Choosing the Companies

This report is based on corporate annual reports to shareholders and the similar 10-K forms that corporations are required to file with the Securities and Exchange Commission. We relied on electronic versions of these reports from the companies’ web sites or from the SEC web site.

As we pursued our analysis, we gradually eliminated companies from the study based on two criteria: either (1) a company lost money in 2018 or (2) a company’s report did not provide sufficient information for us to accurately determine its domestic profits, current federal income taxes, or both. This left us with the 379 companies in our report.

The total net federal income taxes reported by the 379 companies in this study amounted to about 40 percent of all net federal corporate income tax collections in fiscal year 2018.

Method of Calculation

Conceptually, our method for computing effective corporate tax rates is straightforward. First, we determined a company’s domestic profit and then subtracted current state and local taxes to determine net U.S. pretax profits before federal income taxes. We then calculated a company’s federal current income taxes. Current taxes are those that a company is obligated to pay during the year; they do not include taxes “deferred” due to various federal “tax incentives” such as accelerated depreciation. Finally, we divided current U.S. taxes by pretax U.S. profits to determine effective tax rates.[7]

A. Issues in measuring profits.

The pretax U.S. profits reported in the study are generally as the companies disclosed them. In a few cases, if companies did not separate U.S. pretax profits from foreign, but foreign profits were obviously small,

we made our own geographic allocation, based on a geographic breakdown of operating profits minus a prorated share of any expenses not included therein (e.g., overhead or interest), or we estimated foreign profits based on reported foreign taxes or reported foreign revenues as a share of total worldwide profits.

Many companies report “noncontrolling interest” income, which is usually included in total reported pretax income. This is income of a subsidiary that is not taxable income of the parent company. When substantial noncontrolling income was disclosed, we subtracted it from U.S. and/or foreign pretax income.

Where significant, we adjusted reported pretax profits for several items to reduce distortions. In the second half of 2008, the U.S. financial system imploded, taking our economy down with it. By the fourth quarter of 2008, no one knew for sure how the federal government’s financial rescue plan would work.

Many banks predicted big future loan losses and took big book write-offs for these pessimistic estimates. Commodity prices for things like oil and gas and metals plummeted, and many companies that owned such assets booked “impairment charges” for their supposed long-term decline in value. Companies

that had acquired “goodwill” and other “intangible assets” from mergers calculated the estimated future returns on these assets, and if these were lower than their “carrying value” on their books, took big book “impairment charges.” All of these book write-offs were non-cash and had no effect on either current income taxes or a company’s cash flow.

As it turned out, the financial rescue plan, supplemented by the best parts of the economic stimulus program adopted in early 2009, succeeded in averting the Depression that many economists had worried could have happened. Commodity prices recovered, the stock market boomed, and corporate profits zoomed upward. But in one of the oddities of book accounting, the impairment charges could not be reversed.

Here is how we dealt with these extraordinary non-cash charges, plus “restructuring charges,” that would otherwise distort annual reported book profits and effective tax rates:

2. Smoothing adjustments

Some of our adjustments simply reassign booked expenses to the years that the expenses were actually incurred. These “smoothing” adjustments avoid aberrations in one year to the next.

1. “Provisions for loan losses” by financial companies: Rather than using estimates of future losses, we generally replaced companies’ projected future loan losses with actual loan charge-offs less recoveries. Over time, these two approaches converge, but using actual loan charge-offs is more accurate and avoids year-to-year distortions. Typically, financial companies provide sufficient information to allow this kind of adjustment to be allocated geographically.
2. “Restructuring charges”: Sometimes companies announce a plan for future spending (such as the cost of laying off employees over the next few years) and will book a charge for the total expected cost in the year of the In cases where these restructuring charges were significant and distorted year-by-year income, we reallocated the costs to the year the money was spent (allocated geographically).

3. “Impairments”

Companies that booked “impairment” charges typically went to great lengths to assure investors and stock analysts that these charges had no real effect on the companies’ earnings. Some companies simply excluded impairment charges from the geographic allocation of their pretax income. For example, Conoco-Phillips assigned its 2008 pretax profits to three geographic areas, “United States,” “Foreign,” and “Goodwill impairment,” implying that the goodwill impairment charge, if it had any real existence at all, was not related to anything on this planet. In addition, many analysts have criticized these non-cash impairment charges as misleading, and even “a charade.”[8] Here is how we treated “impairment charges”:

1. Impairment charges for goodwill (and intangible assets with indefinite lives) do not affect future book income, since they are not amortizable over We added these charges back to reported profits, allocating them geographically based on geographic information that companies supplied, or as a last resort by geographic revenue shares.
2. Impairment charges to assets (tangible or intangible) that are depreciable or amortizable on the books will affect future book income somewhat (by reducing future book write-offs, and thus increasing future book profits). But big impairment charges still hugely distort current year book So as a general rule, we also added these back to reported profits if the charges were significant.
3. Caveat: Impairments of assets held for sale soon were not added. All significant adjustments to profits made in the study are reported in the company-by-company notes.

