax break could offset all taxes on up to $1.2 billion in profits going forward. Mattel also reports enjoying $140 million in stock option tax breaks over the past five years. Former U.S. Senator Carl Levin (D-MI) has estimated that this tax break will costs $23 billion over the next decade.[iii]

Qualcomm has enjoyed more than $290 million in research and development tax breaks over the past three years. The R&E tax credit has been criticized for rewarding companies for “research” they would have done anyway, as well as rewarding research in areas such as fast-food packaging.[iv]

General Electric uses the “active financing” tax break as one of many ways that it eliminates its U.S. income tax bill.[v] This arcane tax break allows some multinational financial institutions to avoid paying income taxes to any government on their international financing activities. The Joint Committee on Taxation estimates the current ten-year cost of this provision to be $70.2 billion.[vi]