Some of you may have noticed that companies are disclosing more tax information lately, thanks to a new accounting rule that requires filers to break out taxes paid to federal, state, local, and even overseas tax authorities.

If tax analysis is your thing, fear not! Calcbench has an easy way to find all this information and we’ve even cooked up a template to track tax disclosures automatically.

These new disclosures arise from updates to tax accounting rules that the Financial Accounting Standards Board adopted in 2023, and which went into effect with annual 10-K filings that companies started to make this month. Previously, companies only disclosed a single number for “income tax provisions.” Now they must report individual amounts and percentages for a variety of taxes paid or tax credits claimed, and do so in a nice table format.

One of the first companies to report these new details was Netflix ($NFLX), with its annual report filed on Jan. 23. Figure 1, below, is the new table that you see when you go digging through Netflix’ tax footnote.

Here is another example from Facebook — er, Meta Platforms ($META) — from its 10-K filed on Thursday morning. See Figure 2, below.

You can find these tables and disclosures via the Calcbench Disclosures & Footnotes Query page. Just look up the 10-K filing of the company you’re researching, find the tax footnote from the disclosures pull-down menu on the left side of the screen, and the disclosures will be in there. You can also try searching for “ASU 2023-09” in the text, since that’s the accounting rule prompting these new disclosures.

And of course, since Calcbench is all about ease of finding data, we have a few other short-cuts you can use too.

Finding Tax Data Quickly

One way to find tax disclosures quickly is via our Multi-Company page. Once you configure the group of companies you want to study, you can enter “income taxes” in the search fields and the disclosures that companies have made (if any) will automatically appear. 

For example, we searched the S&P 500 for companies that have already filed their 2025 annual reports, and looked up the federal, state and local, and foreign taxes paid. Figure 3, below, shows some of the results.

As you can see, a large number of companies still haven’t filed 2025 reports yet so we don’t have much data — but it will come soon! As companies file, Calcbench automatically indexes and collates that information so it’s at your fingertips. (You can also export the data to Excel for further analysis on your own desktop.) 

Calcbench also created a template to capture these tax disclosures as companies file them. The data populates automatically, so you’re getting the most comprehensive information as fast as possible. All you need is (a) a Premium-level Calcbench subscription; and (b) the Calcbench Excel Add-In. (If you need help with either of those, drop us an email at us@calcbench.com.)

That’s all there is to it!

Today we have another example of Calcbench used in the field: a research note from Morgan Stanley that used Calcbench data to identify net operating losses that companies carry on their books, and which the companies can then use to lower taxable income in future years. 

One of the more fascinating concepts that can be found deep in the footnotes of a company’s 10-K annual report is called ‘unrecognized tax benefits’. In short, it is the difference between the amount of money the company knows they ought to pay in taxes (and therefore report on their income statement as tax expense), and the amount they actually plan on paying (and therefore report on their tax return). You see, unlike us individuals, large companies tend to treat the IRS as more of a kid brother than an angry parent.  

As a result of this, at any given time large companies have a certain amount of unpaid taxes (AKA unrecognized benefits!) that they are kind of just hoping they can get away with. And as time passes, many of these positions ‘expire’, or, that is, the statute of limitations runs out. So the IRS can no longer look to enforce payment. So they do get away with it. In total US public companies grabbed an extra $8 billion or so each of the last 2 years in total due to these expirations.

But, as you may know, the IRS picked up a large funding infusion over the summer (What the IRA budget increase for the IRS means for taxpayers: PwC), and the plan at least is for some of it to be used to go after some of these corporations. Since the companies must report these details for all of us to see…it will be interesting to watch if the numbers do in fact start dropping. In the meantime, here is a peek at ‘unrecognized tax benefits’ in 2021, and (most of) 2022:      

Corporate taxes are an endlessly fascinating niche of financial analysis. Today we have a prime example of that phenomenon, courtesy of a research note shared with us from Morgan Stanley.

The note explores how a recent tax increase meant to cover the costs of corporate tax cuts from 2017 actually lowered tax rates for numerous technology and biotech companies. The note caught our eye because Morgan Stanley used Calcbench data to perform the analysis, and of course we’re shameless self-promoters around here — but also because this truly is a fascinating glimpse into the topsy-turvy world of corporate reporting.

