Business Insider: The Secret To Getting A -45% Corporate Tax Rate

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Dina Spector | Jan. 20, 2012, 11:02 AM

The "Occupy Wall Street" movement may have settled down since last October, but a new study comparing 30 U.S. corporations' effective tax rates to the amount spent lobbying Congress should fire up the 99 percent.

The report by Citizens for Tax Justice examined 280 Fortune 500 companies that were profitable between 2008 and 2010. Although the corporate tax rate is 35 percent, it found the average tax rate for the U.S. firms was 18.5 percent.

The report identified 30 companies — the "Dirty Thirty" — that were particularly crafty at dodging taxes, including 29 firms that had a negative tax rate over the three-year period, while spending a combined half a billion dollars to lobby Congress.

According to the report, here's how companies—including GE, which enjoyed a -45% tax rate—get away with paying less than nothing:

Most simply, a company enjoys a negative tax rate if it gets a net tax rebate from the federal government. Corporations achieve negative tax rates in a few different ways. If a company had excess tax deductions or credits in a given year, it can “carry” them back to a previous year, when it did not enjoy excess deductions, and thereby get a refund check from the federal government.

A company may also not receive tax benefits claimed one year until a later year. This happens when the corporation’s tax attorneys claim a tax benefit they don’t expect the IRS will eventually grant them. Since they aren’t counting on it, the benefit isn’t reported in that earlier year’s annual report to the SEC. If the IRS unexpectedly grants them their wish in a later year, the benefit gets reported as a decrease in the income taxes it has to pay the year it was received.

This was a major way that GE was able to achieve a negative tax rate over the three-year period of the study.  

Corporations also got around paying taxes by shifting U.S. profits to offshore tax havens (like the Cayman Islands) to avoid U.S. tax obligations.