How do major firms avoid income taxes?

Companies use array of tax loopholes and aggressive strategies.

Complaining that the United States has one of the world’s highest corporate tax levels, President Donald Trump and congressional Republicans have repeatedly vowed to shrink it.

Yet if the level is so high, why have so many companies’ income tax bills added up to zero?

That’s what a new analysis of 258 profitable Fortune 500 companies that earned more than $3.8 trillion in profits showed.

Although the top corporate rate is 35 percent, hardly any company actually pays that. The report, by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington, found that 100 of them — nearly 40 percent — paid no taxes in at least one year between 2008 and 2015. Eighteen, including General Electric, International Paper, Priceline.com and PG&E, incurred a total federal income tax bill of less than zero over the entire eight-year period — meaning they received rebates. The institute used the companies’ own regulatory filings to compute their tax rates.

How does a billion-dollar company pay no taxes?

Companies take advantage of an array of tax loopholes and aggressive strategies that enable them to legally avoid paying what they owe. The institute’s report cites these examples:

Multinational corporations like Apple, Microsoft, Abbott Laboratories and Coca-Cola have ways of booking profits overseas, out of the reach of the IRS.

Others, like American Electric Power, Con Ed and Comcast, qualified for accelerated depreciation, enabling them to write off most of the cost of equipment and machinery before it wore out.

Facebook, Aetna and Exxon Mobil, among others, saved billions in taxes by giving options to top executives to buy stock in the future at a discount. The companies then get to deduct their huge payouts as a loss.

Individual industries have successfully lobbied for specific tax breaks that function as subsidies: for instance, drilling for gas and oil, building NASCAR racetracks, roasting coffee or undertaking certain kinds of research.

Why do some industries make out better than others?

These industry-specific subsidies mean that the goodies were not evenly distributed. Utilities logged an effective tax rate of just 3.1 percent over the eightyear period. Industrial machinery, telecommunications and oil, gas and pipeline companies paid roughly 11.5 percent. Internet services paid 15.6 percent. In just two sectors — health care and retail — companies paid more than 30 percent of their profits in federal income tax.

“One of the things that jumps out pretty starkly is there’s a real gap between the tax rates paid by different industries,” said Matthew Gardner, a senior fellow at the institute and a co-author of the study.