How 60 Profitable Fortune 500 Companies Evaded All Federal Income Taxes in 2018
A report by the Institute on Taxation and Economic Policy (ITEP) shows how 60 Fortune 500 companies avoided paying federal corporate income taxes in 2018.
Out of the Fortune 500 companies that have reportedly already filed their taxes for 2018, 60 of those companies managed to evade income taxes, despite being profitable, according to an ITEP report released last Thursday. The companies – including Amazon, Delta and IBM – had a total U.S. income of at least $79 billion, with an effective tax rate of -5%. Many of these companies received tax refunds.
Companies Who Did Not Pay Taxes in 2018
Below is a comprehensive chart from ITEP showing the 60 companies that avoided paying federal income taxes in 2018. Figures are in millions of dollars.
|Company||U.S. Income||Federal Tax||Effective Tax Rate||Industry|
|Activision Blizzard||$447||$-228||-51%||Computers, office equip, software, data|
|AECOM Technology||$238||$-122||-51%||Engineering & construction|
|Alaska Air Group||$576||$-5||-1%||Transportation|
|Amazon.com||$10,835||$-129||-1%||Retail & wholesale trade|
|Ameren||$1,035||$-10||-1%||Utilities, gas and electric|
|American Electric Power||$1,943||$-32||-2%||Utilities, gas and electric|
|Arrow Electronics||$167||$-12||-7%||Retail & wholesale trade|
|Atmos Energy||$600||$-10||-2%||Utilities, gas and electric|
|Avis Budget Group||$78||$-7||-9%||Motor vehicles and parts|
|Chevron||$4,547||$-181||-4%||Oil, gas & pipelines|
|Cliffs Natural Resources||$565||$-1||0%||Oil, gas & pipelines|
|CMS Energy||$774||$-67||-9%||Utilities, gas and electric|
|Delta Air Lines||$5,073||$-187||-4%||Transportation|
|Devon Energy||$1,297||$-14||-1%||Oil, gas & pipelines|
|Dominion Resources||$3,021||$-45||-1%||Utilities, gas and electric|
|DTE Energy||$1,215||$-17||-1%||Utilities, gas and electric|
|Duke Energy||$3,029||$-647||-21%||Utilities, gas and electric|
|Eli Lilly||$598||$-54||-9%||Pharmaceuticals & medical products|
|EOG Resources||$4,067||$-304||-7%||Oil, gas & pipelines|
|FirstEnergy||$1,495||$-16||-1%||Utilities, gas and electric|
|General Motors||$4,320||$-104||-2%||Motor vehicles and parts|
|Goodyear Tire & Rubber||$440||$-15||-3%||Motor vehicles and parts|
|Halliburton||$1,082||$-19||-2%||Oil, gas & pipelines|
|Honeywell International||$2,830||$-21||-1%||Industrial machinery|
|International Business Machines||$500||$-342||-68%||Computers, office equip, software, data|
|Kinder Morgan||$1,784||$-22||-1%||Oil, gas & pipelines|
|MDU Resources||$314||$-16||-5%||Oil, gas & pipelines|
|MGM Resorts International||$648||$-12||-2%||Miscellaneous services|
|Molson Coors||$1,325||$-23||-2%||Food & beverages & tobacco|
|Netflix||$856||$-22||-3%||Retail & wholesale trade|
|Occidental Petroleum||$3,379||$-23||-1%||Oil, gas & pipelines|
|Owens Corning||$405||$-10||-2%||Miscellaneous manufacturing|
|Penske Automotive Group||$393||$-16||-4%||Motor vehicles and parts|
|Performance Food Group||$192||$-9||-4%||Retail & wholesale trade|
|Pioneer Natural Resources||$1,249||—||—||Oil, gas & pipelines|
|Pitney Bowes||$125||$-50||-40%||Computers, office equip, software, data|
|PPL||$1,110||$-19||-2%||Utilities, gas and electric|
|Public Service Enterprise Group||$1,772||$-97||-5%||Utilities, gas and electric|
|Rockwell Collins||$719||$-16||-2%||Aerospace & defense|
|Salesforce.com||$800||—||—||Computers, office equip, software, data|
|SpartanNash||$40||$-2||-4%||Retail & wholesale trade|
|Tech Data||$203||$-10||-5%||Retail & wholesale trade|
|TOTAL, THESE COMPANIES||$79,025||$-4||-5%|
|Trinity Industries||$138||$-19||-14%||Miscellaneous manufacturing|
|UGI||$550||$-3||0%||Utilities, gas and electric|
|United States Steel||$432||$-40||-9%||Metals & metal products|
|Whirlpool||$717||$-70||-10%||Electronics, electrical equipment|
|Wisconsin Energy||$1,139||$-218||-19%||Utilities, gas and electric|
|Xcel Energy||$1,434||$-34||-2%||Utilities, gas and electric|
Legal Tax Breaks Contribute to Companies’ Low Taxes
There are a variety of ways in which companies can avoid paying or “zero out” their federal income taxes. Tax credits being one such way.
