Many Companies Pay No Tax
Essex & Associates::www.essexinc.biz November 8, 2011
Many companies pay no taxes – even getting money back from the government in some cases – in years when they reap big profits, according to a new report.
Thirty of the 280 Fortune 500 companies studied paid zero in federal income taxes or enjoyed tax refunds in 2008, 2009 and 2010, even though they took home a combined $160 billion in pre-tax profits, according to the study by Citizens for Tax Justice, a Washington-based nonprofit research and advocacy group.
The study comes at a time when taxes are a hot topic in the U.S. As Occupy Wall Street protesters decry the income disparity between the 1% and the 99%.
Companies are able to take advantage of a variety of loopholes available to them to avoid paying taxes. Two of my favorite strategies are:
1.) The "active financing exception" which allows corporations to sidestep paying taxes on profits if the company derived those profits by "actively financing" a deal.
2.) Corporations also commonly take advantage of a rule called "accelerated depreciation," which allows them to write off investments faster than they wear out. The companies then subtract the falling value of the investments from their taxable income.
The difference between companies that do not pay taxes and companies that do pay taxes is one main thing, the quality of their tax accountants. It is the same with individuals, to pay less taxes you simply must engage an experienced tax advisor.
Wishing you many happy returns,