B. Issues in measuring federal income taxes.

The primary source for current federal income taxes was the companies’ income tax notes to their financial statements. The tax note includes each company’s best assessment of its current federal income tax bill for 2018. In general, the numbers included in our report are identical to “current federal income tax” as reported by each company.[9] However, 2018 tax disclosures present a special challenge for the use of these data. In late December of 2017, the newly-enacted tax law passed by Congress imposed a one-time “deemed repatriation” tax on companies’ accumulated prior foreign profits. Companies included the estimated value (if any) of this tax in their current income tax for 2017, because accounting rules required immediate recognition of this expense even if it wasn’t paid immediately. In most cases, this did not affect the 2018 data used in our report. But there were two situations in which the transition tax required an adjustment to our data.

First, some companies in our sample have fiscal years that overlap mostly, but not completely, with the calendar year. For companies with fiscal years ending in (for example) October, the 2018 annual report covers a time period including late December 2017, which means the transition tax is included in 2018 current income tax and must be subtracted.

Second, some companies with conventional fiscal years that follow the calendar year made second-round re-estimates of the transition tax in 2018. (A special FASB rule, in a nod to the very short period of time companies were given to assess the impact of the 2017 tax cuts before the end of their 2017 fiscal year, gave companies latitude to make adjustments their original estimates in the following year, and many companies did so.) In many cases, the transition tax was adjusted downward, making current federal income tax for 2018 appear lower than it really was. In a smaller number of cases, the transition tax was adjusted upwards, making current federal income tax related to 2018 income appear larger than it really was.

In each of these cases, current federal income tax for 2018 should not include the effect of the transition tax or the transition tax adjustment. The transition tax is not related to U.S. income earned during 2018 but is associated with foreign income earned in an indeterminate year, usually before 2018. We adjusted reported current federal income tax, where necessary, to exclude the effect of the transition tax or transition tax adjustment. When companies disclosed the existence of a transition tax adjustment but did not disclose its size, we eliminated that company from the sample because it wasn’t possible to determine true 2018 income tax liability.

C. Negative tax rates

A “negative” effective tax rate means that a company enjoyed a tax rebate. This can occur by carrying back excess tax deductions and/or credits to an earlier year or years and receiving a tax refund check from the U.S. Treasury Department. Negative tax rates can also result from recognition of tax benefits claimed on earlier years’ tax returns but not reported as tax reduction in earlier annual reports because companies did not expect that the IRS would allow the tax benefits. If and when these “uncertain tax benefits” are recognized, they reduce a company’s reported current income tax in the year that they are recognized. See the appendix on page 30 for a fuller discussion of “uncertain tax benefits.”

D. High effective tax rates

Some of the companies in our study report effective U.S. federal income tax rates that are higher than the 21 percent official corporate tax rate. This phenomenon is usually due to taxes that were deferred in the past but that eventually came due. Such “turnarounds” often involve accelerated depreciation tax breaks, which usually do not turn around so long as companies are continuing to increase or maintain their investments in plant and equipment. But these tax breaks can turn around if new investments fall off (for example, because a bad economy makes continued new investments temporarily unprofitable).

E. Industry classifications

Because some companies do business in multiple industries, our industry classifications are far from perfect. We generally, but not always, based them on Fortune’s industry classifications.

The federal current tax expense is just exactly what the company expects its current year tax bill to be when it files its tax return. If the calculation of the income tax provision was done perfectly, the current tax expense would exactly equal the total amount of tax shown on the tax return. But the income tax provision is calculated in February as the company is preparing its 10-K for filing with the Securities and Exchange Commission (SEC), and the company’s tax return isn’t usually filed until September. While the company’s tax return is prepared over those several months, things will be found that weren’t accounted for in the financial statement income tax provision, and numbers that were estimated in February will be refined for the actual return. Those small differences will be included in the following year’s current tax expense, but the impact on our calculations should be minimal. If the differences in any one year were material, accounting rules would require the company to restate their prior year financials.

The complaints that “current income taxes” are not an accurate measure of taxes actually paid does contain an important truth that is worth remembering; “current income tax” is almost certainly an inflated estimate of what companies actually pay, because of a concept called “dubious tax benefits.”

Dubious tax benefits, officially known as “uncertain tax positions” and “unrecognized tax benefits,” are tax breaks that companies claim on their tax returns but are not allowed to report on their financial books until and if these claimed tax benefits are allowed. Securities and Exchange Commission rules require each company to assess the likelihood that each tax break it claims on tax returns will be disallowed on examination by tax administrators. The disclosure was introduced so that policymakers and tax administrators could assess the overall aggressiveness of each company’s tax avoidance.

For example, suppose a corporation on its 2018 tax return tells the IRS that it owes $700 million in federal income tax for the year. But the corporation’s tax staff believes that on audit the corporation will most likely owe an additional $300 million because $300 million in tax benefits that the company claimed on its tax return are unlikely to be approved by the IRS. As a result, the corporation’s current income tax for 2018 that it reports to shareholders (and that we calculate in our reports) will be $1 billion, the amount that the corporation expects to actually owe in income taxes.[11]

After that, two things, in general, can happen:

More often than not. Suppose that, as the corporation’s tax staff predicted, the IRS in 2020 disallows the $300 million in dubious tax benefits claimed on the company’s 2018 tax return. In this case, the $1 billion in reported current income tax for 2018 will turn out to have been correct. In 2020, when the dubious tax benefits are disallowed, the company will have to pay back the $300 million (plus interest and penalties) to the IRS. Reasonably enough, the corporation will not report that 2020 payback in its 2020 annual report to shareholders, since it had already reported it as paid back in 2018.

