- 55 publicly traded companies paid $0 in federal taxes last year, a study by ITEP found.
- Nike and FedEx are among 26 companies that have not paid federal taxes in three years.
- In 2020, the 55 companies avoided paying about $12 billion in federal taxes.
- See more stories on Insider’s business page.
55 of America’s biggest companies paid $0 in federal taxes last year, a new study from the Institute on Taxation and Economic Policy (ITEP) found.
The 55 publicly traded companies would have paid an estimated $12 billion in federal taxes if not for corporate tax breaks in 2020, including $8.5 billion in tax avoidance and $3.5 billion in tax rebates, the report found using regulatory filings and other information.
Nearly half of the companies have avoided paying federal taxes for the last three years, according to the report. Nike, FedEx, and DTE Energy were among 26 companies that recorded $77 billion in combined pre-tax income in the past three years, but did not pay any federal income taxes.
The news comes at the same time President Joe Biden looks to raise taxes on corporations. The White House announced this week that it plans to limit the number of companies that do not pay federal taxes, as well as increase the corporate tax rate to 28% – raising an estimated $2 trillion over the course of 15 years.
How do multi-billion dollar companies avoid federal taxes?
ITEP’s data found some of the nation’s biggest companies have been avoiding federal taxes for decades, dating back to the Reagan administration. The companies, which encompass a wide variety of industries, use a range of tactics, including tax exemptions and deductions.
While company tax returns are private, publicly traded companies must file financial reports that include information on federal income taxes. Using the financial reports as well as data on each companies’ pre-tax income, ITEP was able to analyze some of the major resources the companies used to avoid paying federal taxes.
In 2017, the Trump administration’s Tax Cuts and Jobs Act of 2017 amended the Internal Revenue Code of 1986, the Washington-based research group said the act failed to address major loopholes in the tax code.
“When President Trump signaled his intention to cut corporate taxes in 2017, he and Congress had an opportunity to pare back the many loopholes that have allowed companies to avoid tax on much of their income since the 1980s,” the report said. “Now, with three years of data published on the effective tax rates paid by publicly traded companies, it is clear that the Trump law has not meaningfully curtailed corporate tax avoidance and may even be encouraging it.”
The 2017 tax bill dropped the top corporate income tax rate from 35% to 21% – a corporate tax rate that is below average for most countries represented in the Organisation for Economic Co-operation and Development, a group that represents 37 developed countries. The act also allows companies to immediately write off the cost of new equipment and machinery.
Some of the loopholes ITEP found many companies used include tax breaks for executive stock options which allowed the companies to write off stock-option expenses.
Multiple companies, including Nike and Hewlett Packard, used federal research and experimentation tax credits to reduce their incomes, while companies like DTE Energy and Duke Energy used tax breaks for renewable energy to avoid paying federal taxes.
The CARES Act made it even easier for companies to avoid taxes
The $2.2 trillion CARES Act which was passed last year to help alleviate the economic distress of the pandemic and help businesses survive, provided the 55 companies with over $500 million in tax breaks, according to ITEP.
Dozens of publicly traded companies used provision from the CARES Act that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the research group.
FedEx was one of the companies that used the CARES Act to reduce tax bills from prior years when the tax rate was higher.
The company told Insider the CARES Act “helped companies like FedEx navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”
Nike, HP, Salesforce, Duke Energy, and DTE Energy did not respond to a request from Insider for a comment.
In its report, the left-leaning research group pointed to several tax code amendments that could cut down on the number of companies that do not pay federal taxes, including a “minimum tax” for profitable companies, as well as cutting back on tax breaks for public companies.
On Wednesday, Biden called out Amazon for avoiding federal taxes. After paying $0 in federal taxes for two years, Amazon started paying federal income taxes in 2019.
Biden said he was aware the company was one of many Fortune 500 companies that use loopholes to avoid taxes, while middle class families are not afforded the same opportunities and pay over 20% tax rates.
“I don’t want to punish them, but that’s just wrong,” Biden said.