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Ask The California Employment Tax And Payroll Tax Attorney – Do Many Large Corporations Pay Little Or No Federal Income Taxes? – Yes

By Robert S. Schriebman
2023

For years we have heard that America’s largest corporations pay little or no federal income taxes. Is this in fact true? According to the latest study by the U.S. Government Accountability Office, in each year from 2014 to 2018 about half of all large corporations had no federal income tax liability. A large corporation is defined as having $10 million or more in assets. On the average, 25% had no tax liability.

There are a number of reasons for this.   It has nothing to do with cheating on taxes. Not all corporations are profitable in any given year. Many corporations sustain huge losses, or they have credits from other years that can be used to offset current-year tax liabilities.  Among large corporations, from 2014 through 2018, an average of about 44% reported a loss in a given year.

Among profitable large corporations, the average effective tax rates varied between 2014 and 2018. The effective tax rates based on actual tax liability was as high as 16% in 2014, and as low as 9% in 2018.

In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). This act lowered the top corporate tax rate from 35% to 21%.

America’s large corporations still pay huge taxes. the total tax liability among profitable large corporations in 2018 was $267 billion. In 2017, profitable corporations paid $278 billion, this was up from 2016 at only $263 billion.

A $1 billion does not buy what it used to be.

GAO Study 23-105384 (Dec. 2022)

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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