The U.S. has the highest corporate tax rate in the developed world. After Japan lowered its tax rate last year, the combined federal and average state tax rate of 39.2% in the U.S. was the highest of any nation in the Organization for Economic Co-operation and Development.
Some mega-corporations pay billions of dollars every year in federal and state taxes. In its most recent fiscal year, Exxon Mobil reported $31 billion in corporate income tax expenses. Some large corporations, on the other hand, paid no taxes at all and even received tax benefits. General Motors, which had annual revenue of more than $150 billion, received a tax benefit of $28.6 billion. 24/7 Wall St. examined the 10 U.S.-based, publicly traded companies with tax expenses of more than $5 billion in their most recently reported fiscal year, and the 10 companies that received a benefit of at least $5 million.
ALSO READ: The Best and Worst Run Cities in America
The single biggest factor determining how much a company pays in income taxes is simply the size of its profits. The 10 publicly traded companies that recorded the largest tax expenses had the nation’s 11 highest pre-tax incomes. Exxon Mobil earned more than $78 billion before taxes, or more than $28 billion more than any other company.
The amount companies pay in taxes, however, is not just a product of their sheer size. Certain industries are more likely to face a higher tax expense due to the nature of their business. According to Martin Sullivan, chief economist at Tax Analysts, companies producing oil abroad cannot easily avoid taxes imposed by foreign governments, which often tax oil production at a higher rate than the U.S. As a result, such companies are “sitting ducks for high taxes.” ConocoPhillips faced an effective tax rate of more than 50% of pre-tax earnings in 2012.
ALSO READ: America's Favorite Basketball Teams
Of course, one way to avoid paying any taxes is to simply not make any money. AMR, The Hartford, and General Motors -- three of America’s largest companies and among the largest tax benefit recipients -- all posted pre-tax losses in their most recent fiscal year. In the case of GM, the carmaker lost nearly $28.7 billion.
Retailers also often face higher taxes than other companies. This, Sullivan added, is due to the fact that “of the major tax benefits in the law ... nothing really applies to them.” Even Wal-Mart, with its large global presence, was able to cut its effective tax rate only slightly below the federal corporate income tax rate of 35% through a combination of paying taxes abroad and repatriating international earnings.
When it comes to how much companies pay in taxes, Sullivan told 24/7 Wall St., “by far the major factor that separates the winners from the losers is the ability to shift profit into tax havens.” Retail and oil companies, he noted, often lack the ability to do this. Companies with a great deal of intangible assets, such as software and pharmaceutical companies, fit the bill, he added. Technology companies Microsoft, IBM, and Apple, although among the 10 largest taxpayers, had effective tax rates of just 19%, 24% and 26%, respectively.
To determine the 10 companies paying the most in taxes and the 10 companies paying the least, 24/7 Wall St. reviewed the 150 largest U.S. publicly traded companies by revenue. We then selected companies with the highest income tax expense and the lowest income tax expense in their most recent fiscal year. Income tax expense includes tax liabilities and assets that may be deferred the year they are reported. Data on factors that affected tax expenses, as well as effective tax rates, are from tax disclosures in SEC filings. All data are for the most recent fiscal year reported by each company.
These are the companies paying the most and least taxes.
> Income tax expense: $5.2 billion
> Earnings before taxes: $27.1 billion (6th most)
> Revenue: $77.8 billion (29th most)
> 1-yr. share price change: +36.2%
> Industry: Technology
Microsoft is one of America’s largest tech companies, with nearly $78 billion in revenue and $22 billion in income during its most recent fiscal year. Because of its size, it was also one of the nation’s largest corporate taxpayers. However, due in large part to foreign earnings taxed at a lower rate, the company’s effective tax rate was just over 19%, compared to the federal government's statutory rate of 35%. In all, the company paid slightly less than $3.5 billion to U.S. federal, state and local authorities, and slightly more than $1.7 billion internationally. The company has been criticized for stashing cash in several tax havens. In 2012, a Senate report used Microsoft as a case study to demonstrate how U.S. companies avoid paying taxes.
