(Original Post)
12:32 AM, Nov. 7, 2011 |
Written by Brian Tumulty
Gannett Washington bureau
WASHINGTON — New York-based Corning Inc. and Consolidated Edison Inc. avoided paying federal income taxes last year, according to a new report that highlights how some Fortune 500 companies pay much higher federal tax rates than others.
The study by liberal-leaning Citizens for Tax Justice found that only a few of the 280 Fortune 500 firms the group looked at paid federal taxes at the 35 percent corporate tax rate from 2008 through 2010.
One factor was the 50 percent "bonus depreciation" tax break enacted in 2008 during the Bush administration to encourage firms to make large-scale capital investments. The Obama administration renewed the tax break through the end of 2012.
The law allows firms to write off up to 75 percent of a new investment in the first year.
Con Ed spokesman Mike Clendenin confirmed that's how the utility company serving Westchester and New York City was able to lower its tax bill.
"We invest nearly $2 billion every year in infrastructure improvements, which helps create jobs and support the economy," Clendenin said in an email. "Investment incentives account for the high level of depreciating assets we generate each year and offset federal tax obligations, which the report acknowledges."
Verizon Communications also took advantage of the bonus depreciation tax break, investing $33.3 billion in infrastructure in 2009 and 2010, according to the company.
Other tax breaks abound.
Among the 280 companies studied, 180 claimed "excess stock option tax benefits" for executives as a tax deduction.
And some had losses in earlier years.
Corning spokesman Dan Collins said losses totaling about $5 billion in 2002 through 2006 were used as "loss carry forwards" on his company's 2008 through 2010 tax returns.
"The cash taxes noted in this report do not reflect the fact that U.S. tax laws allow for the carryover of prior years losses to reduce current year taxes." Collins said in an email. "It is these losses that reduced our cash taxes from 2008-2010."
Robert McIntyre, director of Citizens for Tax Justice and the report's lead author, said multinational firms also lower their tax bill by moving profits from intellectual property and other operations overseas, where they are taxed at a lower rate.
"The international issue is at the heart of the problem," he said.
Republican Rep. Dave Camp of Michigan, chairman of the House Ways and Means Committee, recently proposed a "territorial" taxation system that would exempt overseas profits from taxes if the profits are returned to the U.S.
The Senate Finance Committee also is considering options for corporate tax reform but has not issued any recommendations.
Con Edison and Corning don't dispute the findings in the report, but Verizon Communications does.
Verizon says Citizens for Tax Justice has a political agenda linked to the Communications Workers of America, which went on strike in August, and whose president, Larry Cohen, sits on the CTJ board.
"This union-orchestrated report is deceptive and politically motivated," Verizon spokesman Bob Varettoni said in an email. "Verizon fully complies with all tax laws and pays its fair share of taxes."
One source of Verizon's tax breaks, according to Citizens for Tax Justice, is the company's investment in unrelated businesses.
That includes leasing commercial aircraft and investing in power-generating facilities and real estate. Verizon did not respond to a request for a comment on that aspect of the report.
McIntyre of Citizens for Tax Justice said the aircraft leasing by Verizon highlights how some companies aggressively use the tax code to reduce their tax bill while others don't.
Among three Westchester-based firms included in the report, International Business Machines paid an effective tax rate of 2.1 percent on its $8.86 billion 2010 profit, MasterCard paid 19.3 percent on its $1.59 billion profit, and PepsiCo paid 21.7 percent on $3.89 billion in profits.
The disparities occur even among competitors. Among package delivery companies, FedEx paid a 0.9 percent effective tax rate on its profits while United Parcel Service paid 24.1 percent.
Officials at UPS are among businesses that advocate overhauling corporate taxes by lowering the current 35 percent rate in exchange for ending various corporate tax deductions and credits.
Many advocates of this approach recommend a 25 percent rate.
But a report issued this past week by the congressional Joint Committee on Taxation found that a revenue neutral exchange would lower the corporate rate only to 28 percent.