Occasionally. Suppose instead that to the surprise of the corporation’s tax staff, the IRS in 2020 allows some or part of the $300 million in dubious tax benefits claimed in 2018. In this case, the corporation will reduce its 2020 “current income tax” reported to shareholders by the allowed amount of the dubious tax benefits previously claimed on the corporation’s 2018 tax return.

But, argue some analysts, isn’t the right answer to go back and reassign the eventually allowed dubious tax benefits to 2018, the year they were claimed on the corporation’s tax return? The answer is no, for two reasons:

First, booking the corporation’s tax windfall in 2020, the year it was allowed by the IRS, makes logical sense. That’s because until the IRS allowed the dubious tax benefits, it was the judgment of the company’s tax experts that the company was probably not legally entitled to those tax benefits. In essence, the IRS’s allowance of all or part of the dubious tax benefits claimed on the company’s 2018 tax return is the same as the corporation receiving an unexpected tax refund in 2020.

It’s as if the company had initially borrowed the money from the IRS, but expected to pay it back (with interest). When and if the IRS “forgives” part or all of the “loan,” then the company recognizes the tax benefit. Likewise, suppose you borrow money from your employer with the expectation that you’ll pay it back. But later, your employer forgives your debt. You didn’t have to declare the loan as income when you borrowed the money, but you do have to declare it as income when the loan is forgiven.

Second, even if one believed that the 2020 tax windfall ought to be reassigned to 2018, there is simply no way to do so. That’s because corporations do not disclose sufficient information in their annual reports to make such a retroactive reallocation.[12]

An Alternative Measure: Cash Income Taxes Paid

 In their annual reports to shareholders, corporations also report something called “cash income taxes paid.” Cash income taxes paid is net of stock option tax benefits and does not include “deferred” taxes.[13] Unlike current taxes, however, cash income taxes paid subtracts dubious tax benefits that are likely to be reversed later (and adds those dubious tax benefits if and when they are later reversed).

“Cash income taxes paid” is sometimes interesting, but it is useless for purposes of measuring the federal income taxes that U.S. multinational corporations pay on their U.S. profits. That’s because “cash income taxes paid” are not broken down by taxing jurisdiction. Instead, this measure lumps together U.S. federal income taxes, U.S. state income taxes and foreign income taxes. Since most big corporations are multinationals these days, and almost all are subject to both federal and state income taxes, that’s a fatal defect.[14]

Even for purely domestic corporations, “cash income taxes paid” is a problematic measure. It often fails to match income in a given year with the taxes paid for that year (since companies don’t settle up with the IRS until after a given year is over). The cash payments made during the year include quarterly estimated tax payments for the current year, balances due on tax returns for prior years, and any refunds or additional taxes due as a result of tax return examinations or loss carrybacks. Put another way, any check a company writes during a given fiscal year related to income taxes in any year, in any jurisdiction, will be incorporated into “cash income taxes paid.”

To be sure, if “cash income taxes paid” were reported by taxing jurisdiction and better linked with the pretax income in a given year, then this measure could be useful. But as of now, it is not, except in one way: it supports our use of current taxes as a measure of how much in taxes corporations are really paying. If you compare a company’s total current taxes (after subtracting the excess stock benefits) to cash taxes paid over a period of years, you will see that they are generally very close. The differences, if any, suggest that the effective rate corporations are paying may be even less than what we’ve calculated.

3M: The foreign-derived intangible income deduction (FDII) reduced taxes by $91 million.  The GILTI provision increased taxes by $77 million. The research and experimentation tax credit reduced taxes by $105 million. Excess benefits from stock options reduced federal and state taxes by $100 million.

ABM Industries: The company’s fiscal year ended in October of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax. Excess benefits from stock options reduced federal and state taxes by $3.4 million. A tax credit for energy-efficient government buildings reduced taxes by $2.8 million.

Activision Blizzard: Current federal income tax was adjusted to exclude a second-round addition to the TCJA transition tax. The research and experimentation tax credit reduced taxes by $46 million. Excess benefits from stock options reduced federal and state taxes by $58 million.

AECOM: The company’s fiscal year ends in September of 2018. Pretax income was adjusted to exclude noncontrolling interest income. Current federal income tax was adjusted to exclude the TCJA transition tax. “Income tax credits and incentives” reduced income taxes by $37 million.

Agilent: The company’s fiscal year ends in October of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Air Products and Chemicals: The company’s fiscal year ends in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax. Excess benefits from stock options reduced federal and state taxes by $21.5 million. The company realized a tax savings of $35.7 million from the “restructuring of foreign subsidiaries.”

