55 Corporations Exploit Old and New Loopholes to Pay $0 in Federal Taxes in 2020

In 2020, a year marked by a pandemic, small business closures and widespread job loss for ordinary people, many major U.S. corporations remained profitable and 55 of them paid $0 in federal corporate income taxes on a combined $40 billion in profits, the Institute on Taxation and Economic Policy (ITEP) said today. They secured a zero-tax liability using a variety of tax breaks, including a new one enacted in 2020 as part of the CARES Act.

These findings are outlined in 55 Corporations Paid $0 in Federal Taxes on 2020 Profits. Released today, the report is based on ITEP's analysis of 2020 annual financial reports filed by the nation's largest publicly traded corporations. The 55 companies had collective profits of $40 billion. They would have paid $8.5 billion in federal income taxes at the statutory 21 percent rate. Instead, these companies received a collective $3.5 billion in rebates. Further, the report reflects on the first three years of the 2017 Tax Cuts and Jobs Act (TCJA) and finds that 26 of these corporations paid an average tax rate of 0% from 2018 through 2020.

"We should continue to call on policymakers to address the gaping corporate tax loopholes that make this kind of tax avoidance possible," said Matthew Gardner, a senior fellow at ITEP and an author of the report. "But in a pandemic year when so many small businesses shuttered and millions of people lost their economic livelihoods, we should be asking bigger questions about a tax system so flawed that it asks next to nothing of profitable corporations that derive great benefit from our economy--in good and bad economic times."

The companies represent a variety of industries, including technology, utilities, manufacturing, banking, agriculture and others. The most familiar names include Archer Daniels Midland, Dish Network, FedEx, Nike and Salesforce. A table that includes all 55 companies' profits and effective tax rates is here: https://itep.org/55-profitable-corporations-zero-corporate-tax/#table

The companies used a combination of old and new tax breaks to secure a zero-tax obligation. More than a dozen of them used a tax break for executive stock options and at least six used a federal research and experimentation break. Renewable energy tax breaks figured into the tax avoidance equation for energy and utility companies. A break enacted as part of the 2020 CARES Act provided a new means for tax avoidance. The act loosened rules for how corporations can treat their losses for tax purposes. But the provision's generosity (the act retroactively loosens rules even for losses in years before the pandemic) provides a ripe breeding ground for corporate tax accounting gimmicks, the report explains.

ITEP has been documenting corporate tax avoidance since the 1980s. Big businesses often lobby for generous tax breaks that allow them to pay nothing or substantially less than the effective federal corporate income tax rate. In 2017, then President Trump and his supporters in Congress claimed a substantially reduced corporate tax rate would result in a more functional tax system and a stronger economy. The real effect seems to be continued, rampant tax avoidance and massive benefits for CEOs and the wealthy Americans and foreign investors who own most corporate shares.

However, corporate tax dodging does not have to be a foregone conclusion.