American and United Airlines Paid No Taxes in 2015
A new report on the taxes paid by Standard and Poor’s 500 found that two airlines did not pay any income tax in 2015: American and United. Even though the two posted record profits, they were still able to use the benefits of accounting rules to prevent them from paying taxes on their 2015 profits.
According to an analysis and report by USA Today:
There are a number of reasons why a profitable company may not pay taxes. For instance, years of deep losses can affect a tax bill.
Take United Continental, which reported a $3.2 billion income tax credit in 2015 despite reporting earnings before taxes of $4.2 billion. Accounting rules allow the airline to offset taxes due with valuation allowances resulting from losses in past years. During 2015, these allowances amounted to $4.7 billion which erased the company’s $1.5 billion tax bill based on its normal corporate tax rate.
In other words, the United was able to capitalize on losses from prior years in order to prevent paying taxes in the current tax year. It seems like quite the benefit for an airline to be able to do…I wonder if while filling out my taxes this year I can do the same?
United Airlines’ pre-tax profit was $4,219 million, with a income tax expense of -$3,121 million. American Airlines’ pre-tax profit stood at $4,616 million and an income tax expense of -$2,994 million. For a full list of the companies that did not pay any taxes in 2015, see USA Today’s chart.
To be fair, United and American weren’t the only companies to not pay any taxes in 2015. Of the S&P 500 companies, 27 paid zero taxes for the prior tax year. However, as airlines make the products worse in the search for more revenue, it’s incredible they are able to use accounting allowances to provide a tax shelter for themselves simply based on prior years’ losses. In a message to its investors, United has said to be aware that eventually these benefits will no longer exist and the company will be required to pay taxes. Perhaps that should occur sooner, rather than later.