Charlotte-based Duke Energy is among 26 profitable Fortune 500 companies that didn’t pay any federal income taxes from 2008 to 2012, according to a new report on corporate taxes.
Among all industries, gas and electric utility companies had the lowest effective rate, at 2.9 percent, benefiting from a tax break that comes from taking accelerated depreciation on the capital investments they make in their plants, according to the report. Duke said it will pay the federal taxes over the 30- to 40-year life of its projects.
Other companies that didn’t pay taxes on an aggregated basis during the period included General Electric, Verizon Communications and Boeing, the study by two nonpartisan research groups, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, found.
Wells Fargo, which has an East Coast hub in Charlotte, was flagged for receiving the biggest tax subsidy over the five-year period, $21.6 billion, although it paid taxes in all of the five years except 2009. The bank said the study covered an unusual period for the bank in which losses from its Wachovia acquisition reduced its taxable income.
Another Charlotte-based company cited in the report was industrial conglomerate SPX, which didn’t pay taxes in two of the five years.
Federal tax law, on paper, requires corporations to pay 35 percent of their profits in federal income taxes, but the groups found the actual rate was 19.4 percent after tax breaks and other deductions for the 288 companies covered by the report.
“A third of the companies paid less than 10 percent,” Bob McIntyre, one of the authors of the report, told the Observer. “It says if you’ve got lobbying muscle your return on investment is very high.”
Duke, which has faced scrutiny in recent weeks for a Feb. 2 spill from a coal ash pond into the Dan River, posted profits of $9 billion from 2008 to 2012, but received tax rebates of $299 million, according to the study.
“Duke Energy, like all utilities, is a very capital intensive business,” Duke spokesman Tom Williams said. “Our federal taxes were lowered by bonus depreciation rules, temporarily put in place as a part of the 2009 federal stimulus to help create jobs.”
The rules allowed the company to expense a significant portion of its projects in the early years of their operation, he said, but the company will still pay federal taxes over their expected lifetime.
The company recently completed a $9 billion plant modernization program in which it retired coal plants and replaced them with more efficient and cleaner natural gas and coal units, Williams said. “Many of these projects,” he said, “were already planned and/or started before the 2009 recession.”
Williams also noted the report ignored the hundreds of millions of dollars in state and local taxes that Duke pays each year.
The report comes amid a new push in Congress by House Republicans to overhaul the tax code, although chances are slim for the plan going into effect, with House Speaker John Boehner, R-Ohio, distancing himself from the proposal.
The research groups made their own recommendations for changes in the tax code, including the repeal of a rule that allows companies to defer U.S. taxes on offshore profits. They also pushed for more disclosure about tax payments in the filings companies make with the U.S. Securities and Exchange Commission.
Allan Freyer, public policy analyst with advocacy group N.C. Justice Center’s Budget & Tax Center, issued a statement urging Congress to close corporate tax loopholes.
“Closing these loopholes doesn’t punish companies for success,” Freyer said. “It simply asks them to play by the same rules everyone else does and pay their fair share in supporting the public investments that made their success possible.”
The report, which was released Tuesday, updated an earlier one that covered the years 2008 through 2010. It added new Fortune 500 companies such as Facebook and dropped ones that lost money in 2011 or 2012.
Wells Fargo’s tax bill
San Francisco-based Wells Fargo, which bought Charlotte’s Wachovia in 2008, posted the biggest total tax subsidy during the five-year period at $21.6 billion, according to the report.
The groups calculated that number by taking the difference between what companies would have paid under a 35 percent tax rate and what they actually paid. Duke’s subsidy didn’t make the top 25.
Wells spokesman Ancel Martinez said the study took “data out of context to advance an agenda.”
Over the past 10 years, Wells and Wachovia “have paid more than $40 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations,” he added.
In 2012, Wells Fargo paid a $10.4 billion tax bill, of which $9.1 billion was for U.S. federal corporate income taxes, he said. In addition, Wells pays payroll, property and other taxes, which totaled $2 billion in 2011, he said.
Another bank with a Charlotte presence, PNC Financial Services Group, was also listed among the 25 companies with the largest tax subsidies over the five years, at $5.3 billion. The Pittsburgh-based bank, which declined to comment, also made a major acquisition during the financial crisis.
SPX didn’t pay federal income taxes in 2010 and 2012, according to the report. During those two years, the company posted profits of $101 million, but received tax rebates of $46 million, according to the report. SPX declined to comment. David Ranii of The (Raleigh) News & Observer and the Associated Press contributed.