Some of the Bay Area's bigger tech firms paid $0 in federal income taxes last year, despite posting millions — sometimes billions — of dollars in profits.
Advanced Micro Devices Inc., Salesforce.com Inc., HP Inc., Xilinx Inc. and Sanmina Corporation were all able to wipe out their federal tax bill last year, according to new report from the Institute on Taxation and Economic Policy. All but AMD actually saw a tax rebate.
The companies were among 55 profitable public corporations that paid no federal taxes in 2020, according to ITEP.
"This continues a decades-long trend of corporate tax avoidance by the biggest U.S. corporations," said Matthew Gardner, an ITEP senior fellow, and Steve Wamhoff, the organization's director of federal tax policy, in the report.
Of the local companies on ITEP's list, Salesforce (NYSE:CRM) reported the biggest profit last year. The cloud software provider earned $2.6 billion; despite that, it saw a $12 million rebate on its federal taxes. It used a variety of tax credits, including a break on compensation that's paid to executives and employees in the form of stock options, to whittle down its taxes, Gardner told the San Francisco Business Times.
Among local firms, AMD posted the next biggest profit at $1.2 billion. It too used the stock options tax credit as well as the credit for research and experimentation to reduce its tax burden down to $0, according to the report.
Meanwhile, HP, which reported a $861 million profit last year, saw a $24 million federal rebate. Xilinx, which earned $140 million, got $2 million back from the federal government. And Sanmina, which earned $95 million, got a $1 million rebate.
Collectively, the five companies earned $4.1 billion and saw a combined rebate of $39 million.
None of the five companies responded to a request for comment.
The report doesn't assert that the companies did anything illegal; instead the companies were taking advantage of legal tax breaks, according to the report. And while the companies may not have paid any federal income taxes, they often paid other taxes. Salesforce, for example, paid $53 million in state income taxes last year and $238 million in foreign income taxes, according to its annual report.
Among the companies that paid $0 income taxes last year, 26 — including three Bay Area ones — have effectively paid no taxes over the last three years despite being profitable. Salesforce earned $4.1 billion over that period and saw a rebate of $4 million. AMD posted a combined profit of $1.7 billion for that period and saw a rebate of $1 million. Sanmina earned $262 million over those three years and had a net tax bill of $0.
That ability to pay no taxes over an extended period is partly a result of the 2017 Tax Cuts and Jobs Act (TCJA), the researchers said in the report.
"It is crystal clear that the TCJA failed to address loopholes that enable tax dodging — and may have made it worse," Gardner and Wamoff said in the report.
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