When the Domestic Production Activities Deduction (DPAD) became law in 2004, proponents described it as a way to help American companies manufacture in the United States and export products abroad. In recent years, the DPAD has grown into one of the largest corporate tax expenditures, with an estimated cost of more than $15 billion in 2016 and $174 billion over the next 10 years.
Corporate Taxes
ITEP’s corporate tax research examines the tax practices of Fortune 500 companies. Besides its corporate study on average effective tax rates paid by the nation’s largest, most profitable corporations, throughout the year, ITEP produces research on subjects such as offshore cash holdings, tax haven abuse, executive stock options and other tax loopholes.
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report October 26, 2017 The Domestic Production Activities Deduction: Costly, Complex and Ineffective
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blog October 18, 2017 The Corporate Tax Code is in Dire Shape, But Trump-GOP Plan Would Make It Worse
Just how bad has the corporate tax code gotten? The newest edition of Offshore Shell Games, a joint report by the Institute on Taxation and Economic Policy (ITEP) and U.S. PIRG, outlines the massive scale of the offshore tax avoidance undertaken by U.S. multinationals. It’s well known that Fortune 500 companies have accumulated a stash of $2.6 trillion in earnings offshore, which has allowed them to avoid an estimated $752 billion in taxes.
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report October 17, 2017 Offshore Shell Games 2017
This study explores how in 2016 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s biggest corporations benefit the most from offshore tax avoidance schemes.
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report September 6, 2017 Turning Loopholes into Black Holes: Trump’s Territorial Tax Proposal Would Increase Corporate Tax Avoidance
The problem of offshore tax avoidance by American corporations could grow much worse under President Donald Trump’s proposal to adopt a “territorial” tax system, which would exempt the offshore profits of American corporations from U.S. taxes. This change would increase the already substantial benefits American corporations obtain when they use accounting gimmicks to make their profits appear to be earned in a foreign country that has no corporate income tax or has one that is extremely low or easy to avoid.
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blog August 31, 2017 Trump (Sort of) Used Our Data on Corporate Tax Avoidance, But He Missed the Point
On Wednesday, reporters waiting to write about President Trump’s much-ballyhooed tax reform speech in Missouri received a fact sheet from the White House informing them that, “Fortune 500 corporations are holding more than $2.6 trillion in profits offshore to avoid $767 billion in Federal taxes, according to the Institute on Taxation and Economic Policy.”
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blog August 23, 2017 GOP Leaders Tout Corporate Tax Cuts at Boeing and AT&T, Companies that Already Have Single-Digit Tax Rates
House Speaker Paul Ryan plans to visit a Boeing factory in Washington State tomorrow to promote the GOP’s ideas for tax reform, which include a deep cut in the corporate tax rate, while House Ways and Means Chairman Kevin Brady is bringing the same message today to employees of AT&T in Dallas. What is unclear is how much lower taxes for these companies can possibly go.
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blog August 4, 2017 How to Think About the Problem of Corporate Offshore Cash: Lessons from Microsoft
For a corporation with deeply American roots, Microsoft seems remarkably unable to turn a profit here. Against all odds, the Redmond, Washington-based company continues to claim that virtually all its earnings are in foreign countries. Microsoft’s latest annual report, released earlier this week, shows that over the past two years, the company enjoyed worldwide income of almost $43 billion. It claims to have earned just 0.3 percent of that—$128 million—in the United States.
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blog August 4, 2017 Trump Administration May Make Corporate Inversions Great Again
During the presidential campaign, Donald Trump called out companies engaging in corporate inversions saying that one proposed inversion was “disgusting” and that “politicians should be ashamed” for allowing it to happen. Despite this rhetoric, the Trump Administration is considering rolling back critical anti-inversion rules as part of its broad regulatory review of recently issued Treasury Department regulations.
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blog July 27, 2017 Reviving U.S. Manufacturing, One Cheesecake Factory at a Time
In the latest example of how the tax code has been abused and distorted, the Cheesecake Factory is claiming the manufacturing tax deduction, apparently for manufacturing cheesecakes, burgers, and other treats.
