With all the bellyaching about U.S. corporate taxes, you'd think S&P 500 companies were paying up. But some get away with paying nothing.
Nearly 50 companies in the S&P 500, including Tesla, 3M and Airbnb, reported paying no income tax expense in 2023, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge.
To be sure, these are accounting-rules based estimates of corporate tax liabilities. Actual taxes are paid in separate filings with tax authorities. But the income tax expense line on the income statement is still the best public disclosure investors get, making it valuable.
And don't think investors win when Uncle Sam loses. Shares of the top 10 lowest tax payers are up just 10.3% this year on average. That lags the S&P 500's roughly 20% gain.
What's The Typical S&P 500 Tax Rate?
On average, S&P 500 companies reporting a tax expense in 2023 averaged an effective tax rate of 25.2%.
And a vast majority of companies reported at least some tax liability. The top 10 payers reported a 2023 tax liability of more than $128 billion. Interestingly, the shares of the top tax payers outperformed the S&P 500 this year on average, gaining 21.1%.
But still, some companies got off scot free.
Lowest Tax Payers
When it comes to keeping taxes down, no one does it better than Tesla. The electric vehicle maker reported 2023 income tax credit of $5 billion. And that's despite making a 2023 profit of nearly $15 billion.
Turns out taxes have been a touchy subject at Tesla for years. In its filing, Tesla says the tax credit is due to over allowances in past years. But Tesla also says, "We are currently under examination by the Internal Revenue Service ("IRS") for the years 2015 to 2018. Additional tax years within the periods 2004 to 2014 and 2019 to 2022 remain subject to examination for federal income tax purposes."
3M is another low tax payer. It got an income tax credit of $2.6 billion in 2023. But this is a case of a money-losing company not owing money, as there's no profit to be taxed. The industrial company reported a 2023 loss of nearly $7 billion.
And it's not just the giants with savvy accountants paying nothing. Airbnb, an online company that lets homeowners turn their houses into hotels, recorded a tax credit of nearly $2.7 billion in 2023. And that's as it earned a profit of $4.7 billion that year.
Tax Caveats
Again, it's important to note income tax expense is a lumpy figure. It's based on allowances from previous years and assumptions. And this set of books presented to public investors might differ from what companies give to the IRS.
But it's still eye-opening to see who is paying what. It's also a reminder companies often find ways around tax rates.
Lowest Tax Payers In S&P 500
Based on 2023 income tax expense (credit)
| Company | Ticker | Tax credit ($ millions) | Net income ( 2023, $ millions) | Stock YTD % ch. | Sector |
|---|---|---|---|---|---|
| Tesla | TSLA | -$5,001 | $14,997 | 2.2% | Consumer Discretionary |
| 3M | MMM | -$2,691 | -$6,995 | 25.3% | Industrials |
| Airbnb | ABNB | -$2,690 | $4,792 | -3.4% | Consumer Discretionary |
| Aptiv | APTV | -$1,928 | $2,938 | -19.8% | Consumer Discretionary |
| PG&E | PCG | -$1,557 | $2,242 | 10.3% | Utilities |
| Palo Alto Networks | PANW | -$1,411 | $2,277 | 16.1% | Information Technology |
| FMC | FMC | -$1,119 | $1,322 | 2.3% | Materials |
| Pfizer | PFE | -$1,115 | $2,119 | 2.2% | Health Care |
| Gen Digital | GEN | -$990 | $1,395 | 18.7% | Information Technology |
| GoDaddy | GDDY | -$972 | $1,375 | 48.8% | Information Technology |