So what happened? As described in the research note, starting this year companies are required to amortize R&D tax deductions over five years (15 years for foreign R&D), instead of those expenses being immediately deductible. Except, that move to raise taxes gives companies more incentive to use something known as the Foreign-Derived Intangible Income(FDII) deduction. That’s a deduction for domestic IP-based goods & services sold to foreign customers, designed as an incentive to keep new tech and intellectual property here in the United States rather than housed in low-tax jurisdictions overseas.

The FDII deduction lets FDII income be taxed at a 13 percent effective rate, rather than the statutory 21 percent rate. So essentially, the push to raise taxes by amortizing R&D is driving companies to use the FDII deduction — and its lower effective rate — more aggressively.

Which firms benefited from this convoluted tax incentive? Morgan Stanley compiled the following chart.

The biggest winners were technology companies; and indeed, almost all companies in the chart above are tech companies or others that run heavy on R&D and intellectual property. The only exceptions are Nike ($NKE) and McDonalds ($MCD).

At specific companies, these pressures lead to disclosures such as this filed by Moderna ($MDNA):

Effective January 1,2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes. Unless modified or repealed, and based on current assumptions, the mandatory capitalization increases our cash tax liabilities, but also increases our FDII deduction resulting in a decrease to our effective tax rate.

You can conduct your own company-specific inquiries using our Interactive Disclosure tool, searching tax disclosures for key words such as “FDII.” Or we have plenty of other ways to research corporate tax data, neatly summarized in our Guide to Analyzing Tax Disclosures.

Another day, another research note on the Inflation Reduction Act and its possible implications for corporate taxes. This time the research note comes from Morgan Stanley — and yes, that’s Calcbench data the bank uses to perform its analysis.

You can download your own copy of the research note from Morgan Stanley directly. The short version is that analysts at the bank modeled the effects of the Inflation Reduction Act’s new 15 percent “book tax” for companies with net income of $1 billion or more. That tax provision is likely to hit 70 to 100 companies every year, and trim their free cash flow by an average of 7 percent.

As we explored in a previous post on the Calcbench blog, the 15 percent book tax (called that because the tax would be based on GAAP net income reported to shareholders in the annual 10-K) would apply to the domestic profits of corporations that report $1 billion or more in annual net income. According to our Multi-Company page, 303 companies within the S&P 500 fit that profile in 2021. Apple ($AAPL) led the way with $94.7 billion, down to Campbell Soup ($CPB), which squeaked onto the list with $1.002 billion.

The Morgan Stanley analysts did a much more nuanced analysis than that, of course. They identified the sectors most likely to be hit by the minimum tax (diversified financials, communications services, consumer discretionary, technology, healthcare), and gamed out the implications of new tax credits and carryforwards that the law also allows.

Perhaps most interesting for our dear readers here is that Morgan Stanley includes a detailed explanation of its methodology — meaning, you can recreate that model yourself (or modify it as necessary to fit your specific interests) and then populate your model with Calcbench data just like Morgan Stanley did. You can do so via our Excel Add-In or even our dedicated API if you want to get super-fancy.

The bottom line is that we have the financial data, and all the tools and channels necessary to get that data from our archives into your models, computer screens, and brains. Then you can research these issues as long as you’d like!

As anyone who watches Washington politics already knows, on Sunday afternoon the Senate passed its massive economic reform bill known as the Inflation Reduction Act. Two elements in that legislation caught Calcbench’s eye: a new minimum corporate tax of 15 percent; and 1 percent excise tax on share repurchase programs.

Can Calcbench users get an early start on considering the implications for Corporate America? You bet!

Let’s start with share repurchase programs. Calcbench has published numerous reports over the years about how much money corporations have spent buying back shares. Most recently, we did an analysis of all public companies (regardless of size), and found that they collectively spent $6.52 trillion from 2012 through 2021 on share buybacks.

Tech companies such as Apple ($AAPL), Google ($GOOG), Microsoft ($MSFT), and Oracle ($ORCL) led the way; but share repurchase programs reached a large swath of corporations great and small.

In 2021, the S&P 500 spent a collective $841.6 billion on share buybacks. Leading the way were Apple ($85.5 billion), Microsoft ($60.7 billion), Google ($50.3 billion), and Facebook ($44.8 billion).

In theory, that 1 percent excise tax would imply an additional tax cost of, well, 1 percent of whatever amount a company is spending on share repurchases. That would have been $8.4 billion for the S&P 500 based on 2021 numbers. (Before anyone gets carried away, though, let’s remember that the House still has to pass this bill too, and the president sign it into law.)

