Hundreds of billions of dollars of
U.S. corporate profits are now taxed at effective rates that would have been
unthinkably low a decade ago, and a new
report shows at least 88 very
profitable corporations paid exactly zero federal income tax for 2025. That
reality understandably frustrates individual taxpayers and closely held
business owners who feel like they are the ones funding the system while
Fortune 500 balance sheets celebrate.
What the new report actually says
The Institute on Taxation and Economic Policy (ITEP) examined annual reports for some of the largest publicly traded U.S. corporations and identified at least 88 that reported positive U.S. pretax income and no federal corporate income tax for their most recent fiscal year. Collectively, these companies reported more than $105 billion of U.S. pretax income for 2025.
At a 21 percent statutory corporate rate, that pool of income “should” translate to roughly $22.1 billion in federal corporate tax. Instead, the group not only paid nothing but collectively received $4.7 billion in tax rebates, meaning their net federal tax benefit on 2025 activity was negative. When you measure their outcome against the statutory 21 percent rate, the forgone federal corporate tax is about $26.7 billion; measured against the old 35 percent rate, the gap is about $41 billion for 2025 alone.
ITEP is careful to stress that this is not a full universe of zero‑tax corporations. The analysis excludes large private companies, public companies outside the major indices, and firms whose fiscal years do not yet show up in 2025 financials, so the 88 corporations should be considered a floor, not a ceiling.
Who is paying zero
The tax‑avoiding companies span a
wide cross‑section of the U.S. economy, including manufacturing,
transportation, entertainment, and technology. ITEP notes, for example, that
three digital payments companies—PayPal, Toast, and Block—collectively paid zero
federal income tax on $3.2 billion of U.S. income.
Other ITEP work and public discussion
around the report highlight that well‑known brands such as Tesla, Palantir,
Live Nation Entertainment, Coinbase, United Airlines, Walt Disney, and others
have reported very low or zero federal income tax in recent years, often on
billions in U.S. profits. These cases illustrate that zero‑tax outcomes are not
confined to niche industries or struggling firms.
Selected examples
|
Example company (from ITEP work / promotion)
|
2025 U.S. income / context
|
Reported federal income tax outcome
|
|
Tesla
|
About $5.7 billion of U.S. income in 2025.
|
Reported zero federal income tax for 2025.
|
|
Palantir
|
About $1.5 billion of U.S. income in 2025.
|
Reported zero federal income tax for 2025.
|
|
Live Nation Entertainment
|
About $145 million of U.S. profits in 2025.
|
Reported zero federal income tax for 2025.
|
|
PayPal, Toast, Block
|
$3.2 billion of combined U.S. income in 2025.
|
Paid zero federal income tax for 2025.
|
How
do profitable corporations get to zero?
From a tax professional’s
perspective, nothing in the report suggests systemic fraud; instead, it
reflects deep, sustained use of provisions Congress deliberately put in the
Code and then expanded in recent Trump‑era tax packages. Because corporate tax
returns are confidential, we only see the broad categories of tax breaks in
financial statement footnotes, but that is enough to explain most of the
remarkable results.
Here are the primary tools:
·
Accelerated depreciation and
expensing. A 2025 law allowed companies
to immediately write off capital investments, the most extreme form of
accelerated depreciation. ITEP found that more than half of the 88 companies
used depreciation incentives to reduce or erase their current federal income
tax, collectively cutting tax expense by about $11.4 billion in 2025.
·
Research
incentives (credits and expensing). At least 40 of the zero‑tax corporations
used the research and experimentation credit, disclosing roughly $1.6 billion
of federal R&D credits for 2025. In addition, a new provision enacted in
2025 allows immediate expensing of domestic R&D instead of slower
amortization, and more than 30 companies appear to have cut their 2025 income
taxes by at least $4.4 billion using this rule.
·
Export‑related
deductions. At least 10 companies benefited from the Foreign‑Derived Deduction
Eligible Income (FDDEI) deduction, a successor to and expansion of the older
FDII regime, which lowers the effective U.S. tax rate on certain export‑related
profits by allowing a 33.34 percent deduction for qualifying income.
Beneficiaries include companies in technology, defense, and consumer brands
with substantial foreign sales.
·
Stock‑based
compensation. More than a dozen companies used the stock‑option tax preference,
which allows a deduction for the spread between strike price and market value
even when the related expense reported to investors is smaller. Well‑known
names in tech, energy, and crypto are among those that substantially reduced
their tax expense this way.
These tools work together, but they
rest on a foundation created by the 2017 Tax Cuts and Jobs Act and then
reinforced by the 2025 “One Big Beautiful Bill Act,” both of which
substantially lowered the statutory rate and expanded or preserved the most generous
corporate preferences. The result is that large enterprises, with sophisticated
planning and capital‑intensive footprints, can often drive their current
federal income tax to zero in profitable years without breaking a single rule.
Why
smaller businesses and individuals can’t replicate this
If you are a high‑earning individual,
a professional services firm, or the owner of a closely held pass‑through, you
may wonder why you cannot “do what the big guys do.” The answer is structural
and highlights how the Code favors certain activities and entity types over
others.
·
Different
entities, different playbook. Most closely held businesses operate as S
corporations, partnerships, or sole proprietorships, where income flows through
to owners and is taxed at individual rates. Many of the largest corporate
breaks in the ITEP report (FDDEI‑type deductions, large‑scale bonus
depreciation on heavy infrastructure, export incentives) are either unavailable
or far less valuable to pass‑throughs.