Alaska Air: Accelerated depreciation explains most of the company’s tax breaks in 2018.

Alliance Data Systems: Accelerated depreciation reduced income taxes by $41 million.

Amazon: Excess tax benefits from stock options reduced federal and state taxes by $1.6 billion. Tax credits reduced income taxes by $419 million.

Ameren: Accelerated depreciation reduced income taxes by $60 million.

American Express: Pretax U.S. and foreign income are each adjusted to include a share of pretax income that the annual report does not allocate geographically.

AmerisourceBergen: The company’s fiscal year ended in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $21 million.

Amphenol: Current federal income tax was adjusted to exclude a second-round adjustment to the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $19 million.

Andersons: Accelerated depreciation tax breaks explain almost all of the company’s negative tax rate. The GILTI provision increased income taxes by less than $1 million. Federal income tax credits reduced income taxes by $1.8 million.

Anixter International: Current federal income tax was adjusted to exclude a second-round adjustment to the TCJA transition tax.

Anthem: The Health Insurance Provider (HIP) Fee increased income taxes by $324 million. Tax-exempt interest reduced income taxes by $27 million.

Archer Daniels Midland: Current federal income tax was adjusted to exclude a second-round adjustment to the TCJA transition tax. Biodiesel tax credits reduced income taxes by $47 million. The GILTI provision increased income taxes by $21 million, while the FDII provision reduced income taxes by $21 million.

Atmos Energy: The company’s fiscal year ends in September. Most of the company’s tax breaks were due to deferrals related to depreciation.

Ball: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. The GILTI provision increased taxes by $15 million. The research and experimentation tax credit reduced taxes by $7 million. Excess tax benefits from stock options reduced federal and state taxes by $14 million.

Bank of America: Affordable housing credits, energy credits and other credits reduced income taxes by $1.9 billion. Excess tax benefits from stock options reduced federal and state taxes by $257 million.

Bank of New York Mellon: Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $31 million. Unspecified “tax credits” reduced income taxes by $171 million.

BB&T: Excess tax benefits from stock options reduced federal and state taxes by $17 million.

Berry Global Group: Current federal income tax was adjusted to exclude the TCJA transition tax. The research and development tax credit reduced income taxes by $7 million. Excess tax benefits from stock options reduced federal and state taxes by $9 million.

Best Buy: The company’s fiscal year ended in February of 2019. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Accelerated depreciation reduced income taxes by $21 million.

Big Lots: The company’s fiscal year ended in February of 2019. Limits on the deductibility of executive pay increased income taxes by $1.4 million. Accelerated depreciation reduced income taxes by $15 million. The Work Opportunity Tax Credit and other employment credits reduced federal and state taxes by $2.9 million.

Biogen Idec: Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax.  The GILTI provision increased taxes by $94 million.

C.H. Robinson: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

Campbell Soup: The company’s fiscal years end in July of 2018. Reported pretax profits were adjusted upward for a non-cash goodwill impairment. Current federal income tax was adjusted to exclude the TCJA transition tax.

Capital One: Reported pretax profits were adjusted for the timing of payments for credit losses. Affordable housing, new market and other tax credits reduced income taxes by $292 million.

Casey’s General Stores: The company’s fiscal year ends in April of 2019. Accelerated depreciation reduced income taxes by $42 million. Excess tax benefits from stock options reduced federal and state taxes by $2 million. “Federal tax credits” reduced income taxes by $6 million.

Caterpillar: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. We disregarded non-cash charges that the company booked to reflect reduced assumptions about the future return on its pension and other retirement plans. Excess tax benefits from stock options reduced federal and state taxes by $56 million. “U.S. tax incentives” reduced income taxes by $106 million.

CBS: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

Celanese: Reported total current income taxes were adjusted in order to separate federal and state taxes. The company’s income tax note did not distinguish between federal and state taxes, so the study estimated the federal and state share of current U.S. taxes. Accelerated depreciation reduced income taxes by $68 million.

CF Industries Holdings: Pretax income was adjusted to exclude noncontrolling interest income.  Excess tax benefits from stock options reduced federal and state taxes by $6 million.

Cigna: The health insurance industry taxes increased taxes by $78 million.

Cintas: Accelerated depreciation reduced income taxes by $33 million. “Permanent differences,” including excess tax benefits from stock options, reduced income taxes by $51 million.

Clorox: The company’s fiscal year 2018 ends in June of 2019. Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $23 million.

CMS Energy: Accelerated depreciation reduced income taxes by $64 million. The research and experimentation tax credit reduced taxes by $14 million. Production tax credits reduced income taxes by $11 million.

Consol Energy: Excess tax depletion reduced income taxes by $20 million. Research and development tax credits reduced income taxes by $1 million.

Consolidated Edison: Accelerated depreciation explains almost all of the company’s tax breaks. Renewable energy credits reduced income taxes by $18 million.

Corning: Deferral explains most of the company’s low tax rates.

Costco Wholesale: The company’s 2018 fiscal year ends in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

DaVita: “Political advocacy costs” increased the company’s income taxes by $24 million. Accelerated depreciation reduced income taxes by $18 million.