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blog July 21, 2017 Tax Avoidance: Nike “Just Did It” Again, Moving $1.5 Billion Offshore Last Year
The Nike Corporation’s annual financial disclosure of income tax payments is always notable for two recurring trends: the Oregon-based company’s steady shifting of profits into offshore tax havens, and Nike’s apparent effort to conceal how it’s achieving this tax avoidance. This year’s report, released earlier this week, is no exception.
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blog July 18, 2017 FedEx Pays Just 7.5% of Its Profits in Taxes While Pushing for a Lower Corporate Tax Rate
The latest annual financial report released by shipping giant FedEx is yet another reminder that where you stand often depends on where you sit.
The report shows that last year FedEx paid a 7.5 percent federal income tax rate on nearly $3.6 billion of U.S. pretax income and this low rate is due in part to accelerated depreciation, a provision in the tax code that allows the company to write off capital investments faster than they wear out. It’s not surprising, then, that FedEx’s leadership is currently promoting a tax plan that would drop the company’s statutory tax rate even more, and allow it to write off capital investments even faster.
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blog June 23, 2017 Inverter Mylan Finds Yet Another Way to Avoid Taxes
Rather than being known for its pioneering pharmaceuticals, Mylan is increasingly becoming infamous for its pioneering tax avoidance strategies. In 2015, Mylan used an inversion to claim that it is now based in the Netherlands for tax purposes. It is a Dutch company only on paper because ownership of the company was mostly unchanged and it continues to operate largely out of the United States. This maneuver has allowed the company to avoid millions in taxes on its earnings in the U.S. and abroad.
But that’s not the end of Mylan’s innovation when it comes to tax planning. A new report by Reuters found that Mylan is using a surprising new technique for dodging taxes: investing in coal refineries.
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blog May 25, 2017 Congressional Hearing Highlights Problems with the Border Adjustment Tax
The debate over the so-called border adjustment tax (or BAT) took center stage this week when the House Ways and Means Committee held its first hearing on the topic. Despite strong support by the House Republican leadership and the Chairman of the Ways and Means Committee, Rep. Kevin Brady, the proposal faced an onslaught of criticism during the hearing from invited witnesses and members of both parties.
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blog May 18, 2017 Tax Avoiding Companies Well Represented at Tax Reform Hearing
Today the House Ways and Means Committee will hold its first tax reform hearing of 2017, which marks the official opening of the tax reform debate in Congress. True tax reform, if the committee sought to achieve it, could create more jobs and ensure companies are paying their fair share by cracking down on the massive offshore tax avoidance that companies engage in. Unfortunately, the panel of witnesses for today’s hearing is largely made up of representatives of various major corporations that are beneficiaries of the loopholes in our current corporate tax laws. Given this, it seems likely that these panelists will not push for a fairer corporate tax code, but rather a code that allows them to avoid even more taxes and incentivizes moving more jobs offshore.
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blog May 9, 2017 Representative John Delaney’s Bills Take the Wrong Approach on Funding Infrastructure
Lawmakers across the political spectrum recognize the need for additional spending to maintain and upgrade our nation’s transportation infrastructure. According to the Federal Highway Administration, there is a backlog of… -
blog May 4, 2017 Apple: A Case Study in Why a Tax Holiday for Offshore Cash is Indefensible
The Apple corporation made waves earlier this week with its disclosure that its worldwide cash now exceeds $250 billion. Less noticed was a separate disclosure on Wednesday that the company’s… -
blog April 27, 2017 President Trump’s Corporate Tax Outline: At Least He Didn’t Use a Napkin
The most complimentary thing that can be said about the corporate tax changes outlined by President Trump earlier this week is that they weren’t scribbled on a napkin. Unlike supply-side… -
blog April 25, 2017 Does a 15 Percent Corporate Tax Rate Sound Low? For Dozens of Major Corporations, Maybe Not
President Donald Trump has promised to release new details Wednesday on what he says could be “the biggest tax cut we’ve ever had.” While much is unclear about the shape… -
blog April 21, 2017 The Trump Administration Should Not Reopen Offshore Loopholes Closed by Recent Regulations
A new executive order signed by President Donald Trump on Friday asks that Treasury Secretary Steven Mnuchin review significant tax regulations issued in 2016. The broader context of the order… -
report April 13, 2017 Fifteen (of Many) Reasons We Need Corporate Tax Reform
Profitable Fortune 500 companies in a range of economic sectors have been remarkably successful in manipulating the tax system to avoid paying even a dime in tax on billions of dollars in U.S. profits. This ITEP report examines a select, diverse group of 15 corporations’ tax situations to shed light on the widespread nature of corporate tax avoidance. As a group, these companies paid no federal income tax on $21 billion in profits in 2016, and they paid almost no federal income tax on $111 billion in profits over the past five years. All but one received federal tax rebates in 2016, and almost all paid exceedingly low rates over five years.
