The Text: More than two dozen Fortune 500 companies paid no U.S. federal income taxes in recent years partly because of a corporate tax break that is broadly supported by Republicans and Democrats alike, a consumer group said on Monday.
In at least half of the cases cited by the group, companies used accelerated depreciation, a tax provision that allows increased deductions in the early years of the life of an asset.
Citizens for Tax Justice, which advocates steeper corporate taxes, said it surveyed major U.S. companies and found that 26 on average paid no net federal income taxes between 2008 and 2011, among them General Electric and Duke Energy.
“This isn’t fair to the rest of us,” said Bob McIntyre, director of the left-leaning tax research group.
“Things do not get changed in the tax code unless someone asks,” McIntyre said, blaming company lobbying for a failure to thoroughly overhaul the U.S. tax code in 25 years.
Accelerated depreciation will cost the U.S. Treasury $37 billion between 2010 and 2014, according to a recent estimate by Congress’s Joint Committee on Taxation.
Still, President Barack Obama and Republicans have backed an expansion of the tax break through bonus depreciation, which gives companies an even faster and larger first-year write-off. Many policymakers backing accelerated depreciation have cited the need to jump-start the economic recovery.
Disparate tax rates between companies that heavily use accelerated depreciation and those that cannot is among inequities prompting lawmakers to begin debate on simplifying the tax code through a major rewrite. The last such rewrite occurred 25 years ago under President Ronald Reagan.
The U.S. government’s corporate tax receipts have been dwindling for decades, in part because of special tax provisions in the code.
Revenue from corporate income taxes fell to about 1.3 percent of GDP in 2010 from 5 to 6 percent of gross domestic product in the early 1950s, according to the Tax Policy Center, another tax research group.
General Electric keeps its tax rate low — an average negative 19 percent between 2008 and 2011 — primarily by using tax benefits from its leasing business to offset profits in other units, such as the company’s finance arm, McIntyre said.
“All of our businesses, to some extent, have a lower total tax liability as a result of tax incentives at the federal, state or local level for certain investments and activities,” GE spokesman Andrew Williams said.
GE will pay U.S. taxes of about $1 billion for 2011 after three years of having paid no cash taxes, according to CTJ.
The company did not dispute those figures but said it will pay $2.9 billion for 2011 across all the countries where it operates.
Duke Energy’s average negative 3.5 percent tax rate over the four-year period largely resulted from accelerated depreciation, according to the CTJ study.
Duke spokesman Tom Williams said the study is misleading.
“We’re in a modernization phase now and we’ll have four new plants by the end of this year,” Williams said. “They cost $7 billion and so we’re taking the tax benefits allowed.”
Williams said the taxes will be paid over the life of the assets. McIntyre said that may be true in some cases, but the companies can keep deferring taxes by generating more depreciation breaks.