Which Bay Area companies didn’t pay federal income taxes in 2018: report – The Mercury News

Corporations — they’re just like us. They, too, have to file income taxes every year. But unlike most of us, they have teams of accountants who can minimize their tax burden as much as possible.

Three of the Bay Area’s Fortune 500 companies — Chevron, Netflix and Salesforce — paid no federal taxes in 2018, according to a new report from the Institute on Taxation and Economic Policy, a left-leaning think tank. Chevron and Netflix together got more than $200 million in tax rebates.

Nationally, 60 profitable Fortune 500 companies paid nothing in federal taxes in 2018 or even received a rebate, according to the report. Companies can either cash out their rebates or apply them toward future taxes.

“There’s no indication that any of these companies are doing anything illegal,” said Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy. “By all accounts, they’re simply using tax breaks that Congress and various presidents have chosen to make available.”

Data on companies taxes comes from annual financial statements filed by the companies with the U.S. Securities and Exchanges Commission.

San Ramon-based Chevron had $4.5 billion in domestic income in 2018 and received a rebate of $181 million, according to the report. That’s an effective tax rate of -4 percent.

“Chevron complies with all applicable tax laws,” Sean Comey, a spokesman for Chevron, said in an email. “Our approach to tax matches our efforts to conduct our business legally, responsibly, and with integrity.”

Comey said tax reform “is good for business and for consumers because” it makes investing in ventures such as offshore drilling “look even better.”

Chevron was able to reduce its tax burden in part using accelerated depreciation, Gardner said. That allows companies to write off the cost of large capital investments, such as expensive new equipment, much more quickly — within the first year, under the new tax law. Chevron filed $290 million in depreciation-related tax breaks, according to the report.

Los Gatos-based Netflix had $856 million in domestic income and received a $22 million rebate, according to the report. That’s an effective tax rate of -3 percent. San Francisco-based Salesforce had $800 million in domestic income and paid nothing in taxes, according to the report. Neither company immediately responded to requests for comment.

Netflix and Salesforce reduced their taxes in part by writing off the cost of stock options given to executives and other employees, according to the report. Stock options are a popular way to compensate CEOs and other executives at tech companies, Gardner said.

“It’s generally thought that these don’t represent a real cost for companies in the same way that it does when they’re paying employees with salaries,” he said.

There’s a limit to how much money spent on executive salary companies can write off. That limit doesn’t apply to stock options, Gardner said. Stock options tax breaks allowed Neflix to reduce its income taxes by $191 million and Salesforce by $137 million.

Amazon, which got a $129 million rebate on $10.8 billion in domestic income, reduced its tax burden by $1 billion by writing off stock options, the report found.

“It’s a win win for the company and their CEO,” Gardner said.

Not all Bay Area companies avoided paying taxes in 2018. Facebook paid $1.7 billion in federal income taxes on $8.8 billion in domestic profits. That’s less than half the $4.4 billion the company paid in federal taxes in 2018.

Alphabet, Google’s parent company, paid $2.1 billion in state and federal income taxes on $15.8 billion in domestic income.

Leave a Reply