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blog April 7, 2017 How to Shut Down Offshore Corporate Tax Avoidance, Full Stop
A new bill introduced this week by Rep. Mark Pocan (D-WI), the Tax Fairness and Transparency Act, would rip out the offshore corporate tax avoidance system by its roots. This… -
blog April 6, 2017 Two New Bills Would Plug Major Loopholes in Our Offshore Corporate Tax System
A new pair of bills introduced by Representative Lloyd Doggett (D-TX) this week would crack down on loopholes that allow corporations and individuals to avoid paying their fair share in… -
press release March 31, 2017 New Analysis Compares Tax Rates Paid by Companies Lobbying for/against Border Adjustment Tax
An Institute on Taxation and Economic Policy analysis finds that, on average, companies that are opposed to the Border Adjustment Tax pay higher tax rates than a coalition of companies… -
blog March 30, 2017 A Comparative Analysis: Tax Rates Paid by Companies for and Against the Border Adjustment Tax
It’s often noted that corporate tax reform is difficult, in part, because it creates so many winners and losers. As Congress turns its attention to federal corporate tax reform, the… -
blog March 28, 2017 The $767 Billion Money Pot Driving Tax Reform
With the failure of legislation to repeal the Affordable Care Act, the Trump administration and Republicans lawmakers are moving on to corporate tax reform. At the heart of this debate… -
report March 28, 2017 Fortune 500 Companies Hold a Record $2.6 Trillion Offshore
All told, Fortune 500 corporations are avoiding up to $767 billion in U.S. federal income taxes by holding more than $2.6 trillion of “permanently reinvested” profits offshore. In their latest annual financial reports, 29 of these corporations reveal that they have paid an income tax rate of 10 percent or less in countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens.
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press release March 28, 2017 Corporations’ Offshore Cash Hoard Grew to $2.6 Trillion in 2016
U.S. corporations now hold a record $2.6 trillion offshore, a sum that ballooned by more than $200 billion over the last year as companies moved more aggressively to shift their profits offshore, according to a new report, Fortune 500 Companies Hold a Record $2.6 Trillion Offshore, released today by the Institute on Taxation and Economic Policy (ITEP).
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blog March 9, 2017 Debunking the 35 Percent Corporate Tax Myth
For years, the number one tax policy talking point from corporate lobbyists has been the claim that the United States has the highest corporate tax rate in the world. The… -
report March 9, 2017 The 35 Percent Corporate Tax Myth
Profitable corporations are subject to a 35 percent federal income tax rate on their U.S. profits. But many corporations pay far less, or nothing at all, because of the many tax loopholes and special breaks they enjoy. This report documents just how successful many Fortune 500 corporations have been at using loopholes and special breaks over the past eight years. As lawmakers look to reform the corporate tax code, this report shows that the focus of any overhaul should be on closing loopholes rather than on cutting tax rates.
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blog February 22, 2017 The Border Adjustment Tax Creates More Problems Than It Solves
In recent weeks, the Republican congressional leadership’s effort to introduce a comprehensive tax reform bill has increasingly faced opposition from major business groups and skeptical lawmakers from across the aisle.… -
report February 22, 2017 Regressive and Loophole-Ridden: Issues with the House GOP Border Adjustment Tax Proposal
In the summer of 2016, House Republicans released a blueprint for tax reform that is likely to be used as the starting point for major tax legislation in 2017.[1] One of the most radical provisions is a proposal to shift the corporate tax code from a residence-based to a destination-based system through applying a border adjustment on exports and imports. This proposal has major flaws that would make it a challenge to implement. Further, it is inherently regressive, rife with loopholes and would violate international agreements.
