In performing a quick review of SEC filings of large corps with an SEC State Location Code in Illinois, I found 21 corps with pretty large State Corporate Income Tax Loopholes Taken, as I define them, of at least $300 mil each, for the last dozen years.
Boeing was excluded, because even though it is now headquartered in Chicago, it has an SEC State Location Code of Washington.
Accenture plc was included. Many years ago, it was part of the Chicago-based Arthur Andersen partnership. It went public in an IPO early in the 2000 decade and switched from a partnership form to Accenture Ltd., a corporation legally based in the tax haven of Bermuda. In 2009, it moved its legal residence from Bermuda to Ireland, another tax haven. It has always had two different Chicago CPA firms as its external auditors. It should be pointed out that in Fortune's ranking of its largest 500 Global firms, from 2005 to 2009, Fortune had Accenture's City listed as New York City.
It is pretty clear that state corporate income tax planning of these large Illinois Corps has been front and center. But the problem here is that this has been very detrimental to the State of Illinois, which is in such desperate financial shape.
Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 21 large Illinois Corps. Some pundits might call this a Race to the Bottom, or which large Illinois Corp can pay the least state corporate income taxes. Well, it looks like insurance corps Allstate and Old Republic won out, with Sara Lee just nosing out both Baxter and Caterpillar for third place, at the wire. These 21 large Illinois Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.11%, or a 71% discount to Illinois’ current state corporate income tax rate of 7.30%.
….……………………............Current…………………......State
….……………………..............State...Consolidated..Effective
….……………………..............Tax……….Pretax………Tax Rate
….……………………..............Paid……..Income……….Paid
….……………….…..............(Millions of Dollars)
21. Exelon.........................1,359.......27,903.......4.87%
20. Walgreens………...........1,150…....27,781……..4.14%
19. Tribune………..................349……...9,382……..3.72%
18. Discover Fincl Svcs........270…......7,811……..3.46%
17. Fortune Brands..............313.........9,097*......3.44%
16. Kraft Foods………….......1,319…....43,055....….3.06%
15. AON…………………...........275….....10,034……..2.74%
14. McDonalds……............1,029….....41,669……...2.47%
13. Illinois Tool Works........509……..21,129……....2.41%
12. Sears Holdings…............474……..23,910……...1.98%
11. Accenture plc................345........20,724........1.66%
10. Archer Daniels Midland.309….....17,567……...1.76%
..9. Deere…..........................258……..16,768……...1.54%
..8. Northern Trust...............131….....10,176……...1.29%
..7. Abbott Labs...................619……..48,287……...1.28%
..6. Wrigley...........................75………..6,302……...1.19%
..5. Caterpillar…………..........315……...30,412……...1.04%
..4. Baxter……......................161……....16,961……...0.95%
..3. Sara Lee.........................70..........13,083*.......0.54%
..1. Old Republic Intl...............0...........4,318........0.00%
..1. Allstate.............................0.........36,823........0.00%
Total all 21………..............9,330…....443,192……...2.11%
* Exclusive of Asset Impairments
For the most recent six years, the weighted state corporate effective income tax rate paid by these 21 large Illinois corps was an even lower 2.02%.
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by each of these 21 large Illinois Corps for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Illinois Corporate Income Tax Rate of 7.30% by the total Consolidated Pretax Income of each large Illinois Corp for the last twelve years. Then, I subtracted the actual total State, and in some cases also Local, Corporate Income Taxes Paid by each of these Corps for the same twelve years.
……………………….....................IL……......State……..Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1. Abbott Labs………….......…7.30%.......1.28%...........2,906
2. Allstate............................7.30%......0.00%...........2,688
3. McDonalds………….........…7.30%.......2.47%..........2,013
4. Caterpillar……………..........7.30%.......1.04%..........1,905
5. Kraft Foods......………………7.30%.......3.06%..........1,824
6. Sears Holdings……………....7.30%.......1.98%...........1,271
7. Accenture plc..................7.30%........1.66%...........1,168
8. Baxter………..………............7.30%.......0.95%..........1,077
9. Illinois Tool Works......……7.30%.......2.41%..........1,033
10. Archer Daniels Midland…7.30%.......1.76%............973
11. Deere…………………………...7.30%.......1.54%............966
12. Sara Lee..........................7.30%........0.54%...........885
13. Walgreens........………….....7.30%.......4.14%............878
14. Exelon.............................7.30%.......4.87%............678
15. Northern Trust………….....7.30%.......1.29%.............612
16. AON…....………………….......7.30%......2.74%.............457
17. Wrigley……………………......7.30%.......1.19%.............385
18. Fortune Brands................7.30%.......3.44%.............351
19. Tribune……………...............7.30%......3.72%............336
20. Old Republic Intl.............7.30%.......0.00%............315
21. Discover Fincl Svcs...........7.30%......3.46%............300
Total all 21………………………………………23,068 (yeah, $23.1 bil)
For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken was $14.2 bil, as compared to $23.1 bil for the past twelve years.
I think it makes much more sense to balance a State’s severely stressed budget by closing some of the huge Big Corp State Corporate Income Tax Loopholes, rather than by either drastically reducing critical state services like education and citizen protection, or by significantly increasing state university tuition.
For maximum positive effect to the US economy and to US job creation, I think the US government should let businesses have a choice on the capital expenditures they make.....they could either take 100% first year expensing, or they could instead choose a refundable investment tax credit, with a bonus percentage for capital expenditures made by troubled manufacturers, like some in Illinois. I wouldn't give the bonus investment tax credit percentage to huge companies.
Also, from a fairness standpoint, the above effective Illinois Corporate State Income Tax Rates Paid by these 21 Big Corps of 2.11% is low in comparison with Illinois’ current individual income tax rate of 3.00%.
