Boeing, Second Largest Federal Contractor, Pays No Federal Income Tax in 2013

by Scott Klinger, 2/19/2014

In its just-released annual report, Boeing Company reported that it claimed $82 million in federal tax refunds, despite reporting $5.9 billion in U.S. pre-tax profits last year. This represents an effective tax rate of -1.4 percent. Boeing paid just $11 million in state income taxes, an effective state tax rate of just 0.2 percent. The disclosures were made in Boeing’s Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) last Friday.

Since 2008, Boeing has reported between $1.6 billion and $5.9 billion in profits each year, yet has paid no federal income taxes in three of those years. Over the last six years, Boeing has reported $26.4 billion in pre-tax profits to its shareholders, while claiming a total of $105 million in refunds from the IRS, an effective tax rate of -0.4 percent.

With $20 billion in sales to the federal government in fiscal 2013, Boeing was the nation’s second largest contractor. Boeing alone received 4.4 percent of all federal government contracts last year. Boeing reported to shareholders that 34 percent of its 2013 sales were made to the U.S. government.

Boeing’s CEO, W. James McNerney, Jr., received total compensation of $27.5 million in 2012, according to the company’s proxy statement filed with the SEC. Information on McNerney’s 2013 pay will be revealed when the company files its new proxy statement next month.

When any large corporation makes tens of billions of profits and pays nothing in taxes, it is scandalous. When a company that draws its lifeblood from taxpayer-funded contracts pays nothing to support the government it claims to serve, it is time to change the rules that allow such behavior to continue unchecked.

Editor's Note: Responding to the Anonymous commenter, Boeing’s current taxes paid are reported in the tax footnote of its Form 10-K. In its income statement it reports income taxes paid, which include “deferred taxes”, which as the name implies are taxes that Boeing did not pay in the current year, but which may be paid at some future date. Deferred taxes do not pay the government’s bills. If Boeing delivered an aircraft to the federal government and the Defense Department told Boeing that it was deferring payment years into the future, Boeing would not have much of a business. When deferred taxes are eventually paid, they show up in the current taxes line and will raise the effective tax rate in that year.

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Then someone doesn't know how to read a SEC filing, balance sheet or annual report. I could care less about the pre-tax profits (since technically under the law business's are taxed annually based off of total gross earnings).

I did however notice that even with gross earning from the U.S. at $5.946 billion the federal tax refunds were classified under: " In 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 that retroactively renewed the research tax credit for 2012 and extended the credit through December 31, 2013."

Which would be from the previous Obama administration.

Yet there is a line in there for $1.531 in DEFERRED FEDERAL TAXES (which over time typically grow through price valuation and market gain), that eventually will be more than double the $82 million in tax refunds. These are refunds that OBAMA retro-activated, which means that was the $82 million they should not of had to pay last year (hello, free loan for the government), going towards their deferred taxes. Which in those years of payment of deferred taxes will severely inflate the net effect tax rate.

I don't know about you but that looks like a temporary opportunity to put paychecks in pockets:
"Pension and other post-retirement plans $1,720,000,000"

By the way-- Accounts Receivable:

"U.S. government contracts $3,604 million"
"Expected to be collected after one year $1,020 million"

So let me get this straight. You cant stand the refund, even though after the refund they pay a total net effective income tax rate of 24%, payed more monies to pensions and post retirement plans. Oh, the government would still owe them 40 times more than their refund in total accounts receivables. Although, almost 30% of that Boeing wont collect for another year and all through that time the private company has to cashflow and payout, wages and contracts, while carrying the government on its financial back. But they shouldn't get the tax break. Am I accurate?

And yes, I have no problem giving any of you my name. Stand if you believe in what you are saying.

To Anonymous above:
As a stockholder, I also get a quarterly Boeing dividend. Dividends are on profits after taxes. As a private corporation, Boeing is obligated to pay taxes and they do in other states. Unfortunately, Washington is one of the handful of states that have no personal or corporate income taxes. Boeing sets high expectations on our K-12 and higher ed systems, wants more engineering grads, demands free technical training for its workers, better roads, ports and transit. All of this infrastructure is what taxes go for. Boeing is a very bad corporate citizen here in Washington, always demanding special treatment. They just held the Legislature hostage and got $8 billion through 2024 in tax breaks (not income taxes). I find it odd that you think any private corporation should not pay taxes to pay for infrastructure and its share of community services. The fact that it profits on government contracts has no bearing one way or the other. You certainly have an odd idea of taxes.

Response to Editor's Note: This is true, but your blog post is very misleading. You misrepresent the effective tax rate as well as the actual taxes paid by Boeing. I understand you are trying to instigate a response from the general public, but I think you reached a little too far.

But I agree, the rules should change as deferring billions in income tax each year is not healthy for the government.

This is clearly an oversimplification of complex accounting. Boeing's effective tax rate for 2013 was 26.4% due to deferred tax expenses. You can't just look at the "current" category, this isn't a 1040EZ.

The article is nonsense.

In his own hyperlinked notes, you get Boeing's 10-K form, which shows, for the last 3 years, they paid taxes of $1.6bn, $2.0bn, and $1.4bn, which ranges from 25-34%.

Does the writer not know the difference between taxes paid and refunds?

The system is being gamed. Scandalously. Other points:

1. Executive pay vs. Labor pay. The forever question-One side will forever say its too little, and one will forever say its too much. Tremendous responsibility indeed.

2. Taxes, as a stockholder your quarterly dividends are the profits after paying corporate taxes. Play by the rules and pay your corporate taxes. If you truly believe the system is being gamed and you have to pay income taxes like everyone else then change the rules.

3. Income tax on earnings from government (social) contracts. I find it odd that earnings from a government (social) contract is taxable. (i.e.: unemployment 'earnings', welfare 'earnings')

The system is being gamed. Scandalously. Other points:

1. Executive pay vs. Labor pay. The forever question-One side will forever say its too little, and one will forever say its too much. Tremendous responsibility indeed.

2. Taxes, as a stockholder your quarterly dividends are the profits after paying corporate taxes. Play by the rules and pay your corporate taxes. If you truly believe the system is being gamed and you have to pay income taxes like everyone else then change the rules.

3. Income tax on earnings from government (social) contracts. I find it odd that earnings from a government (social) contract is taxable. (i.e.: unemployment 'earnings', welfare 'earnings')

Scandalous ? Scott did you receive pay from Airbus to write this article? Boeing plays by the rules in order to do business with federal government. If you truly believe the system is being gamed then change the rules. Other points :

1. McNerney's salary is high but he also has tremendous responsibility for approximately 200,000 employees. I don't believe he works only 8 hours per 5 days per week. Probably more like 80 to 120 hors per week.

2. Taxes, as a stockholder I receive a quarterly dividend check. Those dividends are the profits of the company, and I pay income taxes on that money.

3. Income tax on earnings from government contracts. I find it odd that earnings from a government contract is taxable.

G

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