Why Major Corporations Paid Zero Federal Income Tax in 2025

Major Corporations Paid Zero Federal Income Tax in 2025, Report Finds

In 2025, a significant number of profitable U.S. corporations paid no federal income tax. A report from the Institute on Taxation and Economic Policy (ITEP) identified 114 such companies, a finding that highlights ongoing debates about corporate tax rates and the impact of tax subsidies. These companies, which collectively reported billions in profits, managed to achieve an effective federal income tax rate of zero.

The ITEP analysis looked at 706 companies that were profitable and publicly disclosed enough financial information. These companies reported a combined $1.88 trillion in U.S. profits and paid $196 billion in current federal taxes. This resulted in an aggregate effective tax rate of 10.4% for the group, which is less than half of the 21% statutory corporate tax rate.

Companies Reporting Zero Tax Payments

The list of companies that paid no federal income tax in 2025 includes well-known names across various industries. Among them are Tesla, Walt Disney, CVS, Citigroup, United Airlines, Palantir, and DoorDash. These companies reported substantial profits in the same year they paid no federal income tax. For example, Citigroup reported $4.4 billion in profits, CVS Health reported $8 billion, and Walt Disney reported $8.3 billion. Tesla, a prominent electric vehicle manufacturer, reported $5.7 billion in profits, while United Airlines reported $4.3 billion.

Low Effective Tax Rates Across the Board

Beyond the companies paying nothing, a much larger group paid taxes at very low rates. The ITEP report found that over 250 companies in the sample paid at effective rates below 7%. This indicates a broader trend of corporations paying significantly less than the official 21% statutory rate. The overall effective rate of 10.4% for the 706 companies studied is the lowest ITEP has recorded in over four decades.

Tax Breaks and Subsidies Contribute to Lower Payments

ITEP calculated that tax subsidies accounted for $198 billion in reduced tax burdens for the 706 firms. A tax subsidy is defined as any provision that allows a profitable company to pay less than the 21% statutory rate. Twenty-five corporations were responsible for more than half of these identified subsidies. Companies like Meta, Amazon, Microsoft, and Alphabet received between $13 billion and $19 billion each in tax benefits.

These substantial benefits were often tied to provisions like immediate expensing for domestic research and development costs and 100% bonus depreciation for qualifying business property. For instance, the four largest beneficiaries mentioned above saved a combined $46 billion through these immediate deductions. The report also noted that these same companies benefited from an additional $263 billion from the 2017 reduction in the corporate tax rate.

The Impact of Tax Legislation

The 2017 Tax Cuts and Jobs Act reduced the federal corporate tax rate from 35% to 21%. More recently, the One Big Beautiful Bill Act (OBBBA), passed in July 2026, extended the 21% rate, made several tax breaks permanent, and introduced new ones. These legislative changes have been central to the discussion about corporate tax payments.

Debate Over Corporate Tax Rates

Tax policy experts hold differing views on the current corporate tax rate. Matthew Gardner, a senior fellow at ITEP and coauthor of the report, argued that the concentration of profits at the top and the reduced rates create significant revenue issues. He suggested that when profitable companies pay less than the 21% rate, it weakens the corporate tax system. Gardner compared the 21% corporate rate to the 37% top rate for individual workers, questioning the disparity.

Conversely, Kyle Pomerleau of the American Enterprise Institute defended a lower corporate rate. He stated that the previous 35% rate was among the highest globally and that a rate in the middle of the pack at 21% is beneficial for U.S. competitiveness. Garrett Watson of the Tax Foundation echoed this sentiment, noting that the 2017 law aimed to encourage investment and improve the nation’s economic standing.

Declining Corporate Tax Receipts Amidst Rising Profits

Data from the Treasury Department revealed a drop in corporate income tax revenue. For the fiscal year ending September 30, 2026, corporate income tax revenue was $381 billion, a decrease of about 15% from the previous year. This decline is part of a larger reduction of over 25% since 2024. In contrast, corporate profits reached a record $4.7 trillion in the 12 months leading up to mid-2026, an increase of 17% compared to the prior 12-month period. The Congressional Budget Office projected that the OBBBA could add $3.4 trillion to the federal deficit over the next decade, largely due to reduced revenue.

Frequently Asked Questions