We don’t yet know what 2022 repurchase spending might be, especially since rising interest rates makes borrowing to repurchase shares a less attractive idea than it was in the 2010s. Still, Calcbench has extensive data on share repurchase programs if you want to start modeling some scenarios.

Minimum Tax Plans

The Inflation Reduction Act also contains a corporate minimum tax of 15 percent on the domestic profits of large companies. This is also known as the minimum book tax, since the 15 percent tax would be based on GAAP net income reported to shareholders in the annual 10-K. The tax would apply to companies reporting $1 billion or more in annual net income.

We jumped onto our Multi-Company page and found 303 companies within the S&P 500 that reported $1 billion or more in net income for 2021. Apple led the way with $94.7 billion, down to Campbell Soup ($CPB), which squeaked onto the list with $1.002 billion.

Total net income among this group was $1.752 trillion. A 15 percent minimum tax against that amount would be $262.9 billion.

As the Senate bill stands now, the 15 percent book tax would not automatically be the amount a company has to pay. Companies would also need to calculate their potential income tax using the traditional method of applying the current corporate tax rate (21 percent) plus various deductions and credits. Then a company would need to pay whichever amount is greater— either that traditionally calculated number, or the 15 percent minimum tax.

Again, you can skim the Calcbench research archives to see our prior reports on corporate tax payments. Other analysts have also published their own tax research based on our data, and we have some prior posts recapping their findings as well.

You can always do whatever research catches your fancy as well, using the standardized metrics on our Multi-Company page to search for net income, tax payments, or other related terms.

Calcbench loves to see how financial analysts put data to work, so we were delighted earlier this week when Morgan Stanley published a research note gaming out various ways that tax proposals floated by the Biden Administration might affect Corporate America.

If you haven’t heard yet, one idea is to enact a 15 percent minimum tax on the profits that certain large firms report in their financial statements — a so-called “book tax,” since the profits that a firm reports in the financial statements are not, for various accounting reasons, the same profit number that the firm reports on its tax return.

Specifically, the Biden Administration proposal is to impose this book tax on firms that report more than $2 billion in profit. A firm fitting that profile would need to make an additional tax payment, beyond its normal tax liability for that year, so that the total amount equals 15 percent of global profits reported on the financial statements.

So the research gurus at Morgan Stanley’s Global Valuation, Accounting & Tax team dove into our data to determine: How many businesses might actually get hit by a tax like this? And how much could those higher tax payments cut into net income and free cash flow?

The full report is titled, “Next Chapter of Biden's Book Tax: Who's Potentially Exposed.” We won’t steal all the glory from the MS research note, but here are some key findings:

• Roughly 200 companies report $2 billion+ in net income, and would be in the book tax zone
• But only about 45 companies would be candidates to pay the tax, facing an average payment of about $350 million
• Companies exposed to the tax could see hits of 10 percent to net income, and 13 percent to free cash flow
• The tax would generate about $10 billion to $20 billion annually

Now, to be clear, this book tax is not going into force any time soon. The Treasury Department has proposed the idea, but it takes an act of Congress to change corporate tax rates. These days Congress can barely agree that the sun rises in the east, so lord knows when a tax change will see the light of day.

Still, there’s plenty of data available — right here in our archives, naturally! — to model the possible consequences of such a book tax. For example, Morgan Stanley also calculated which industries would bear the biggest burden. See Figure 1, below.

If you’d like to build your own model with Calcbench data, we designed a simple template to calculate how the minimum book tax might affect individual firms. Calcbench subscribers can download our template and model to your heart’s content!

You may have seen news last week of yet another research report declaring that a significant swath of Corporate America paid no federal income taxes last year. 

This time around the report came from the Institute on Taxation and Economic Policy, which found that 55 large businesses paid zero to Uncle Sam in 2020 even while they reported a total of $40.5 billion in pretax income. ITEP’s report hit the interwebs on April 2, and was promptly picked up by the New York Times and other big media outlets.

Our only question: Everyone knows this data is readily available, right? Calcbench has been providing data on corporate federal tax payments — or the lack thereof.

That is, publicly traded firms need to disclose their federal tax expense or benefit in their quarterly reports. Those numbers are tagged as XBRL data, which means Calcbench can find them with just a few keystrokes.

