The Tax Times: How 88 Billion‑Dollar Corporations Paid Zero in Federal Income Tax

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.

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