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Even with a profit margin, many large companies pay zero tax

NEW YORK (AP) – Just as President Biden was trying to raise taxes on companies to help pay for his infrastructure program, a report by a Washington policy group states how many companies are paying zero despite having large initial revenues.

Last year, more than 50 major US companies paid nothing from federal income taxes, many of which received discounts, despite the fact that they as a group reported nearly $ 40.5 billion in pre-tax profits, according to the Institute for Tax and Economic Policy. The group believes that the tax system should collect more tax revenue.

The 55 companies mentioned in the report published on Friday cover a wide range of sectors, from agriculture to high technology, including big names such as Nike and Duke Energy. The report says companies have taken advantage of breaks that have been maintained or expanded by President Donald Trump in the 2017 tax review, as well as under the economic bailout package that Washington passed last spring.

According to the 2017 tax cut, the corporate profit rate is 21%. But companies can use many tools to avoid taxes, such as writing off expenses related to the share options of their CEOs and other executives.

Companies can also use a range of affordable tax credits to make investments that the US government seeks to encourage, just as individuals can benefit from tax breaks to save on retirement or make their homes more energy efficient.

At Duke Energy, one of the country’s largest utility owners, the company filed $ 110 million in tax credits last year to generate renewable energy through wind farms, for example. Charlotte, a North Carolina company, and other loans helped off a $ 281 million federal income tax rebate last year after reporting $ 826 million in operating income on an estimated US income.

“Legislators have developed this tax policy to encourage corporate taxpayers to invest in economic growth, infrastructure, and renewables,” said Duke spokeswoman Catherine Butler.

He said federal tax rules allow Duke to defer some cash payments for taxes in the future but not eliminate them. The company had about $ 9 billion in deferred tax liabilities by the end of 2020, which Butler said would become future tax payments over time.

At the same time, Nike used a federal tax credit to encourage corporate research and development. The sportswear giant received tax-exempt shares for its fiscal year ending May 31. In total, he received $ 109 million in federal tax breaks after reporting an annual return of $ 2.9 billion.

Nike, based in Biverton, Oregon, could not immediately be reached for comment.

“Most CEOs of large, commercial corporations are not going to risk imprisonment for not paying taxes when Congress gives them so many legal options,” said Steve Wamhoff, director of the Fiscal Institute’s Federal Tax Policy.

The $ 2.2 trillion bailout package approved by Washington last spring to ease the pain of the epidemic opened up more avenues for companies to limit their federal tax accounts. The law allowed corporations to take the losses reported from 2018 to 2020, use them to reduce tax liabilities in previous years, even when revenues were taxed at a higher rate.

“When President Trump announced his intention to cut corporate taxes in 2017, he և Congress had the opportunity to close a number of gaps that have allowed companies to avoid taxing most of their profits since the early 1980s,” Wamhoff and Matthew Gardner wrote. : “But now, with three years of data on effective tax rates paid by public companies, it is clear that Trump’s law has not significantly restricted corporate tax evasion; it may even encourage it.”

Corporations paid a total of nearly $ 243 billion in tax revenue in 2019, up 30% from five years ago.

One in three corporations with more than $ 1 billion in assets paid zero federal income tax between 2013 and 2017, according to a report prepared last year by the House of Representatives’ Joint Taxation Committee. For smaller companies with less than $ 1 billion in assets, two out of three companies have a net income tax liability for the year.

In 2019, according to the tax fund, a group that wants a tax policy that will lead to greater economic growth, corporate taxes accounted for 3.9% of total US tax revenue. This compares with an average of 9.6% of the economies of the Economic Cooperation and Development Organization.

That figure could rise if Biden were able to push for corporate tax changes, which he is proposing to help pay for his $ 2.3 trillion program to rebuild the country’s infrastructure.

The offer to raise the corporate tax rate by 28% may not make much of a difference to companies using tax credits or other tools to avoid paying any taxes. But Biden’s plan to set a 15% minimum income tax that corporations inform their investors, known as book income, could force some corporations to start paying zero tax, depending on how they do it.

Republicans in Congress have also already resisted raising corporate taxes, saying they would hurt the US economy.


Sweet reported from Charlotte, North Carolina.


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