Deere: The company’s fiscal years end in October of 2018. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Research and business tax credits reduced taxes by $43 million. Excess tax benefits from stock options reduced federal and state taxes by $49 million.

Delek U.S. Holdings: Income taxes increased by $1.7 due to executive compensation above deductible limits. Excess tax benefits from stock options reduced federal and state taxes by $2.2 million. “Tax credits and incentives” reduced taxes by $8.3 million.

Discovery Communications: The company’s high effective tax rate reflects turnarounds of deferred federal income taxes from prior years. Renewable energy investment tax credits reduced income taxes by $12 million. Non-deductible compensation increased income taxes by $20 million.

Dollar General: Because the company does not disclose U.S. and foreign pretax income, the study estimated foreign pretax income based on reported current foreign income taxes. The company’s fiscal years end in January of 2019. Jobs credits reduced income taxes by $27 million.

Dollar Tree: The company’s 2018 fiscal year ended in February of 2019. Reported pretax profits were adjusted upward for a non-cash goodwill impairment.

Ecolab: Reported total current income taxes were adjusted in order to separate federal and state taxes. Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. The research and experimentation tax credit reduced taxes by $18 million. Excess tax benefits from stock options reduced federal and state taxes by $29 million.

Emerson Electric: The company’s fiscal years end in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Eversource Energy: Accelerated depreciation provided the company with substantial tax savings. Excess tax benefits from stock options reduced federal and state taxes by $19 million.

Facebook: The research and experimentation tax credit reduced taxes by $254 million. Excess tax benefits from stock options reduced federal and state taxes by $717 million.

FedEx: The company’s fiscal year used here ends in May of 2019. We disregarded non-cash charges that the company booked to reflect reduced assumptions about the future return on its pension and other retirement plans.

First Energy: Accelerated depreciation saved the company substantial amounts.

Fiserv: Because the company does not disclose foreign pretax income, the study estimated foreign income based on reported current foreign income taxes. Excess tax benefits from stock options reduced federal and state taxes by $34 million.

Ford Motor Company: General business credits reduced income taxes by $399 million.

Gannett: Deferral explains the company’s zero tax rate. Excess tax benefits from stock options also reduced federal and state taxes.

Gap: The company’s fiscal years end in February of 2019. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax.  Accelerated depreciation reduced income taxes by $101 million.

General Dynamics: The foreign-derived intangible income deduction (FDII) reduced taxes by $49 million. Domestic tax credits and equity-based compensation each reduced income taxes by $45 million.

General Mills: The company’s fiscal year ends in May of 2019. Accelerated depreciation reduced income taxes by $48 million. Excess tax benefits from stock options reduced federal and state taxes by $25 million. Pretax income was adjusted upward for a non-cash impairment of intangible assets.

General Motors: General business credits and manufacturing incentives reduced income taxes by $695. Accelerated depreciation reduced income taxes by $680.

Genuine Parts: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $4.2 million. Depreciation reduced taxes by $5.7 million.

Goodyear Tire & Rubber: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.  Accelerated depreciation reduced taxes by $61 million.

Graybar Electric: Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax.

Group 1 Automotive: Employment credits reduced income taxes by $1.3 million.

H&R Block: The company’s fiscal year used here ends in April of 2019. Accelerated depreciation reduced taxes by $1.8 million.

Halliburton: Accelerated depreciation appears to explain most of the company’s tax breaks. The company also reduced taxes by $306 million using “a strategic change in the Company’s corporate structure.”

Harley-Davidson: A turnaround of deferred tax liabilities from prior years is one driver of the company’s high tax rate. The research and experimentation tax credit reduced taxes by $8 million. The foreign-derived intangible income deduction (FDII) reduced taxes by $8 million. The GILTI provision increased taxes by $2.7 million. The company paid $3 million due to executive compensation in excess of deductible limits.

Harris: The company’s fiscal year used here ends in June of 2019. Harris merged with L3 Technologies after the end of each company’s fiscal 2019, so the two companies are presented separately in this report. The research and experimentation tax credit reduced taxes by $50 million. The foreign-derived intangible income deduction reduced taxes by $14 million. Excess tax benefits from stock options reduced federal and state taxes by $24 million.

Hartford Financial: The company paid $11 million due to executive compensation in excess of deductible limits. Tax-exempt interest reduced income taxes by $66 million, and stock-based compensation cut taxes by $5 million.

HCA Holdings: Pretax income was adjusted to exclude noncontrolling interest income. Excess tax benefits from stock options reduced federal and state taxes by $128 million. Depreciation reduced taxes by $80 million.

Henry Schein: The company’s high tax rate reflects a turnaround of deferred tax liabilities from prior years. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $1 million. The GILTI provision increased taxes by $7.4 million. A “legal entity reorganization outside the U.S.” reduced taxes by $14 million.

Hershey: The company’s high tax rate reflects a turnaround of deferred tax liabilities from prior years. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Historic and solar tax credits reduced income taxes by $49 million. Accelerated depreciation reduced taxes by $12 million.

Hilton Worldwide Holdings: The company’s high tax rate reflects a turnaround of deferred tax liabilities from prior years.

