How We Do Our Corporate Tax Research


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Citizens for Tax Justice has been publishing studies of what major U.S. corporations pay in federal income taxes for years. Not just the effective tax rate, but also what they actually pay in federal (and state) taxes on their profits each year. From time to time, however, we hear the critique that there is no way to figure out what corporations actually pay in federal income taxes, based on corporate 10-K annual reports that we use.
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Most recently, in the Washington Post of April 12, 2013, Allan Sloan levels this mistaken charge. According to Sloan:

 "There are more than a dozen tax metrics disclosed in a 10-K — but not the federal income tax incurred for a given year. . . . The stories you read about disgracefully low corporate taxes are based on the “current portion” of taxes due, disclosed in 10-K footnotes. Many people —­ including me, years ago, before I learned better — use that number as a proxy for the federal income tax that a company pays. But that’s a mistake. . . . The current-portion number . . . has no connection whatsoever with what a company actually forks over to the IRS for a given year."

As we pointed out in our November 2011 study, Corporate Taxpayers & Corporate Tax Dodgers 2008-10, the “current” federal income taxes that corporations disclose in their annual reports, adjusted for stock-option tax benefits that are reported separately, are the best (and only) measure of what corporations really pay (or don’t pay) in federal income taxes.

To read our full explanation of why this is true, click here.

We wholeheartedly endorse the call, made by Sloan and others, for more transparent disclosure of tax information in corporate annual reports. But the disclosure we already get, if one knows how to understand it, is quite fine. The journalists, lawmakers, policy advocates and the general public who rely on our research can be confident in our findings about corporate taxes.

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