In performing a quick review of SEC filings of large corps with an SEC State Location Code in Pennsylvania, I found 17 Corps with pretty large State Corporate Income Tax Loopholes Taken, at least the way I measure them, in the last dozen years.
ACE, Ltd. was included in the below list. It was established in the Cayman Islands tax haven jurisdiction, with HQs located in Bermuda. In 2008, it was relocated to Switzerland. PriceWaterhouseCooper's Philadelphia office has been its external CPA firm for its financial statements from 2005 on. Previously, its external CPA firm was PriceWaterhouseCooper's New York office.
Tyco Electronics, Ltd was also included in the below list. It is now a Swiss Corp. It was previously a Bermuda Corp. It's CPA firm is in Philly. The amounts below are just for the six years 2004-2009.
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 core pretax income, which are exclusive of large Asset Impairments, both in total for the past twelve years for each of these 17 large Pennsylvania Corps. These 17 large Pennsylvania Corps below had a weighted average state corporate effective income tax rate paid of a very modest 1.98%, or a huge 80% discount to Pennsylvania’s current state corporate income tax rate of 9.99%.
….……………………............Current……………Core......State
….……………………..............State...Consolidated..Effective
….……………………..............Tax……….Pretax………Tax Rate
….……………………..............Paid……..Income……….Paid
….……………….…..............(Millions of Dollars)
17. Sunoco………................452…......8,819……...5.13%
16. Comcast(2000-2009)..956…….23,671……...4.04%
15. Amerisource Bergen....248…......7,148……...3.47%
14. Hershey..…………..........249….....7,503.....….3.32%
13. PPG Industries.............334…....10,675……...3.13%
12. Mellon Financial..........323…....10,810……...2.99%
11. PNC Financial Svcs…....521…….23,367……...2.23%
10. PPL…...........................222…….10,496……...2.12%
..9. US Steel……………...........97…......5,497……...1.76%
..8. Cigna...........................229……..16,190……...1.41%
..7. Air Products & Chems..129........10,164.….....1.27%
..6. HJ Heinz......................149……..12,707……...1.17%
..5. Rohm&Haas(98-08)......60………..6,392……...0.94%
..4. Alcoa…………...............177……...24,115……...0.73%
..3. Tyco Electronics, Ltd....13...........6,834.........0.19%
..1. Lincoln National.............0*……...8,742……...0.00%
..1. ACE, Ltd.........................0*........16,426.........0.00%
Total all 17……….............4,159…...209,556……...1.98%
* I assumed no state income tax was paid, since there was nothing disclosed about it.
For the most recent year, the weighted state corporate effective income tax rate paid by these large Pennsylvania Corps was a much lower 0.55%.
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 17 large Pennsylvania 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 Pennsylvania Corporate Income Tax Rate of 9.99% by the total Consolidated Core Pretax Income of each large Pennsylvania 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.
……………………….....................PA……......State……..Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1.. Alcoa………….......…………..9.99%......0.73%...........2,232
2.. PNC Financial Services....9.99%.......2.23%...........1,813
3.. Comcast…………….............9.99%......4.04%...........1,409
4.. Cigna......……………………...9.99%.......1.41%...........1,388
5.. ACE, Ltd..........................9.99%.......0.00%..........1,150
6.. HJ Heinz…………….............9.99%.......1.17%..........1,120
7.. Air Products & Chemicals.9.99%.......1.27%.............886
8.. Lincoln National......………9.99%.......0.00%............873
9.. PPL………………………….......9.99%.......2.12%.............827
10. Mellon Financial……........9.99%.......2.99%............757
11. PPG Industries....…………..9.99%.......3.13%.............732
12. Tyco Electronics, Ltd.......9.99%.......0.19%.............670
13. Rohm & Haas………….........9.99%.......0.94%.............579
14. Hershey…………………........9.99%.......3.32%.............501
15. Amerisource Bergen.........9.99%......3.47%.............466
16. US Steel……………………......9.99%.......1.76%.............452
17. Sunoco..............................9.99%.......5.13%.............429
Total all 17…………………………………………16,285 (yeah, $16.3 bil)
For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken was $10.8 bil, as compared to $16.3 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 significantly reducing critical state services like education and citizen protection. Also, I think it might make sense to use some of the funds from the closing of these Big Corp State Income Tax Loopholes to provide some wise, highly stimulative, job-creating tax incentives to small and medium-sized businesses.
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 the very troubled Rust Belt manufacturers, like those in Pennsylvania.
At first glance, Pennsylvania’s corporate income tax rate of 9.99% seems high. However, it hasn’t prevented many of Pennsylvania’s Big Corps from paying very low effective tax rates, which averaged just 1.98% for the above 17 Corps. My hunch is that many profitable small and medium-sized Pennsylvania Corps are actually paying much higher than this average 1.98% tax rate paid by Pennsylvania Big Corps, but also much lower than the 9.99% statutory tax rate.
Also, from a fairness standpoint, the above effective Pennsylvania Corporate State Income Tax Rates Paid by these 17 Big Corps of 1.98% is pretty low in comparison with Pennsylvania’s current state individual income tax rate of 3.07%, which gets stepped up markedly in some Pennsylvania cities/counties by additional individual income taxes.