> Income tax expense: $5.3 billion
> Earnings before taxes: $21.9 billion (9th most)
> Revenue: $104.5 billion (18th most)
> 1-yr. share price change: -2.4%
> Industry: Technology
IBM reported a total tax expense of nearly $5.3 billion in its most recent annual report, more or less in line with what it paid the year before. This amounted to 24% of its pre-tax income, less than the 35% federal corporate tax rate. IBM often pays less than the federally required rate because it pays some of its taxes internationally at a lower rate. In November, India demanded the tech company to pay the equivalent of $866 million U.S. for taxes it owed in fiscal 2009. The Armonk-based tech giant is currently challenging India’s claim.
8. Berkshire Hathaway
> Income tax expense: $6.9 billion
> Earnings before taxes: $22.2 billion (8th most)
> Revenue: $162.5 billion (6th most)
> 1-yr. share price change: +25.1%
> Industry: Conglomerate
Berkshire Hathaway Inc. (BRK-A) is helmed by Warren Buffett, often considered one of the greatest investors of all time. Among the company's rigorous goals are to grow net worth faster than the S&P 500 can rise in price. However, like every company, the conglomerate must pay its tax expenses, which totaled nearly $7 billion in 2012. Of this total, roughly $5.7 billion was payable to the U.S. government, although the company deferred a total of more than $2 billion in tax payments to a later year. Due to a number of tax credits, deductions and foreign taxes, Berkshire Hathaway’s tax expense was $700 million less than the $7.7 billion it would have owed if all its pre-tax income had been charged at the U.S. corporate tax rate of 35%.
7. J.P. Morgan
> Income tax expense: $7.6 billion
> Earnings before taxes: $28.9 billion (4th most)
> Revenue: $91.7 billion (22nd most)
> 1-yr. share price change: +28.7%
> Industry: Banking
J.P. Morgan Chase & Co. (JPM) earned nearly $29 billion before taxes in its most recently reported fiscal year. In all, the company reported a tax expense of $7.6 billion. Recently, however, taxes have hardly been the biggest drain on the mega bank's profits. Last year, J.P. Morgan agreed to pay $13 billion to the U.S. government. The fine was a result of the bank’s own actions -- as well as those of its acquired banks, Bear Stearns and Washington Mutual -- in selling poor quality mortgages to investors prior to the financial crisis. After tax deductions, the fines should cost the bank a total of $9 billion. It also set aside a whopping $23 billion to cover potential litigation costs.
> Income tax expense: $7.9 billion
> Earnings before taxes: $15.4 billion (11th most)
> Revenue: $60.3 billion (45th most)
> 1-yr. share price change: +19.1%
> Industry: Oil and gas
ConocoPhillips is one of three oil and gas companies that reported among the 10 highest tax expenses. The company, which focuses on exploration and production, had more than two-thirds of its proved reserves in Alaska, Canada and the lower 48 states as of 2012. It also has sources for potential future production around the world, especially in Asia. In fiscal 2012, the company reported more than $15 billion in pre-tax income and recorded nearly $8 billion in tax expenses. Yet very little -- less than $1 billion -- of this expense was due to taxes charged by U.S. federal, state or local governments. Most of the company’s taxes were paid to foreign governments that charged the company a higher rate than the U.S.’s 35% corporate tax rate. As a result, the oil and gas giant’s effective tax rate was 51.5% of its pre-tax income.
