27 GIANT PROFITABLE FIRMS PAID NO TAXES
Companies must boost their bottom line, which for some firms involves finding different ways to reduce their liabilities
Death and taxes are supposed to be two certainties of life. But a few companies have at least escaped the taxes part.
There are 27 companies in the Standard & Poor’s 500 that reported paying no income tax expense in 2015 despite reporting pretax profits, according to a USA TODAY analysis of data from S& P Global Market Intelligence.
Only profitable firms were included in the analysis since firms that lost money wouldn’t be expected to pay taxes.
Escaping the taxman, so far, hasn’t been an advantage, at least in the eyes of investors. Shares of the companies that paid no taxes are down 11% on average in the past 12 months, more than twice the 4.8% decline by the S& P 500 in the same period.
“Income tax issues, while important, are not as important as how well a company is doing or how well an industry is performing,” says Bill Selesky, investment analyst at Argus Research. “It gets to be an issue that I would put at the bottom of the list.”
Some companies have taken advantage of lower overseas tax rates, a practice that has drawn criticism. Drugmaker Pfizer drew fire last year for a plan to merge with rival Allergan and move its headquarters to Ireland. Sunday, Democrat presidential candidate Hillary Clinton took aim at Johnson Controls, which plans to merge with Tyco and move to Ireland.
“I am also going to go after companies like Johnson Controls in Wisconsin,” Clinton said. “They came and got part of the bailout because they were an auto parts supplier. Now they want to move headquarters to Europe. They are going to have to pay an exit fee.”
There are a number of reasons why a profitable company may not pay taxes. For instance, years of deep losses. Take United Continental, which reported a $ 3.2 billion income tax credit in 2015 despite reporting earnings before taxes of $ 4.2 billion. Accounting rules allow the airline to offset taxes due with valuation allowances resulting from losses in past years. During 2015, these amounted to $ 4.7 billion which erased the company’s $ 1.5 billion tax bill based on its normal corporate tax rate.