In performing a quick review of SEC filings of large corps with an SEC State Location Code in Illinois, I found 22 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 from the below list, 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 core pretax income, which are exclusive of both large Asset Impairment Charges and Acquired In Process R&D Charges, in total for the past twelve years for each of these 22 large Illinois Corps. These 22 large Illinois Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.07%, or a huge 72% discount to Illinois’ 2010 state corporate income tax rate of 7.30%.
….……………………............Current…….Core….........State
….……………………..............State...Consolidated..Effective
….……………………..............Tax……….Pretax………Tax Rate
….……………………..............Paid……..Income……….Paid
….……………….…..............(Millions of Dollars)
22. Exelon........................1,454.......32,057.......4.54%
21. Walgreens………...........1,150…....27,781……..4.14%
20. Tribune(1998-2007).....349……...9,382……..3.72%
19. Fortune Brands..............313.........9,097.......3.44%
18. Discover Fincl Svcs*......305…......9,587……..3.18%
17. Kraft Foods…………......1,488…....47,469....….3.13%
16. AON…………………...........275….....10,034……..2.74%
15. Illinois Tool Works........509……..21,129……....2.41%
14. McDonalds……............1,029…....44,647……...2.30%
13. Sears Holdings…............474……..23,910……...1.98%
12. Motorola………………......258……..13,907………1.86%
11. Archer Daniels Midland.309….....17,567……...1.76%
10. Accenture plc(00-09)...345........20,724........1.66%
..9. Deere…..........................279……..19,540……...1.43%
..8. Northern Trust...............131….....10,176……...1.29%
..7. Wrigley(1998-2007).......75……….6,302……...1.19%
..6. Abbott Labs...................619……..52,542……...1.18%
..5. Caterpillar…………..........315……...30,412……...1.04%
..4. Baxter……......................161……....18,596……...0.87%
..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 22………..............9,908…....479,083……...2.07%
* Information for just the five years 2004-2009
For the most recent six years, the weighted state corporate effective income tax rate paid by these 22 large Illinois corps was an even lower 1.90%.
Three additional Corps (WW Grainger, CME Group, and RR Donnelley) were excluded from the above list of Illinois Big Corps, even though they generated Total Pretax Income for the past 12 years of more than $5 bil. These three Corps were excluded because their Total State Corporate Income Tax Loopholes Taken were less than $300 mil each.
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 22 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 2010 Illinois Corporate Income Tax Rate of 7.30% by the total Consolidated Core 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 2010........State……....Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1. Abbott Labs………….......…7.30%.......1.18%...........3,217
2. Allstate............................7.30%......0.00%...........2,688
3. McDonalds………….........…7.30%.......2.30%..........2,230
4. Kraft Foods......………………7.30%.......3.13%..........1,977
5. Caterpillar……………..........7.30%.......1.04%..........1,905
6. Sears Holdings……………....7.30%.......1.98%...........1,271
7. Baxter………..………............7.30%.......0.87%..........1,197
8. Accenture plc...................7.30%.......1.66%...........1,168
9. Deere…………………………....7.30%.......1.43%...........1,147
10. Illinois Tool Works....……7.30%.......2.41%..........1,033
11. Archer Daniels Midland…7.30%.......1.76%............973
12. Exelon............................7.30%.......4.54%............886
13. Sara Lee..........................7.30%........0.54%...........885
14. Walgreens........…………....7.30%.......4.14%............878
15. Motorola………………….....7.30%.......1.86%............757
16. Northern Trust………….....7.30%.......1.29%............612
17. AON…....………………….......7.30%......2.74%............457
18. Discover Fincl Svcs...........7.30%......3.18%............395
19. Wrigley…………………….......7.30%.......1.19%...........385
20. Fortune Brands................7.30%.......3.44%............351
21. Tribune……………...............7.30%......3.72%............336
22. Old Republic Intl..............7.30%.......0.00%...........315
Total all 22………………………………………25,065 (yeah, $25.1 bil)
For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken was $15.8 bil, as compared to $25.1 bil for the past twelve years.
And then here’s an updated list of the 24 Illinois Big Corps with Total Core Pretax Income of more than $5 bil for the most recent 12 years. This list is sorted by Pretax Income.