> Income tax expense: $8.0 billion
> Earnings before taxes: $25.7 billion (7th most)
> Revenue: $469.2 billion (the most)
> 1-yr. share price change: +14.9%
> Industry: Retail
Walmart is truly a global retail giant, with more than 4,000 Walmart stores and 630 Sam’s Clubs in the United States and another 6,337 stores around the globe. The company has a heavy presence in a number of countries, with hundreds of stores in Canada, South Africa, Brazil and China, as well as more than 2,000 in Mexico alone. As of fiscal 2013, the bulk of the company’s income before taxes still came from the United States, accounting for nearly $19.4 billion of a $25.7 billion total. Not surprisingly, of the roughly $8 billion the company recorded in tax expenses, about $6.2 billion was paid or owed to the U.S. federal government, states and localities.
4. Wells Fargo
> Income tax expense: $9.1 billion
> Earnings before taxes: $28.5 billion (5th most)
> Revenue: $79.5 billion (28th most)
> 1-yr. share price change: +31.3%
> Industry: Banking
Wells Fargo & Co. (WFC) had a total tax expense of more than $9 billion in its most recently reported fiscal year, and it generated nearly $28.5 billion in pre-tax income. Almost all of its tax expense was payable to U.S. federal, state and local governments, with only a small amount in foreign taxes. While Wells Fargo is one of the largest banks in the United States by assets, it is far less involved in investment banking than many other financial giants, although it has grown its underwriting business in recent years. Last year, Wells Fargo made headlines when it surpassed the Industrial and Commercial Bank of China as the largest bank in the world by market capitalization.
> Income tax expense: $13.1 billion
> Earnings before taxes: $50.2 billion (2nd most)
> Revenue: $170.9 billion (4th most)
> 1-yr. share price change: +3.7%
> Industry: Computer hardware
Apple recorded one of the largest tax expenses in the nation in its most recently reported fiscal year, at more than $13 billion. Yet the company has been accused of exploiting loopholes in the Irish legal code -- using a now-infamous strategy called the “double Irish” -- to avoid paying taxes. In all, the company saved more than $4.6 billion on taxes by leaving earnings indefinitely invested abroad in its most recent fiscal year. This helped Apple cut its effective tax rate to 26.2% from the federal corporate income tax rate of 35%.
> Income tax expense: $20.0 billion
> Earnings before taxes: $46.3 billion (3rd most)
> Revenue: $222.6 billion (3rd most)
> 1-yr. share price change: 13.8%
> Industry: Oil and gas
Chevron Corp. (CVX) had one of the largest tax expenses in the nation during its most recently reported fiscal year, but most of that money was payable to the U.S. federal government. Of Chevron’s $20 billion tax expense, more than $17 billion was in taxes owed to foreign countries. As a result, Chevron’s effective tax rate was 43.2% -- well above the U.S. statutory rate of 35%. High taxes, though, are not the company’s only concern abroad. The oil and gas giant remains embroiled in a long-running lawsuit related to pollution in Ecuador by Texaco, which it acquired more than a decade ago. Chevron has alleged that the Ecuadorian verdict, ordering it to pay damages running well into the billions of dollars, is based on fraudulent evidence.
ALSO READ: Seven Ways Americans Pay Taxes
1. Exxon Mobil
> Income tax expense: $31.0 billion
> Earnings before taxes: $78.7 billion (the most)
> Revenue: $428.4 billion (2nd most)
> 1-yr. share price change: +14.5%
> Industry: Oil and gas
Exxon Mobil is one of the nation’s largest companies by a number of measures. The oil and gas titan trails only Walmart in revenue and has the highest pre-tax income of any American public company. Not surprisingly, Exxon Mobil also pays more in taxes than any other corporation. In its most recently reported full year, the company’s tax expenses totaled nearly $31 billion. Exxon Mobile’s foreign income totaled more than $67 billion in its most recent fiscal year, which helped boost its effective tax rate to 44% of before-tax income. However, foreign taxes are not the company’s only drain on profits. For much of last year, the company had to contend with diminishing profitability from its refining operations.
