Corporate Tax Watch: CMS Energy, Expedia, and Netflix


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February is a special time of the year for corporate tax watchdogs: it’s when hundreds of Fortune 500 corporations release their annual financial reports to shareholders, including potentially embarrassing details about their relationship with the U.S. tax system.

CTJ and ITEP’s corporate tax analysts will be knee deep in these reports for much of the next month, but will come up for air every now and then to give quick updates on their findings. Here’s a first take on what we’re seeing so far.

Perfecting the art of long-term tax dodging

A February 2014 CTJ/ITEP report highlighted 26 profitable corporations that paid no current federal income taxes over the five years between 2008 and 2012. The Michigan-based utility CMS Energy this week confirmed that its inclusion in this list was no accident: in the three fiscal years since CTJ’s original report, CMS has enjoyed $2.2 billion in U.S. profits—and hasn’t paid a dime in federal income taxes over this period. For those needing a scorecard, this means over the past eight years CMS has paid no federal income taxes on $4.6 billion in profits. Like many other big utilities, CMS appears to be relying on generous tax breaks for accelerated depreciation. With the resurrection of expired “bonus depreciation” measures in the December 2015 “extenders” package, the good times will likely continue to roll for CMS going forward.

Sending customers and profits all over the world

Washington-based Expedia is no stranger to arranging worldwide travel—and a side benefit appears to be that the company is adept at sending its own profits to exotic foreign climates. The company’s newest annual report discloses that Expedia is now declaring $1.5 billion of its profits to be “permanently reinvested” in undisclosed foreign nations. Taking advantage of a toothless provision in the Securities and Exchange Commission’s rules on corporate tax disclosure, the company refuses to divulge whether even a dime of income tax has been paid to foreign nations on these profits—but if their six Cayman Islands subsidiaries are any indication, a big chunk of these offshore profits may be enjoying the same beachfront view Expedia routinely provides its clients.

Changing the way we view television and avoiding tax at home and abroad

Not all corporations are as evasive about their offshore profits as Expedia: the Netflix corporation remains as open about their foreign and domestic tax avoidance as ever in its latest annual report. The company discloses that if it repatriated $65 million stashed offshore, it would face a tax bill of just a hair under 35 percent—which means that wherever its foreign profits are located, it’s someplace that levies about a zero percent tax rate. Domestically, the company is likely not too worried about that 35 percent rate since in 2015 it was able to use just one tax break, an unwarranted giveaway for executive stock options, to zero out all federal income taxes on its $95 million in U.S. profits.

 

 

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