….…………………….....................Current……...Core…......State&Loc
….……………………...................State&Loc.Consolidated..Effective
….…………………….......................Tax………...Pretax……..Tax Rate
….…………………….......................Paid……....Income……….Paid
….……………….….........................(millions of dollars)
Abbott Labs.................................619........52,542.......1.18%
Kraft Foods...............................1,488........47,469.......3.13%
McDonalds................................1,029........44,647.......2.30%
Allstate............................................0........36,823.......0.00%
Exelon.......................................1,454........32,057.......4.54%
Caterpillar....................................315.........30,412.......1.04%
Walgreens..................................1,150........27,781.......4.14%
Sears Holdings..............................474........23,910.......1.98%
Illinois Tool Works........................509........21,129.......2.41%
Accenture plc(2000-2009)...........345.......20,724.......1.66%
Deere.............................................279.......19,540.......1.43%
Baxter............................................161........18,596.......0.87%
Archers Daniel Midland.................309........17,567.......1.76%
Motorola........................................258........13,907.......1.86%
Sara Lee...........................................70........13,083.......0.54%
Northern Trust...............................131........10,176.......1.29%
Aon...............................................275........10,034.......2.74%
Discover Fincl Services(04-09)......305.........9,587.......3.18%
Tribune(1998-2007)......................349.........9,382.......3.72%
Fortune Brands...............................313.........9,097.......3.44%
William Wrigley(1998-2007)............75.........6,302.......1.19%
WW Grainger...................................342.........5,856.......5.84%
CME Group.....................................454..........5,815.......7.81%
RR Donnelley..................................256..........5,246.......4.88%
IL Total for all 24 Corps...........10,960......491,682.......2.23%
And below here is a listing of the 7 Illinois Mid-sized Corps with Total Core Pretax Income for the most recent 6 years of at least $2 bil each, but which had Total Core Pretax Income for the most recent 12 years of less than $5 bil, and thus weren’t included in the above list of the 24 Very Big Illinois Corps.
........................................Most Recent Six Years
.......................................State&Local.....................Effective
.......................................Corporate........Core......State&Local
..........State.......................Income.........Pretax......Tax Rate
.......Corporations.............Tax Paid.......Income........Paid
...........................................(Millions of Dollars)
CNA Financial.........................0............3,174..........0.00%
CF Industries........................79............2,752..........2.87%
CNH Global NV*......................0**........2,726..........0.10%
Telephone & Data Systems...110............2,676..........4.11%
United States Cellular............61............2,085..........2.93%
Hospira.................................30............2,040..........1.47%
Pactiv....................................28............2,035..........1.38%
IL Total for all 7................308..........17,488...........1.76%
* CNH Global is a Netherlands Corp, but with both an SEC Business and Mailing Address in Burr Ridge, IL
** No mention of State Income Tax Paid, therefore it was assumed none were paid
When you review the above two lists of the 31 Big and Mid-sized Illinois Corps, you have to be very impressed with the quality and superb financial performance.
But this strong financial performance is but a drop in the bucket in comparison to what has been going on with US Big Oil and Gas Corps. There has been a massive income shift in the past decade from non-Big Oil and Gas Corps to Big Oil and Gas Corps, which has been devastating to all non-Big Oil and Gas businesses.
To illustrate how this massive income shift in the past decade has applied to Illinois, there were 19 Very Profitable Illinois non-Big Oil and Gas Big Corps, from the above list of 24, which were in existence for the entire past 12 years. The Total Core Pretax Income for these 19 Illinois non-Big Oil and Gas Big Corps of $79.3 bil for the most recent two years was up 41% from the $56.3 bil earned a decade earlier.
On the other hand, the 35 US Oil and Gas Big Corps, 25 of which are based in Texas, generated Core Pretax Earnings of $373.7 bil for the most recent two years, which was an incredible 712% increase from the $46.0 bil earned a decade earlier. I'm not kidding!
Clearly, it would be wise for the US government to take action that would reverse this horrible income shift trend, which has severely damaged not just more than 95% of US businesses, but has also devastated US individuals, and all of federal, state and local governments. Not only has it resulted in much higher US unemployment, much higher US underemployment, and lower median US wages, but it also has resulted in a substantially higher portion of a family's take-home pay being used to pay for energy costs than that of a decade ago.
I think it only makes sense for the US government to eliminate the many massive tax loopholes that are granted to Big Oil and Gas Corps to reward them for generating these windfall profits. And the money raised here should be given as wise, lucrative tax incentives to all US businesses that effectively reduce their energy costs.
Such a tax plan, is a ten-fer:
.....higher US real GDP growth
.....lower US unemployment
.....lower US underemployment
.....higher US median wages
.....lower portion of take-home pay needed to fund energy costs
.....higher after-tax corporate profits for more than 95% of US businesses
.....significant reduction in the US deficit
.....better State government coffers
.....more competitive US firms
.....and a huge step toward US becoming energy independent
Now on to updating some other States.