10. United Continental Holdings
> Income tax expense: -$1 million
> Earnings before taxes: -$724 million
> Revenue: $37.2 billion
> 1-yr. share price change: +55.6%
> Industry: Airlines
Several airlines merged in recent years in an attempt to cut costs and capacity. United and Continental Airlines were no different when they merged in 2010, joining a long list of mergers, including Delta and Northwest, Southwest and Airtran, as well as American Airlines and U.S. Airways. However, United Continental has hardly been a model for a successful merger. The new company has struggled to integrate the systems and workers of the two airlines. Additionally, the company finished 2012 with a net loss for the year, while in the most recent quarter passenger revenue per available seat mile -- an important industry measure of profitability -- fell. In large part because of its lack of profits, losses before taxes totaled $724 million, the company recorded no tax expense in its most recently reported fiscal year.
9. Bunge Limited
> Income tax expense: -$6 million
> Earnings before taxes: $372 million
> Revenue: $61.0 billion
> 1-yr. share price change: +10.5%
> Industry: Agricultural products
Bunge, a global agribusiness company, reported $372 billion in earnings before taxes in fiscal 2012, but the company actually received a tax benefit that year of $6 million. If the company had assessed all of its income based on the federal corporate tax rate of 35%, it would have had $130 million in tax expenses. However, 42% of Bunge's total pre-tax income comes from operations overseas, on which the company pays cheaper foreign corporate tax rates. Also the company received over $50 million in fiscal incentives for its investments in Brazil. In October, the company indicated it was considering a sale of its sugar operations in the country after reporting a substantial quarterly loss.
8. Rite Aid Corporation
> Income tax expense: -$111 million
> Earnings before taxes: $8 million
> Revenue: $25.4 billion
> 1-yr. share price change: +317.3%
> Industry: Drugstore
Rite Aid, one of the country’s largest pharmacy chains, had more than $25 billion in revenues in its most recent fiscal year but just $8 million in earnings before taxes. Between a decrease in deferred taxes and a number of tax credits received, the company actually reported a total tax benefit of nearly $111 million. Since it filed its annual report, the company has shown some positive signs. Shares are up by more than 300% in the last year. In the most recent reported 12 months, the company reported net income of roughly $300 million. The drugstore chain may owe much more in taxes when it reports this year.
7. Bristol-Myers Squibb Company
> Income tax expense: -$161 million
> Earnings before taxes: $2.3 billion
> Revenue: $17.6 billion
> 1-yr. share price change: +58.7%
> Industry: Pharmaceuticals
Bristol-Myers Squibb is a New York City-based pharmaceutical giant with some 28,000 employees as of fiscal 2012. That year, the company lost patent protection on its blockbuster drug, Plavix, a blood thinner that accounted for roughly a third of its sales the year before. In all, earnings after taxes fell from $3.7 billion in 2011 to just under $2 billion in 2012. However, the drugmaker was able to take advantage of rates abroad to reduce its tax expense dramatically. According to Tax Analysts’ Sullivan, companies that can shift profits abroad and have a great deal of non-physical assets, such as pharmaceutical companies, often save on their taxes. The company also received a tax benefit related to the writeoff of its acquisition of Inhibitex, helping to bring its total tax balance below zero.
6. Morgan Stanley
> Income tax expense: -$239 million
> Earnings before taxes: $515 million
> Revenue: $26.1 billion
> 1-yr. share price change: +60.8%
> Industry: Banking
Global investment bank and brokerage house Morgan Stanley reported revenue in excess of $26 billion and had just over half a billion in pre-tax income in fiscal 2012, it’s most recently reported fiscal year. However, the company recorded no income tax expense at all. In fact, it reported a tax benefit of nearly $240 million that year. The combination of lower foreign tax rates, tax-exempt income, and domestic tax credits all helped Morgan Stanley record this sizable tax benefit.
