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Amazon paid no US income taxes for 2017
Seattle-based online giant ‘doesn’t appear to be a company that’s excessively burdened by the workings of the tax system’
By Stephen Cohen, SeattlePI Updated
3:17 pm PST, Tuesday, February 27, 2018
Thanks to a complex system of credits and deferment, Amazon won’t pay any federal income taxes after topping $5.6 billion in income in 2017. The Seattle-based online retailer will end up paying out roughly $769 million in taxes for the year, but $724 million of that will be in foreign taxes.
That’s according to an analysis of the online behemoth’s 2017 10-K form, which “provides a comprehensive overview of the company’s business and financial condition,” according to the Securities and Exchange Commission. Public companies are required to submit the form every year to the SEC in addition to quarterly updates (10-Q forms) and, when announcing major events shareholders should know about, the 8-K or “current report” form.
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Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy, wrote about Amazon’s tax bill that won’t come due in a Feb. 13 blog post. Without being privy to the company’s tax return, no one can say exactly how CEO Jeff Bezos and Co. avoided what could have been more than $1.3 billion in federal taxes based solely on the annual financial report, but there is information to be gleaned.
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For example, Amazon took out a $917 million tax deduction on stock options exercised by current or former employees. Unlike wages, which are also deducted from any company’s taxable income, the stock options don’t require any cash expenditures by the company.
“Even though these don’t represent as meaningful out-of-pocket expenses for the companies, they’re still allowed to deduct the fair value of the stock options when they’re exercised,” Gardner told SeattlePI. “When somebody who has been given this right cashes them in, the company gets to deduct this from their taxable income.”
Amazon’s stock price closed at just under $1,512 per share on Tuesday.
Another ingredient in the low tax bill is likely capital expenditure depreciation, Gardner said, where companies are allowed to write off the cost of some expenses — say those incurred while building a distribution center, for example — up front. Those taxes are essentially shifted to future years’ tax bills.
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Some of the disclosures in the 10-K form are maddeningly vague. For instance, a table on page 65 lists a tax credit of $220 million, but there’s no indication of whether or not those credits apply to federal, state or foreign taxes.
Bezos, a frequent critic — and target — of President Donald Trump, nevertheless earned a windfall from the Trump administration’s U.S. Tax Cuts and Jobs Act of 2017, passed in December. Amazon readjusted estimates for taxes deferred under the old 35 percent corporate tax rate to meet the new tax law’s 21 percent figure, which resulted in an estimated $789 million reduction for Amazon.
Gardner is quick to point out that there’s no evidence that Amazon engaged in behavior that is unusual, let alone illegal. But he thinks it might be relevant for cities attempting to attract the company’s second North American headquarters (HQ2).
“At a time when states all want to see HQ2 coming to them, but they don’t necessarily have the cash to spend on tax incentives, it’s potentially helpful for them to know that at least in 2017, Amazon doesn’t appear to be a company that’s excessively burdened by the workings of the tax system to begin with,” he said.
Seattlepi.com reporter Stephen Cohen can be reached at 206-448-8313 or email@example.com. Follow Stephen on Twitter at @scohenPI.