Pepco tops a list of 68 companies that paid little to no state income taxes over the last three years, and instead cashed in on tax breaks and loopholes to avoid shelling out millions of dollars, according to a new study.
Some companies even wound up with negative tax rates, according to the new report by the Institute on Taxation and Economic Policy and the Center for Tax Justice, a liberal D.C.-based advocacy group.
Pepco Holdings, which Business Insider ranked the "most hated" company in America earlier this year, made $779 million in profits from 2008 through 2010, but paid a tax rate of minus 13.2 percent, the lowest on the list. Pepco actually gained an extra $103 million in tax rebates, the authors of the study found.
| Top five tax withholders | ||
| 2008-2010 | ||
| Company | Profit | Tax rate |
| Pepco Holdings (Maryland, D.C.) | $779 million | -13.2% |
| Computer Sciences (Virginia) | $1.5 billion | -9.5% |
| Baxter International | $898 million | -3.1% |
| Rockwell Automation | $670 million | -2.5% |
| Chesapeake Energy | $8.4 billion | -2.1% |
"We don't know what their actual tax bill in the state of Maryland was, or in D.C. or West Virginia or any other state they do business in," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy. "It's not to say they're using illegal means to do it. Far from it, these are tax breaks that lawmakers have enacted, and they're just taking advantage of it."
The study follows a November report by the groups, which found that 30 of the companies they studied paid zero dollars in federal taxes.Pepco also topped that list with a federal tax rate of nearly minus 58 percent.
Pepco officials attributed the low rates to government policy shifts.
"These types of policy actions are economic incentives that the U.S. Congress put in place to achieve important economic objectives -- stimulate investment and create jobs," said Anthony Kamerick, senior vice president of Pepco Holdings.
Kamerick pointed to the other taxes Pepco paid -- approximately $1.2 billion, including real estate taxes and personal property taxes.
Even the companies that did pay income taxes paid very little -- all the companies reviewed forked over an average of 3 percent of their profits in the United States.
Comcast paid an average state tax rate of 3.4 percent during the three-year period, while paying no corporate state taxes in 2009. Verizon Communications paid no state income taxes in 2008, and averaged a rate of 2.6 percent.
Utility companies such as Pepco are in an advantageous position to make the most of federal and state tax breaks claimed for investing in capital improvements, according to Gardner.
Pepco spent about $2 billion on its infrastructure during the three years examined by the institute, money that improves the company's reliability, according to Kamerick.
"It raises the question of why state governments are rewarding these companies for what they'd be doing anyway," Gardner said. "Most state laws already require them to regularly update their equipment."