HollyFrontier: Accelerated depreciation reduced taxes by $16 million.

Home Depot: The company’s fiscal year used here ends in February of 2019. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Pretax income was adjusted upward for a non-cash impairment of indefinite-lived intangible assets.

Honeywell International: Deferred taxes explain most of the company’s tax breaks. Excess tax benefits from stock options reduced federal and state taxes by $52 million.

Hormel Foods: The company’s fiscal year used here ends in October of 2018. Because the company does not disclose U.S. and foreign pretax income, the study estimated foreign pretax income based on reported current foreign income taxes. Excess tax benefits from stock options reduced federal and state taxes by $40 million.

Huntington Ingalls: The research and experimentation tax credit reduced taxes by $80 million. Excess tax benefits from stock options reduced federal and state taxes by $5 million.

Huntsman: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. The research and experimentation tax credit reduced taxes by $80 million. Excess tax benefits from stock options reduced federal and state taxes by $14 million.

Insight Enterprises: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Research and development tax credits reduced taxes by $4 million. Non-deductible compensation increased federal and state taxes by $1.4 million.

Intercontinental Exchange: Accelerated depreciation reduced income taxes by $34 million.

International Business Machines (IBM): Accelerated depreciation reduced income taxes by $140 million.

International Paper: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. The foreign-derived intangible income deduction (FDII) reduced taxes by $25 million. The GILTI provision increased taxes by $19 million. General business credits reduced taxes by $26 million.

Interpublic: The company reports noncontrolling interest income. Pretax income was adjusted to exclude this income. U.S. federal tax credits reduced taxes by $48 million. Excess tax benefits from stock options reduced federal and state taxes by $6.8 million.

Intuit: The research and experimentation tax credit reduced taxes by $38 million. Excess tax benefits from stock options reduced federal and state taxes by $100 million.

ITT: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Tax-exempt interest reduced income taxes by $22 million. Excess tax benefits from stock options reduced federal and state taxes by $2.2 million.

J.B. Hunt Transport Services: Deferred taxes due to accelerated depreciation explain most of the company’s tax breaks. Tax benefits from stock options reduced federal and state taxes by $4.9 million.

J.M. Smucker: The company’s fiscal year end in April of 2019. Reported pretax profits were adjusted upward for non-cash impairments of goodwill and indefinite-lived intangible assets. Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax.

Jacobs Engineering Group: The company’s 2018 fiscal year ended in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Jetblue: Accelerated depreciation reduced income taxes by $71 million.

Jones Lang Lasalle: The company’s high effective tax rate is due to a large turnaround of deferred income taxes from prior years.

Kellogg: Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax. Deferral explains much of the company’s low tax rate. Excess tax benefits from stock options reduced federal and state taxes by $4 million.

Kelly Services: General business credits, primarily the work opportunity credit, reduced income taxes by $23 million. The GILTI provision increased income taxes by $0.5 million. The foreign-derived intangible income (FDII) provision reduced taxes by $0.9 million.

Keycorp: Tax credits reduced income taxes by $234 million. Tax-exempt interest income reduced taxes by $30 million.

Kimberly-Clark: “Routine tax incentives” reduced income taxes by $98 million.

Kohl’s: The company’s fiscal year 2018e ended in February of 2019. The company’s high tax rate is due to a turnaround of deferred income taxes from prior years. Tax credits reduced income taxes by $10 million.

Kroger: The company’s fiscal years end in January following the years listed. Tax credits reduced income taxes by $51 million. Excess tax benefits from stock options reduced federal and state taxes by $12 million.

L-3 Communications: The research and experimentation tax credit reduced taxes by $48 million. Excess tax benefits from stock options reduced federal and state taxes by $37 million.

Laboratory Corp. of America: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. The high rate is explained by a turnaround of deferred taxes. Excess tax benefits from stock options reduced federal and state taxes by $10 million. The GILTI provision increased income taxes by $12 million.

Levi Strauss: The company’s 2018 fiscal year ended in November of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Lockheed Martin: Because the company does not disclose U.S. and foreign pretax income, the study estimated foreign pretax income based on reported current foreign income taxes. The FDII provision reduced income taxes by $61 million. The research and experimentation tax credit reduced taxes by $138 million. Excess tax benefits from stock options reduced federal and state taxes by $55 million.

Loews: Pretax income was adjusted to exclude noncontrolling interest income. Exempt investment income reduced taxes by $64 million. Accelerated depreciation reduced income taxes by $75 million.

M&T Bank: Qualified affordable housing project federal tax credits reduced income tax by $12 million. Tax-exempt income reduced income tax by $26 million. Excess tax benefits from stock options reduced federal and state taxes by $9 million.

Macy’s: The company’s fiscal years end in January following the years listed. Federal tax credits reduced income taxes by $16 million. Accelerated depreciation reduced income taxes by $64 million.

Magellan Health: The non-deductible health insurer’s fee (HIF) substantially increases the company’s effective tax rate. Limits on the deductibility of executive compensation increased taxes by $3 million. Research credits reduced income taxes by $1.7 million. Excess tax benefits from stock options reduced federal and state taxes by $5 million.