For example, we pulled up our Multi-Company database page, and entered “CurrentFederalTaxExpenseBenefit” in the search field that page has for XBRL tags. Within moments, we found what all firms the S&P 500 paid in federal taxes for 2020. Those numbers are the same data ITEP used to compile its report. See Figure 1, below.

The third column denotes federal taxes paid. Notice that those numbers are all in red. ITEP is correct that scads of large firms paid no federal taxes in 2020 even though they generated gobs of pretax income.

For example, DTE Energy ($DTE) reported a negative federal tax expense of $247 million — meaning, the company actually received that amount back from the U.S. Treasury, rather than paid anything into it. That’s the number ITEP included for DTE in its report, and it’s also what we found with a moment’s search on Calcbench.

ITEP’s report flags 55 firms that received $3.5 billion back from the U.S. government in 2020 while also reporting $40.5 billion in pretax income. Not all of those firms are in the S&P 500, but they are all publicly traded, so they’re in the Calcbench data archives somewhere.

On our first (and rather naive) try, we found a total of 126 firms that had assets of more than $100 million, and that had reported domestic profits, and that had negative federal tax expenses in their fiscal 2020 year end filings.  

Meanwhile, we can say that among the 451 S&P 500 firms that have filed their 2020 reports so far, those firms paid a total of $95.6 billion in federal taxes, against $1.076 trillion in operating income.

Of course, much more goes into corporate tax analysis than a firm’s federal tax payment. Many firms that didn’t pay federal taxes did pay state, local, or international taxes. And tax management, where a firm claims various deductions, credits, and other maneuvers to lower its cash payment, is a time-honored tradition among corporate giants.

You can find details about a firm’s tax payments via our Interactive Disclosure page. Call up the firm in question, select its tax disclosure from the drop-down menu on the left, and start digging.

We want to follow up today on our previous post about critical audit matters (CAMs), to take a closer look at one particular set of CAMs: uncertain tax items. 

You might have noticed that tax-related items accounted for a significant portion of the CAMs we’ve seen so far in 2020 annual reports. We found 13 CAMs related to uncertain tax positions, plus another three related to unrecognized tax benefits. Taken together, that’s nearly 20 percent of the 85 CAMs we identified in total.

Well, exactly what are those tax positions? What’s the nature of the uncertainty, and what makes these disclosures qualify as critical audit matters?

Let’s first remember what a critical audit matter is. As dictated by accounting regulators, all CAMs have two parts:

• They relate to items or disclosures that are material to the financial statements; and
• They involve “especially challenging, subjective, or complex auditor judgment.”

In that case, you can see how various corporate tax issues might qualify as critical audit matters. Plenty of tax disclosures can be quite large and therefore material to the financial statements. And given the complexity of modern tax law in the United States and around the world, uncertain tax disclosures will almost always meet the second criteria, too: especially challenging, subjective judgment on the part of the auditor.

One example of this is Pepsico ($PEP), which reported $1.6 billion in reserves the company is salting away for unrecognized future tax benefits. That is, Pepsico might get that $1.6 billion sometime in the future, if certain disputes with tax regulators go the company’s way — but if not, Pepsico will have the cash to cover taxes due.

Pepsico’s auditor, KPMG, still flagged the issue as a CAM. In its auditor’s report (where audit firms disclose CAMs), KPMG had this to say:

The Company establishes reserves if it believes that certain positions taken in its tax returns are subject to challenge and the Company likely will not succeed, even though the Company believes the tax return position is supportable under the tax law. The Company adjusts these reserves, as well as the related interest, in light of new information, such as the progress of a tax examination, new tax law, relevant court rulings or tax authority settlements.

We identified the evaluation of the Company’s unrecognized tax benefits as a critical audit matter because the application of tax law and interpretation of a tax authority’s settlement history is complex and involves subjective judgment. Such judgments impact both the timing and amount of the reserves that are recognized, including judgments about re-measuring liabilities for positions taken in prior years’ tax returns in light of new information.

What does Pepsico itself have to say about unrecognized tax benefits? You can find that using the Interactive Disclosures tool and pulling up the firm’s tax disclosures. For example, in the 10-K Pepsico filed on Feb. 11, the company mentioned a $364 million gain in 2018 from a tax dispute with Russia that was resolved in Pepsico’s favor. The company also disclosed this table, below, showing how its tax reserves changed over the course of the year.