5. The Hartford Financial Services Group, Inc.
> Income tax expense: -$494 million
> Earnings before taxes: -$527 million
> Revenue: $26.4 billion
> 1-yr. share price change: +48.9%
> Industry: Insurance
The Hartford is one of the nation’s largest property and casualty insurance companies in the U.S., and it traces its history back to 1810, when current subsidiary, Hartford Fire Insurance Company, was founded. In fiscal 2012, the company lost more than $500 million before taxes. The combination of tax breaks from past operating losses, in conjunction with the company’s continued weak bottom line, helped The Hartford avoid an income tax expense. Yet, although it recorded an income tax benefit of $494 million, after accounting for discontinued operations and preferred shareholders, stock owners were left with a loss of $80 million -- or $0.17 per share.
4. AMR Corporation
> Income tax expense: -$569 million
> Earnings before taxes: -$2.4 billion
> Revenue: $24.9 billion
> 1-yr. share price change: n/a
> Industry: Airlines
AMR Corporation, the former holding company for American Airlines, filed for Chapter 11 bankruptcy in 2011. In 2012, AMR reported a loss of nearly $2.5 billion before taxes. Not surprisingly, the company owed no taxes to the government, receiving a benefit of nearly $570 million. At the end of 2013, AMR received approval from a judge to exit bankruptcy through its merger with U.S. Airways. The new company, American Airlines Group, Inc, has just started the process of integrating services between the two airlines.
3. Verizon Communications Inc.
> Income tax expense: -$660 million
> Earnings before taxes: $9.9 billion
> Revenue: $115.8 billion
> 1-yr. share price change: +10.29%
> Industry: Telecommunications
Although Verizon recorded a $660 million tax benefit, the company has contended it is untrue that it does not pay taxes. Strictly speaking, the company is correct: in its most recent fiscal year it paid roughly $3.4 billion in cash taxes, although most of this was in property and payroll taxes, not in income taxes. The company’s earnings -- and possibly its tax bill -- would have potentially been higher in past years had it not had to pay Vodafone, former 45% owner of Verizon Wireless, $9.7 billion of its $10.6 billion fiscal 2012 profits. After Verizon bought the rest of Verizon Wireless for $130 billion, the U.K. -based company faced a tax controversy of its own. It was reported that, since its stake was held by a Dutch subsidiary, it would not pay any taxes in Britain.
2. Bank of America Corporation
> Income tax expense: -$1.1 billion
> Earnings before taxes: $3.1 billion
> Revenue: $75.2 billion
> 1-yr. share price change: +38.6%
> Industry: Banking
Bank of America reported more than $3 billion in income before taxes in its most recent fiscal year. However, the banking giant received a tax benefit of more than $1.1 billion that year. Helping the company save money were a combination of tax-exempt income, U.S. tax credits and, especially, a whopping $1.7 billion in foreign tax credits received by the bank. Overall, Bank of America’s shares are up over 36% in the last 12 months, as the company pursues its goals to cut costs and leave its legal problems behind. While the company is still liable for some actions committed by home lender Countrywide Financial, it appears the largest fines incurred through its acquisition of the troubled mortgage lender may be in the past.
1. General Motors Company
> Income tax expense: -$34.8 billion
> Earnings before taxes: -$28.7 billion
> Revenue: $152.3 billion
> 1-yr. share price change: +38.1%
> Industry: Automobile manufacturing
ALSO READ: America’s Most (and Least) Healthy States
General Motors received bailouts from the U.S. government totaling some $50.7 billion in 2008 and 2009, more than any other company except for Fannie Mae, Freddie Mac, and AIG, according to ProPublica. In fiscal 2012, the carmaker lost $28.7 billion before taxes were considered. Much of the loss was the result of one-time charges the company took as part of its broad overhaul of its global businesses. In all, GM reported a nearly $35 billion tax benefit for the fiscal year. The company, which emerged from bankruptcy in 2009, continues to recover and improve its business. In 2014, the federal government sold its last remaining GM shares, and the automaker appointed longtime employee Mary Barra as CEO.