Marriott: Excess tax benefits from stock options reduced federal and state taxes by $42 million.

Mastec: Accelerated depreciation explains virtually all of the company’s tax breaks in 2018.

Mastercard: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

McDonalds: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

McKesson: The company’s fiscal years end in March following the years listed. Pretax income was adjusted to reflect the timing of charges for litigation settlements.

MGM Resorts International: General business credits reduced income taxes by $18 million. Stock-based compensation reduced income taxes by $7.6 million. Accelerated depreciation cut taxes by $59 million.

Mohawk Industries: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Deferral of income tax using accelerated depreciation explains most of the company’s tax breaks.

Molina Healthcare: The non-deductible health insurer’s fee (HIF) substantially increases the company’s effective tax rate.

NextEra Energy: Production tax credits and investment tax credits reduced the company’s income taxes by $220 million.

Nike: The company’s 2018 fiscal years ended in May of 2019. Excess tax benefits from stock options reduced federal and state taxes by $175 million. The federal research and development tax credit reduced taxes by $53 million.

Nvidia: The company’s 2018 fiscal year ended in January of 2019. Current federal income tax was reduced to exclude a second-round increase in the TCJA transition tax. The federal research and development tax credit reduced taxes by $141 million.

NVR: Excess tax benefits from stock options reduced federal and state taxes by $77 million.

Occidental Petroleum: The enhanced oil recovery credit reduced taxes by $168 million.

Oracle: The company’s fiscal year 2018 ended in May of 2019. Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $201 million.

O’Reilly Automotive: Accelerated depreciation reduced income taxes by $18 million. Excess tax benefits from stock options reduced federal and state taxes by $34.7 million.

Owens Corning: Current federal income tax was adjusted to exclude a second-round decrease in the TCJA transition tax. The GILTI provision increased taxes by $13 million. Excess tax benefits from stock options reduced federal and state taxes by $14 million. Accelerated depreciation reduced taxes by $25 million.

Owens & Minor: Excess tax benefits from stock options reduced federal and state taxes by $13.7 million.

Penske: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. Accelerated depreciation reduced income taxes by $10 million.

Pepsico: Excess tax benefits from stock options reduced federal and state taxes by $48 million.

Polaris Industries: Excess tax benefits from stock options reduced federal and state taxes by $6 million. The research and experimentation tax credit reduced taxes by $13 million.

Principal Financial: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Unspecified “tax credits” reduced income taxes by $53 million.

Quanta Services: Accelerated depreciation reduced income taxes by $16 million.

Quest Diagnostics: Pretax income was adjusted to exclude noncontrolling interest income. Deferred taxes reduced the company’s tax rate slightly in most years. Excess tax benefits from stock options reduced federal and state taxes by $17.6 million. Accelerated depreciation reduced income taxes by $81 million.

Raytheon: The Foreign-Derived Intangible Income provision (FDII) reduced taxes by $132 million. The research and experimentation tax credit (including prior year claims that were realized in 2018) reduced taxes by $142 million. Excess tax benefits from stock options reduced federal and state taxes by $18 million. An “Irish restructuring” reduced worldwide income taxes by $62 million, although it’s impossible to know whether this affected US or foreign taxes.

Regeneron Pharmaceuticals: The Foreign-Derived Intangible Income reduced taxes by $25 million. “Income tax credits” reduced taxes by $66 million. Stock-based compensation reduced income taxes by $64 million.

Reinsurance Group of America: Excess tax benefits from stock options reduced federal and state taxes by $6.1 million. The GILTI provision increased taxes by $10.4 million.

Republic Services: Excess tax benefits from stock options reduced federal and state taxes by $12 million. Accelerated depreciation reduced income taxes by $84 million.

Rockwell Automation: The company’s fiscal years end in September. Current federal income tax was adjusted to exclude the TCJA transition tax.  R&D tax credits reduced income taxes by $17 million.

SAIC: The company’s fiscal year 2018 ended in January of 2019. The research and experimentation tax credit and other credits reduced taxes by $8 million. Excess tax benefits from stock options reduced federal and state taxes by $9 million.

Sealed Air: Current federal income tax was adjusted to exclude the TCJA transition tax. Accelerated depreciation reduced income taxes by $13 million. Tax credits reduced income taxes by $21 million.

Sempra Energy: Pretax income was adjusted to exclude noncontrolling interest income.

Sonic Automotive: The company’s high effective tax rate reflects a large turnaround of deferred income taxes from prior years. Non-deductible compensation increased taxes by $2 million.

Southwest Airlines: The company’s low rate is almost entirely attributable to deferred taxes due to accelerated depreciation.

Spartan Nash: Deferral, due to accelerated depreciation, explains most of the company’s tax breaks.

State Street: Low-income housing credits, production and investment tax credits reduced income taxes by $206 million. Tax-exempt income reduced income taxes by $63 million.  The GILTI provision increased taxes by $6 million.

