Duke Energy is one of 26 profitable Fortune 500 companies that paid no federal income taxes over the past five years, according to a new report.
A Duke spokesman said the Charlotte-based company benefited from accelerated depreciation on billions of dollars in capital investments that it will be paying taxes on for decades to come.
Boeing, Corning, General Electric, Priceline.com and Verizon Communications also are listed among the group that paid no federal income taxes from 2008 to 2012 in the report issued Wednesday by the Citizens for Tax Justice, an advocacy group, and the Institute on Taxation and Economic Policy.
The report studied 288 Fortune 500 corporations that were profitable each year between 2008 and 2012 and found that 111 companies paid no federal income taxes in at least one of those years.
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Although federal tax law calls for a 35 percent tax rate on corporate profits, the average effective tax rate for the 288 companies studied was 19.4 percent.
The effective tax rates varied by industry, with gas and electric utilities enjoying the lowest effective federal tax rate – 2.9 percent – thanks largely to their ability to claim accelerated depreciation on their capital investments. Indeed, a number of other utilities besides Duke – including American Electric Power, Consolidated Edison, FirstEnergy, NextEra Energy, Pepco Holdings, PG&E Corp. and Wisconsin Energy – paid no federal incomes taxes from 2008 to 2012, according to the report.
Duke paid no taxes over the five-year span – it actually received $299 million in tax rebates – despite earning $9.02 billion in profits during that period. Duke’s 2012 results were adjusted to include a pro-rated portion of Raleigh-based Progress Energy, which it acquired that year.
Duke spokesman Tom Williams said in an email that the company recently completed a multiyear, $9 billion plant modernization program “where we retired coal plants across our fleet and replaced them with more efficient and cleaner natural gas and coal units.”
“Our federal taxes were lowered by bonus depreciation rules, temporarily put in place as a place as a part of the 2009 federal stimulus to help create jobs,” Williams noted. “This enabled us to expense a significant portion of major projects in the early years of operation – but we will still pay the federal taxes over the expected 30-40 year life of the projects.”
Williams also said in an interview that the report ignored the hundreds of millions of dollars in state and local taxes that Duke pays each year.
Allan Freyer, public policy analyst with advocacy group N.C. Justice Center’s Budget & Tax Center, issued a statement urging Congress to close corporate tax loopholes.
“Closing these loopholes doesn’t punish companies for success,” Freyer said. “It simply asks them to play by the same rules everyone else does and pay their fair share in supporting the public investments that made their success possible.”