Big corporations that pay little to no taxes

Earlier [last] month, the Facebook Inc. released its first “10-K” annual financial report since going public last year. Hidden in the report’s footnotes is an amazing admission: despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes.

Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options. Facebook is also carrying forward another $2.17 billion in additional tax-option tax breaks for use in future years.

So in total Facebook’s current and future tax reductions from the stock options exercised in connection with its IPO will total $3.2 billion.

A November 2011 CTJ report assessing the taxes paid by the Fortune 500 corporations that were consistently profitable from 2008 through 2010 identified this stock option tax break as a major factor explaining the low effective tax rates paid by many of the biggest Fortune 500 companies

“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

CTJ looked at 280 companies, all of them members of the Fortune 500, and found that “while the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount.”

• Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010.

In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.

• Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period.

These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).