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Apple Inc., Goldman Sachs, and Disney: How These Mega-Corporations and Others Evaded $93 Billion in Federal Taxes

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82 of the 100 biggest publicly traded companies have created 2,686 tax haven subsidiaries and stored a total of $1.17 trillion overseas.

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Twenty-one of the top 100 publicly traded US corporations – including such big names as Goldman Sachs (NYSE:GS), Apple (NASDAQ:AAPL), Walt Disney (NYSE:DIS), Microsoft (NASDAQ:MSFT), and Safeway (NYSE:SWY) – avoided paying $93 billion per year in federal taxes by parking their cash in a far-flung network of overseas tax havens, according to a comprehensive new study that examines how corporate America has gamed the US tax code.

The report issued Wednesday by the US Public Interest Research Group documents how relatively commonplace this practice has become. It pulled the data on those 21 companies from filings with the Securities and Exchange Commission.

Based on its research, 82 of the 100 biggest publicly traded companies have created 2,686 tax haven subsidiaries. Not all of those firms documented how much this practice whittled down their obligations to the Internal Revenue Service. However, these companies have stored a total of $1.17 trillion overseas. In many cases, shareholders put pressure on these companies to maximize their profit margins by reducing their tax liabilities.



Some - such as Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) - depended heavily on taxpayer support during the 2008 financial meltdown. Bank of America kept $17.2 billion in 316 different offshore subsidiaries, reducing its tax bill by $4.5 billion. Morgan Stanley shaved its tax obligations by $1.7 billion using foreign subsidiaries that are entirely legal under US law.

On Tuesday, President Obama proposed a corporate tax reform that would generate billions of dollars in new infrastructure and other spending by giving a one-time tax holiday to companies with their funds stashed overseas.

All of this comes as Rep. Dave Camp (R-MI) and Democratic Sen. Max Baucus of Montana attempt to overhaul the entire tax code with an eye toward preventing dependence on overseas dodges. The general framework would lower the top marginal tax rates by eliminating deductions and credits that have yet to be publicly disclosed.

"There is widespread agreement amongst academics, economists and lawmakers that these practices are both unfair to taxpayers who aren't able to engage in these strategies and harmful to the US economy," Camp, chairman of the House Ways and Means Committee, said in June before hearings on the issue.

To limit the use of tax havens, Camp has proposed a 15% tax on any earnings from patents and trademarks regardless of where the subsidiary controlling them has been incorporated. General Electric (NYSE:GE) is willing to trade a loss of tax breaks for lower overall US rates, while firms such as Microsoft and Amgen (NASDAQ:AMGN) oppose the measure.



Eliminating loopholes will not be enough unless the reform changes the incentives that cause companies to rely on foreign subsidiaries, said Dan Smith, the tax and budget advocate who authored the PIRG report.

"You might close one loophole," Smith said. "A company like GE has 1,000 lawyers at its disposal in their tax department - they're going to find another one."
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