UPDATE: Here are the actual tax rates the biggest companies in America pay
By Philip van Doorn, MarketWatch
Others, including 7 Dow components, currently pay tax at a rate that is lower than 20%
There's plenty of reading to do to understand President Donald Trump's tax reform proposal (http://www.marketwatch.com/story/how-to-separate-fact-from-fiction-in-tax-reform-2017-09-27), but one major feature is quite simple -- a lowering of the federal income-tax rate to 20% from the current 35%.
Trump has heralded the corporate rate cut as a move that would greatly benefit Corporate America, although many U.S. companies currently pay far less than the top 35% rate. However, it is widely viewed as the main reason many multinationals tend to keep a lot of cash overseas, as they are reluctant to repatriate it as long as it would be subject to such a high rate.
Read:Why tax repatriation won't jolt the U.S. dollar (http://www.marketwatch.com/story/why-tax-repatriation-wont-jolt-the-us-dollar-2017-09-27)
Related:These are the 5 U.S. companies with the biggest overseas cash piles (http://www.marketwatch.com/story/these-are-the-5-us-companies-with-the-biggest-overseas-cash-piles-2017-04-26)
We have compiled lists of companies to review what's at stake as Congress battles over the proposal for the next several months.
Any company's tax situation can change radically from quarter to quarter or year to year, because of such items as major asset write-downs, gains on sales, realization of deferred tax assets, legal settlements, accounting adjustments or other events. So we decided to use quarterly data provided by FactSet to calculate median effective income-tax rates for the past four quarters.
These tax rates include any state and local income taxes the companies might pay. But regardless of whether a company is paying a boatload of non-federal income taxes, having a high combined effective tax rate means the stakes are high for the companies and their shareholders.
If Trump can make a deal with members of both houses of Congress to slash the corporate income-tax rate, analysts will immediately raise earnings estimates for high-tax companies, which can be reasonably expected to light a fire under the stocks.
These are the median effective income-tax rates for the 30 companies in the Dow Jones Industrial Average, over the past five reported quarters:
Company Ticker Median effective income-tax rate - past five reported quarters UnitedHealth Group Inc. US:UNH 40% Home Depot Inc. US:HD 36% Verizon Communications Inc. US:VZ 34% Walt Disney Co. US:DIS 33% McDonald's Corp. US:MCD 33% American Express Co. US:AXP 32% Wal-Mart Stores Inc. US:WMT 31% Visa Inc. Class A US:V 29% 3M Co. US:MMM 28% Caterpillar Inc. US:CAT 28% J.P. Morgan Chase & Co. US:JPM 28% Goldman Sachs Group Inc. US:GS 27% United Technologies Corp. US:UTX 26% Apple Inc. US:AAPL 26% Travelers Cos. US:TRV 25% Boeing Co. US:BA 24% Procter & Gamble Co. US:PG 23% DowDuPont Inc. US:DWDP 22% Intel Corp. US:INTC 22% Exxon Mobil Corp. US:XOM 21% Coca-Cola Co. US:KO 21% Cisco Systems Inc. US:CSCO 21% Merck & Co. US:MRK 21% Johnson & Johnson US:JNJ 19% Pfizer Inc. US:PFE 18% Chevron Corp. US:CVX 14% Nike Inc. Class B US:NKE 14% Microsoft Corp. US:MSFT 12% International Business Machines Corp. US:IBM 10% General Electric Co US:GE 1% Source: FactSet
As the table illustrates, seven of the 30 Dow components currently pay less than a 20% tax rate.
To broaden our horizons, we also looked at S&P 500 companies domiciled in the U.S., for which effective tax rate data is available for at least three of the five most recently reported fiscal quarters. Here are the 10 with the highest median effective income-tax rates:
Company Ticker Median effective income-tax rate - past five reported quarters Newmont Mining Corp. US:NEM 50% Hewlett Packard Enterprise Co. US:HPE 46% Nordstrom Inc. US:JWN 45% CenturyLink Inc. US:CTL 45% Aetna Inc. US:AET 44% Centene Corp. US:CNC 44% TripAdvisor Inc. US:TRIP 43% W.W. Grainger Inc. US:GWW 41% Hilton Worldwide Holdings Inc. US:HLT 41% Amazon.com Inc. US:AMZN 41% Source: FactSet
And here are the 10 U.S. domiciled S&P 500 companies with the lowest median tax rates over the past five reported quarters:
Company Ticker Median effective income-tax rate - past five reported quarters Mosaic Co. US:MOS -40% Apartment Investment and Management Co. US:AIV -37% Microchip Technology Inc. US:MCHP -35% Arthur J. Gallagher & Co. US:AJG -34% Zimmer Biomet Holdings Inc. US:ZBH -33% eBay Inc. US:EBAY -32% Boston Scientific Corp. US:BSX -17% Thermo Fisher Scientific Inc. US:TMO -4% Welltower Inc. US:HCN -3% Kimco Realty Corp. US:KIM -2% Source: FactSet
If a company's tax rate is negative, it indicates a net loss, which means the company can carry the tax loss forward to other years and offset income which would otherwise be taxed.
Read now:Why is Ireland the U.S. government's third-largest creditor? (http://www.marketwatch.com/story/how-did-ireland-become-the-us-governments-third-largest-creditor-2017-09-20)
-Philip van Doorn; 415-439-6400; AskNewswires@dowjones.com
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