·
Scale
of investment. Accelerated depreciation and 100 percent expensing are powerful
only if you are making large, ongoing capital investments. A Fortune 500
manufacturer adding billions of dollars in plant and equipment can credibly
wipe out its tax base; a local professional practice buying a few computers and
a vehicle cannot.
·
Nature
of income. The Code is particularly generous to income that looks like returns
on capital, intellectual property, and exports, not to labor‑heavy or
service‑based income. Many closely held businesses generate exactly the kind of
active, domestic, service income that remains fully taxed.
·
Access
to capital and advice. Multinationals can afford in‑house tax departments, Big
Four planners, and complex cross‑border structures, while smaller businesses
may work with one advisor and must balance tax against cash‑flow, banking, and
operational constraints. That gap in resources translates directly into an
effective‑rate gap.
In other words, the zero‑tax outcomes
in the report are lawful but not broadly reproducible for ordinary taxpayers.
They reflect policy choices that reward certain behaviors, industries, and
scales of operation.
What
this means for you as an individual taxpayer
For individual clients, the main
implication is not that you are “doing it wrong,” but that the system is not
neutral. Large corporations can combine base‑erosion tools and preferential
regimes to shrink their effective rate; individuals primarily see complexity,
not deep structural discounts.
This has several practical
consequences:
·
Pressure
on enforcement. As large corporate receipts fall relative to profits, tax
administrators have incentives to focus more on easy‑to‑audit income streams:
W‑2 wages, 1099s, and small‑business returns. That can translate into more
correspondence audits and document‑intensive examinations for ordinary
taxpayers, even as headline corporate rates fall.
·
Political
volatility. Reports like ITEP’s will continue to fuel debates about “closing
loopholes” and raising revenue from “the rich” or from “corporations.”
Historically, when Congress tightens high‑end preferences, it often does so
through broad rules—caps, phase‑outs, and new information‑reporting—felt across
the upper‑middle‑class tax base.
·
Planning
against a moving target. High‑income individuals need to assume that today’s
favorable regimes (from QBI to various credit structures) are provisional. A
prudent strategy is one that works under multiple future tax environments
rather than betting everything on a single expiring provision.
What
it means for closely held business owners
For owners of S corporations,
partnerships, and closely held C corporations, the report is both a cautionary
tale and an invitation to plan intentionally.
A few practical takeaways:
·
Use the
tools you actually have. While you may not qualify for FDDEI or billion‑dollar
bonus depreciation, you can often make disciplined use of cost recovery,
retirement plans, R&D credits on a smaller scale, and thoughtful entity
choice to manage your effective rate. The same Code that lets a multinational
get to zero will usually reward a smaller business that systematically
documents and claims what Congress has already offered.
·
Separate
tax strategy from imitation. Trying to “be like Tesla” is not a strategy. Your
goal is not to hit zero tax in a single year; it is to align your tax posture
with your business model, your exit plans, and your risk tolerance over time.
That might mean accepting a reasonable current effective rate in exchange for a
cleaner profile if you expect financing, sale, or succession in the coming
years.
·
Anticipate
state‑level effects. ITEP notes that because state corporate income tax systems
are often tethered to federal definitions, the same tax breaks that wipe out
federal liability also depress state corporate receipts, leaving these 88
companies with an average effective state rate of only about 1.4 percent
against a weighted average closer to 6 percent. States may respond by
decoupling from federal provisions or increasing enforcement, which can affect
how multi‑state closely held businesses structure their operations.
·
Document,
don’t improvise. Many of the favorable rules highlighted in the report (R&D
credits, executive compensation deductions, export incentives) are extremely
documentation‑heavy. Large corporations succeed because they invest in systems;
a smaller business can achieve scaled‑down versions of these benefits only if
it treats record‑keeping as part of its core operations, not an afterthought.
A closing thought
When you see that 88 major
corporations collectively reported $105 billion in U.S. profits and still paid
no federal income tax for 2025, it is tempting to treat the system as
hopelessly rigged. From a technical standpoint, though, what you are seeing is
the logical endpoint of a policy choice to heavily subsidize certain
investments, exports, and forms of compensation at the corporate level,
combined with two aggressive rounds of corporate tax cuts in 2017 and 2025.
If you are an individual or closely
held business owner, you cannot rewrite that policy architecture—but you also
do not have to stand still under it. With careful planning, good documentation,
and a clear understanding of which incentives actually apply to you, it is
possible to reduce your effective rate, improve after‑tax cash flow, and
protect yourself against the next round of tax‑law changes without chasing the
kind of zero‑tax outcomes that make headlines and invite scrutiny.
Want to Reduce Your Tax Bill?
Contact the Tax Lawyers at
Marini & Associates, P.A.
Sources:
1.
https://itep.org/88-profitable-corporations-paid-zero-income-tax-in-2025/
2.
https://itep.org/new-report-finds-88-major-u-s-corporations-paid-zero-federal-income-tax-despite-billions-in-profits/
3.
https://itep.org/corporate-tax-avoidance/
4.
https://itep.org/category/blog+corporate-taxes/
5.
https://x.com/iteptweets/status/2044059299215782073
6.
https://www.linkedin.com/posts/ceteri_at-least-88-profitable-us-corporations-activity-7450316940293849088-hM0q
7.
https://www.commondreams.org/news/88-companies-no-income-tax
8.
https://www.facebook.com/instituteontaxation/photos/these-corporations-paid-0-in-federal-income-tax-for-2025/1348880243935472/
9.
https://www.reddit.com/r/thebulwark/comments/1smf8s3/itep_at_least_88_profitable_us_corporations_paid/
10.
https://itep.org
