One of North Carolina’s largest, most profitable (and most controversial) corporations is the subject of renewed criticism today. A new report co-released last night by the Washington, DC-based groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy along with the North Carolina Budget and Tax Center reveals that Duke Energy has paid no federal income taxes since 2008 – a period in which it raked in more than $9 billion in profit. The report also found that Duke had paid only $3 million in state income taxes since 2010 while at the same time receiving $300 million in tax rebates.
The new report (The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA – And What they Pay Abroad — 2008 to 2012) comes, of course, at the very moment that Duke is enduring blistering criticism from environmental groups, citizens and the news media as well as a federal criminal investigation as the result of its central role in one of the largest environmental disasters in North Carolina history – the Eden, North Carolina coal ash spill that has spread thousands upon thousands of tons of toxic waste along more than 70 miles of the Dan River. The Dan River disaster has also served to shine a spotlight on (and raise questions about) the relationship between Duke and North Carolina regulators in the administration of Gov. Pat McCrory – a former longtime Duke employee.
According to the report, Duke paid an effective federal income tax rate of negative 3.3% for the period 2008-2012 despite the fact that the federal corporate income rate was 35%. The report notes that “The company’s results for 2012 were adjusted to include half of the income and tax of Progress Energy, which it acquired midway through the year. Reported pretax profits in 2009 and 2010 were adjusted upward for a non-cash goodwill impairment. Accelerated depreciation saved the company substantial amounts in most years. The Domestic Production Activities Deduction reduced taxes by $18.0 million in 2008.”
Sadly, Duke was far from the only company to emerge as a tax scofflaw in the report. The report examined 288 profitable Fortune 500 companies and found that 26 paid no federal corporate income tax over the five-year period; 111 paid no federal corporate income tax in at least one of the last five years, and one-third paid a U.S. tax rate less than 10 percent over the same period, Further, most multinational corporations in the study paid lower U.S. taxes on their domestic profits than they paid to foreign governments on their foreign profits.
Nor was Duke the only company with close North Carolina connections to be featured in the report. For the period prior to its acquisition by Duke, Progress Energy paid an effective tax rate of 1.7%. Other companies of note with a large presence in the state include (along with their combined 2008-12 tax rate):
- General Electric (negative 11.1%),
- International Paper (2.6%),
- Time Warner Cable (3.9%),
- IBM (5.8%)
- Wells Fargo (12.2%)
- DuPont (12.3%)
- BB&T (16.5%)
- Merck (17.3%)
- Reynolds American (29.1%)
Other key findings in the report include:
- 111 of the companies enjoyed at least one year in which their federal income tax was zero or less.
- 26 companies, including Boeing, General Electric, Priceline.com and Verizon, enjoyed negative income tax rates over the entire five-year period, despite combined pre-tax profits of $170 billion.
- Of the 125 multinational companies in this sample, two-thirds paid a lower U.S. tax rate than the rate they paid to foreign governments on their foreign profits. On average, their foreign effective tax rate was 12 percent larger than their U.S. effective rate.
- The total amount of federal income tax subsidies enjoyed by the 288 profitable corporations over the five years was $362 billion.
- Wells Fargo tops the list of corporations receiving the most in tax subsidies, getting more than $21 billion in tax breaks from the U.S. treasury from 2008 through 2012.
Robert McIntyre, the Executive Director of Citizens for Tax Justice summed things up this way: “It’s a sorry situation when most Americans can rightly say, ‘I pay more in federal income taxes than General Electric, Boeing, Verizon, Pepco, Priceline, Duke Energy and 20 other big corporations, all put together!”
The report also includes several recommendations for reform including:
- Congress should repeal the rule allowing American multinational corporations to indefinitely “defer” their U.S. taxes on their offshore profits. This reform would effectively remove the tax incentive to shift profits and jobs overseas.
- Limit the ability of tech and other companies to use executive stock options to reduce their taxes by generating phantom “costs” these companies never actually incur.
- Having allowed “bonus depreciation” to expire at the end of 2013, Congress could take the next step and repeal the rest of accelerated depreciation, too.
- Reinstate a strong corporate Alternative Minimum Tax that really does the job it was originally designed to do.
- Require more complete and transparent geography-specific public disclosure of corporate income and tax payments than the Securities and Exchange Commission’s regulations currently mandate.
You can access the entire report, the executive summary and the press release that accompanied their release by clicking here.
Photo of Duke Energy Center in Charlotte (left) by James Willamor (CC BY-SA 2.0)