As GoodJobsFirst.org explains, “Tax credits are economic development subsidies that reduce a company’s taxes by allowing it to deduct all or part of certain expenses from its income tax bill on a dollar for dollar basis.
“Tax credits are usually granted for a particular kind of corporate activity a state wants to promote. Investment tax credits, which allow companies to subtract from their tax bill amounts spent on new facilities and/or equipment, are a boon for capital-intensive manufacturing industries. Research and development (R&D) credits are especially lucrative for pharmaceutical and high-tech companies.”
According to the ITE report, in 2018, Netflix claimed $140 million in research and development (R&D) tax credits, Rockwell Collins reported $60 million, and Activision Blizzard claimed $46 million. CMS Energy recorded research and experimentation (R&E) credit – a tax credit that is often criticized for giving companies “research” tax breaks in areas such as video games or fast food packaging, or awarding “research” the company would have done anyway.
Prudential Financial lowered its taxes by $111 million by using a variety of credits, including low-income credits, and Eli Lilly gained $87 million in business credits. Dominion Energy reported $59 million in investment tax credits.
Another way companies avoid paying federal income taxes is through various stock options. This tax break lets companies write off expenses related to stock-option related expenses in excess of the cost they reported to shareholders and the public, as ITEP explained. According to a Citizens for Tax Justice report in June 2016, 315 Fortune 500 companies benefited from this tax break. In 2018, Amazon decreased its income taxes by over $1 billion, and Netflix lowered its income taxes by $191 million by using the stock option tax break.
Several Fortune 500 companies use accelerated depreciation, which allows companies to drastically lower their tax rates by writing off the expense of capital investments more quickly than the investments wear out.
Under the new tax law, accelerated depreciation was expanded to allow companies to deduct a capital investment’s entire cost in its first year. As ITEP found, in 2018, several companies used accelerated depreciation, including Halliburton, Dominion Resources, JetBlue, Ryder, Owens Corning, Devon Energy, Ameren, Delta Airlines, Chevron and Duke Energy. Together, these corporations lowered their 2018 taxes by $8 billion with accelerated depreciation tax breaks.
Corporate Tax Revenues Continue to Decline
Corporate tax revenues fell by 31 percent in fiscal year 2018, according to a U.S. Treasury report. This was perhaps the most abrupt decline in “any year of normal economic growth” in the U.S. ITEP says.
Although the Tax Cuts and Jobs Act (TCJA) lowered the statutory tax rate from 35 to 21 percent in December 2017, there are still loopholes, as ITEP found, that allow these companies to “zero out” their income taxes and keep nearly half of their income from federal taxes.
So, what does ITEP propose doing? For one, ITEP suggests Congress or the SEC require a higher standard of tax disclosure by publicly traded firms as the existing disclosures that are required are vague and do not provide sufficient data to assess how companies are avoiding paying taxes.
With accurate data, lawmakers could “critically assess the costs of each of existing tax break—including those discussed in this report—and take steps to ensure that profitable corporations pay their fair share of U.S. taxes,” as ITEP says.