Target: The company’s fiscal years ends in February of 2019. Federal tax credits reduced income taxes by $40 million. Excess tax benefits from stock options reduced federal and state taxes by $11 million. Accelerated depreciation was the main factor behind the company’s low rate, reducing taxes by $293 million.

Tech Data: The company’s fiscal years end in January. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. The GILTI provision increased taxes by $3.7 million.

Telephone & Data Systems: Nondeductible compensation increased income taxes by $9 million. Accelerated depreciation reduced income taxes by $22 million.

Tractor Supply Company: Excess tax benefits from stock options reduced federal and state taxes by $4.5 million.

United Natural Foods: The company’s fiscal year used here ends in late July of 2018. The company’s high tax rate reflects a turnaround of deferred taxes from prior years.

United Parcel Service: Pretax income was adjusted upwards for a mark-to-market charge. Accelerated depreciation saved the company substantial amounts.. Excess tax benefits from stock options reduced federal and state taxes by $38 million.

Unum: A turnaround of deferred taxes from prior years explains the company’s high rate. Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

VF: The company’s 2018 fiscal year ends in March of 2019. A turnaround of deferred taxes from prior years explains the company’s high rate. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax.

Viacom: The company’s 2018 fiscal year ends in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Visa: The company’s 2018 fiscal year ends in September of 2018. Reported pretax income was adjusted to remove the noncash component of a litigation charge. Current federal income tax was adjusted to exclude the TCJA transition tax.

W.R. Berkley: Reported total current income taxes were adjusted in order to separate federal and state taxes. Tax-exempt investment income reduced taxes by $18 million. The GILTI provision increased taxes by $2.8 million.

W.W. Grainger: Clean energy credits reduced income taxes by $15 million. Excess tax benefits from stock options reduced federal and state taxes by $15 million.

Walgreens Boots Alliance: The company’s fiscal year used here ends in August of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax. “Tax credits” reduced income taxes by $412 million.

Wal-Mart: The company’s 2018 fiscal year ended in January of 2019. Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Federal tax credits reduced income taxes by $137 million.

Walt Disney: The company’s 2018 fiscal year ended in September of 2018. Current federal income tax was adjusted to exclude the TCJA transition tax.

Waste Management: Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. The Low Income Housing tax credit, the New Markets Tax Credit, and other federal credits collectively reduced income taxes by $58 million. The company’s biggest tax subsidy is related to the accelerated depreciation of property, plant, and equipment. Excess tax benefits from stock options reduced federal and state taxes by $17 million.

WEC Energy Group: Reported total current income taxes were adjusted in order to separate federal and state taxes. Production tax credits reduced income taxes by $12 million.

Wells Fargo: Because the company does not disclose U.S. and foreign pretax income, the study estimated foreign pretax income based on reported current foreign income taxes. Pretax income was adjusted by replacing the company’s non-cash “provision for loan losses” with actual “charge-offs, net of recoveries.” This adjustment reduced pretax profits in 2018 by $1 billion. Low-income housing and other credits reduced income taxes by $1.5 billion. Tax-exempt interest reduced taxes by $494 million.

Wesco International: Current federal income tax was adjusted to exclude a second-round revision of the TCJA transition tax. “Intercompany financing” reduced income taxes by $15 million. Accelerated depreciation reduced taxes by $4 million.

Western Digital: The company’s fiscal year ends in June of 2019. The foreign-derived intangible income deduction (FDII) reduced taxes by $11 million. A “US foreign minimum tax” increased taxes by $38 million. Research and development tax credits reduced income taxes by $24 million.

Westlake Chemical: Accelerated depreciation reduced income taxes by $42 million.

Westrock: The company’s fiscal years end in September. Current federal income tax was adjusted to exclude the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $8 million. Research and development and other tax credits reduced income taxes by $5 million.

Whirlpool: “US government tax incentives” reduced income taxes by $11 million. Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax.

Williams: Pretax income was adjusted to exclude noncontrolling income. Reported pretax profits were adjusted upward for a non-cash impairment for the carrying value of oil and gas properties.

Williams Sonoma: Accelerated depreciation reduced income taxes by $14 million. Research and development tax credits reduced income taxes by $9 million.

Xerox: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. “Tax-exempt income, credits and incentives” reduced income taxes by $12 million. An audit settlement reduced income taxes by $12 million.

Xcel Energy: Wind production tax credits reduced income taxes by $75 million. Accelerated depreciation reduced income taxes by $122 million.

XPO Logistics: Excess tax benefits from stock options reduced federal and state taxes by $22 million. Accelerated depreciation reduced taxes by $44 million. The GILTI provision increased taxes by $8 million.

Yum Brands: Current federal income tax was adjusted to exclude a second-round increase in the TCJA transition tax. Excess tax benefits from stock options reduced federal and state taxes by $47 million. Accelerated depreciation reduced income taxes by $15 million.

Zoetis: The company’s above-average tax rate reflects a large turnaround of deferred taxes. Current federal income tax was adjusted to exclude a second-round reduction in the TCJA transition tax. The federal research credit reduced taxes by $8 million. Accelerated depreciation reduced income taxes by $34 million. Excess tax benefits from stock options reduced federal and state taxes by $15 million.