One scandal-ridden company has managed to essentially avoid paying U.S. income taxes for more than two decades.
Since its founding 23 years ago, Chesapeake has paid about 1 percent in taxes of its $5.5 billion in pretax profits, Bloomberg reports. Because of the risk that oil and gas companies could drill into a well that ends up being dry, they are allowed a loophole to stave off paying taxes on a large percentage of income. Less than a single percent of Chesapeake’s wells turned up dry last year.
Chesapeake has been marred by scandal in recent months. Investors stripped Aubrey McClendon, the company’s founder, of his chairmanship last month after reports surfaced that he, among other corporate governance issues, accepted a personal loan from a company that was working with Chesapeake.
Still, Chesapeake isn’t the only major company to use a loophole in an aim to lower its tax bill. Thirty of America’s most profitable companies paid nothing in income taxes over the last three years, according to a November report from the Citizens for Tax Justice. In addition, nearly 300 companies paid an average tax rate of 18.5 percent between 2008 and 2010. The U.S. corporate tax rate is technically 35 percent.
Major companies have found some creative ways to pay less in taxes. Some, including Apple, Google, JPMorgan Chase and Bank of America, are using one building in Delaware as their legal address in an aim to take advantage of the state’s corporate-friendly laws. More than half of America’s public corporations are incorporated in Delaware.
Another popular tax loophole: Parking cash overseas. Apple’s CFO Peter Oppenheimer said in a conference call with analysts in March that the company had no plans to repatriate its overseas profits, because it “would result in significant tax consequences.” At the time, Apple paid an international tax rate of about 3 percent and two-thirds of the companies profits are sitting overseas, according to the Wall Street Journal.
In addition, Facebook set up its IPO in such a way so that the company could avoid paying state and federal income taxes on its 2011 profits, according to a Februrary report from the CTJ.