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blog January 18, 2017 Trump Plan to Give Billions in Tax Breaks to Multinational Corporations May Have Bipartisan Support
There are a lot of troubling components of the tax reform packages being proposed by President-Elect Donald Trump and the House GOP, but one that especially stands out is the… -
report January 18, 2017 Multinational Corporations Would Receive Half a Trillion in Tax Breaks from Trump’s Repatriation Tax Proposal
One of the central questions for lawmakers looking to reform the federal tax code this year is how to address the $2.5 trillion in earnings that U.S. companies are holding offshore to avoid taxes. Lawmakers on both sides of the aisle have supported proposals that would either require or allow companies to repatriate these earnings to the United States at a discounted tax rate. These proposals have ranged from letting companies repatriate their earnings tax-free to requiring them to immediately pay a discounted rate of 20 percent. All of the proposals would give corporations a substantial tax discount and forego much-needed revenue.
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report November 28, 2016 Comprehensive Guide to “Repatriation” Proposals
Corporations falsely claim that they have to engage in offshore tax avoidance maneuvers because the U.S. corporate tax rate is too high, an argument which has unfortunately found an audience in lawmakers on both sides of the aisle. In 2017, Congress likely will evaluate a number of approaches to taxing the trillions of dollars corporations currently hold offshore. This report explains and evaluates these proposals, including a so-called repatriation holiday and deemed repatriation. Further, it explains why ending deferral of taxes on U.S. multinational corporations’ foreign earnings could halt the widespread corporate practice of funneling money to subsidiaries for the express purpose of avoiding taxes.
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report November 28, 2016 Fact Sheet: What You Need to Know About Repatriation Proposals
Fortune 500 corporations collectively have stashed $2.5 trillion in profits offshore, on which they have avoided up to $718 billion in taxes. It’s no wonder that policymakers on both sides of the aisle are weighing legislative options to either tax these profits or create an incentive for corporations to “repatriate” or bring these profits to the United States so that they are subject to taxation.
Lawmakers have introduced several “repatriation” proposals that would glean tax revenue from these offshore profits. But the only solution that will ensure corporations pay taxes on their offshore profits AND shut down the practice of stashing cash offshore is to end deferral, the tax code loophole that allows corporations to indefinitely avoid paying taxes on profits stashed offshore.
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report October 4, 2016 Offshore Shell Games 2016
This study explores how in 2015 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s wealthiest corporations benefit the most from this tax avoidance scheme.
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report September 30, 2016 Comment Letter to FASB on Income Tax Disclosure
We appreciate the Financial Accounting Standards Board’s (FASB) ongoing review of its accounting standards to ensure that financial statements are “facilitating clear communication of information that is important to financial statement users.” Overall, the changes to disclosure requirements proposed by FASB in the exposure draft would represent a significant step forward toward providing users of financial statements the clarity that they need. We believe, however, that the exposure draft does not go far enough in providing the clarity needed and sought by investors and the public alike.
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press release August 30, 2016 News Release: U.S. Should Take a Page from European Commission’s Book And Crack Down on Corporate Tax Avoidance
Following is a statement by Matt Gardner of the Institute on Taxation and Economic Policy regarding the European Commission’s ruling today that the Apple Corporation must pay as much as… -
report February 25, 2014 The Sorry State of Corporate Taxes
Many of America’s Most Profitable Corporations Pay Little or No Federal Income Taxes; Multinationals Pay Higher Rates Abroad Than in the U.S.
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report November 13, 2011 Corporate Taxpayers & Corporate Tax Dodgers
Earlier this year, Berkshire Hathaway Chairman Warren Buffett made headlines by publicly decrying the stark inequity between his own effective federal tax rate (about 17 percent, by his estimate) and… -
report April 15, 2010 Massey Pays One-Sixth of 35% Federal Tax Rate, Little in State Income Tax
A new analysis shows that Massey Energy, which owned the Upper Big Branch mine where 29 West Virginia miners were killed last week, paid an average of 5.6 percent of… -
report September 15, 2004 Corporate Income Taxes in the Bush Years
This study details which companies have benefitted the most from the decline in corporate taxes over the past three years, and which have been less fortunate. It also measures the…