Big Corporations are people too. I know this because the Supreme Court told me so. They have all the rights that you and I have, and often more (they can afford more after all). For example, lots of big corporations rarely have to pay taxes. Corporations like — well like Bank of America and Wells Fargo, for example:
This tax season will be kind to Bank of America and Wells Fargo: It appears that neither bank will have to pay federal income taxes for 2009.
Bank of America probably won’t pay federal taxes because it lost money in the U.S. for the year. Wells Fargo was profitable, but can write down its tax bill because of losses at Wachovia, which it rescued from a near collapse. […]
“Oh, yeah, this happens all the time,” said Robert Willens, an expert on tax accounting who runs a New York firm with the same name. “Especially now, with companies suffering such severe losses.”
Bob McIntyre, at Citizens for Tax Justice, said he opposes the government giving corporations such a break. […]
Wells Fargo was profitable in 2009, with $8 billion in earnings applicable to common shareholders. But its tax payments were reduced because of Wachovia’s losses.
Wells netted an overall tax benefit of $4.1 billion in 2009. It got a benefit worth nearly $4 billion from the federal government, and another worth $334 million from state governments. It had an expense of $164 million in foreign taxes. Wells did record an overall income tax expense of $5.3 billion, but that was offset by the tax benefits of the Wachovia losses. […]
McIntyre, at Citizens for Tax Justice, co-authored a report in 2004 related to carrybacks, after the Bush administration expanded many corporate tax breaks. The report examined 275 of the country’s largest companies and found that nearly one-third paid no federal income taxes in at least one year from 2001 to 2003. The companies overall were profitable in those years, but took advantage of tax breaks.
“If you or I lose money in the stock market, we don’t get to carry back our losses to any significant degree,” said McIntyre. His group works on closing tax breaks for corporations.
“Getting a refund from the past, that’s just weird,” he added.
You know, my family suffered a lot of “severe losses” and unusual expenses too this year. Unfortunately, most of them are not tax deductible. In my next life I think I want to come back as a major multi-national corporation. It may not be a more evolved species, but it sure gets treated like one by our government.
If corporations are people just like you and me, they should have to file a 1040 just like you and me.
Sweet Mother of Pearl
I once had a “windfall” year wherein I earned a huge amount of money; it was so long ago the details are vague. But, my CPA did some kind of magic — averaged that income over the three previous years — and paying the “back” taxes and penalties was less than paying in the higher tax bracket for the one year alone. It was all perfectly legal; I was a free-lancer and had incorporated myself just so I could take advantage of this kind of loophole. Remembering that I once had enough money to buy corporate status and hire a CPA makes me sad now.
Are the banks counting their bail-out money as taxable income? If not, why not? I forget where the cap is but if my father gave me $10,000 as a Christmas gift, I think I’d have to report it as income, right? And, if they considered the bail-out money to be a loan, when you and I pay off our mortgages we only get to deduct the interest not the principal, right?
If your dad gave you the $10,000 as a gift it will not be taxable as the amount and intent of gifting are legally non taxable.
The tax benefits are part of an illegal giveaway by Henry Paulson that happened right as the banking system was collapsing.
It’s complicated, but generally an acquiring company cannot use the net operating losses of a company it purchases (IRC Sec. 382). When Wells Fargo was negotiating for the purchase of Wachovia, that weekend as I recall, Paulson with no vote of Congress, no signature by the President, on his own initiative, literally changed the law with a stroke of a pen and allowed for those acquired losses to be deductible. Those interested can look up IRS Notice 2008-83.
The bottom line is this was a huge giveaway to Wells Fargo and the banking system – 10s of billions in tax benefits over time – and it occurred with no vote. Just Hank Paulson helping out some friends by changing the law.
It should have been enough to send someone to jail, but this barely got a notice. One story here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/09/AR2008110902155_pf.html
Bring back income tax averaging which ended in the mid80s. It was perfectly respectable. If you made lots of money in three years and then had no income for a year, you averaged the 4 years and paid the appropriate taxes.
Now when Ronnie Raygun was president,and was crying about paying 90 percent taxes, he forgot to mention that with income averaging he only paid a real 40 percent tax. Must have been senile even then.