What The Top U.S. Companies Pay In Taxes

HOUSTON -As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest, most profitable corporations enjoy a far lower tax rate than you do--that is, if they pay taxes at all.


The most egregious example is General Electric. Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.


Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.


How did this happen? It's complicated. GE's tax return is the largest the IRS deals with each year--some 24,000 pages if printed out. Its annual report filed with the Securities and Exchange Commission weighs in at more than 700 pages.


Inside you'll find that GE in effect consists of two divisions: General Electric Capital and everything else. The everything else--maker of engines, power plants, TV shows and the like--would have paid a 22% tax rate if it was a standalone company.


It's GE Capital that keeps the overall tax bill so low. Over the last two years, GE Capital has displayed an uncanny ability to lose lots of money in the U.S. (posting a $6.5 billion loss in 2009), and make lots of money overseas (a $4.3 billion gain). Not only do the U.S. losses balance out the overseas gains, but GE can defer taxes on that overseas income indefinitely. The timing of big deductions for depreciation in GE Capital's equipment leasing business also provides a tax benefit, as will loan losses left over from the credit crunch.


Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. Exxon has tens of billions in earnings permanently reinvested overseas. Likewise, GE has $84 billion in overseas income parked indefinitely outside the U.S.
Though Exxon's financial statement's don't show any net income tax liability owed to Uncle Sam, a company spokesman insists that once its final tax bill is figured, Exxon will owe a "substantial 2009 tax liability." How substantial? "That's not something we're required to disclose, nor do we." 

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