If you’re feeling ambitious, you can also use our Multi-Company Page and search for “unrecognized tax benefits” in the Standardized Metrics search field on the left side of the page. Then you could, say, identify all firms in the S&P 500 where unrecognized tax benefits were a material amount of money; and next search the auditor reports for those firms to see if any have unrecognized tax benefits as a CAM.

Uncertain Tax Positions

A close cousin of unrecognized tax benefits are uncertain tax positions. They’re conceptually similar — firms reporting a tax item as a potential payment or benefit — but uncertain tax positions encompass a wider range of tax items, including potential losses that might not materialize.

Amazon.com ($AMZN) is a good example of what we mean here. The company reported this table of tax contingencies in its annual report from Feb. 3:

Even for Amazon, $2.8 billion in uncertain tax positions is a material amount of money. And sure enough, we see that the company’s auditor, Ernst & Young, flagged this as a CAM. 

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions and, as discussed in Note 9 of the consolidated financial statements, during the ordinary course of business, there are many tax positions for which the ultimate tax determination is uncertain. As a result, significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company uses significant judgment in (1) determining whether a tax position’s technical merits are more likely than not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition. As of December 31, 2020, the Company accrued liabilities of $2.8 billion for various tax contingencies.

Auditing the measurement of the Company’s tax contingencies was challenging because the evaluation of whether a tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings.

Companies can be a bit more liberal in how they tag uncertain tax positions, so you might need to search the XBRL tag field on the Multi-Company page for this disclosure. Try “LiabilityForUncertainTaxPositionsCurrent” or “LiabilityForUncertainTaxPositionsNonCurrent,” and that should get you the results you’re looking for.

Another consequence of the Covid-19 crisis: cuts to executive compensation, which are starting to appear fast and furious in corporate disclosure filings.

You may have seen stories of those pay cuts in the headlines. Well, they also qualify as events to be reported in Form 8-K filings, and you can see them as they arrive in the Calcbench Recent Filings page.

We pulled together just a few from the last two weeks:

You can also search for compensation cuts by doing a “proximity search” on our Interactive Disclosures page. In that case, you want to enter relevant search terms in quotes in the text search box on the right side of the page, followed by a tilde and a number.

For example, if you wanted to search filings that had the words “salary” and “reduction” within 10 words of each other, you’d type "salary reduction"~10. Or you could try "compensation reduction"~10 or "pay reduction"~10 or so forth. See Figure 1, below.

While we’re here, let us also shamelessly plug our Executive Compensation Report from last month, looking at trends in executive compensation across all firms in the 2010s. It explores overall growth in compensation, changes in types of compensation, and how trends in executive pay compare to trends in corporate financial performance.

That study looked at 2010-18. We’ll have an update including 2019 numbers later this spring.

No branch of financial data is too obscure for Calcbench to go full nerd, and today we demonstrate that commitment by returning to the world of tax data for a look at one of the newest tax disclosures out there.

Today we look at Global Intangible Low Tax Income, otherwise known as the GILTI tax.

GILTI was created by the U.S. tax reform law enacted at the end of 2017. It’s supposed to be a tax on certain types of foreign earnings, to dissuade U.S. companies from relocating their corporate headquarters (or other valuable intellectual property) to low-tax jurisdictions overseas.

Basically GILTI sets a minimum tax of 10.5 to 13.125 percent on the average foreign tax rate U.S. companies pay around the world. Spoiler: in the two years since its creation, GILTI hasn’t quite had that “keep your valuable asses here” effect lawmakers desired — but then, unintended consequences are nothing new to the U.S. tax code.

Calcbench isn’t interested in the perverse incentives stuff anyway. We just wanted to know how one can find GILTI tax data, so you can do whatever research is on your mind.

Here’s what we did.

First, GILTI turns up in a company’s tax reconciliation. That’s the breakdown every company provides explaining the difference between what it’s supposed to pay according to statutory corporate tax rates, and what it actually pays after various deductions and credits. So if you want to find GILTI payments, start there.

We used our Interactive Disclosure database, our Segments and Breakouts page, and our Raw XBRL Query tool to search those disclosures for “GILTI.” We found 27 companies that reported a reconciliation item related to GILTI. Table 1, below, shows the firms that reported an actual GILTI amount.

Here comes the tricky part. Firms can reconcile their tax disclosures in several ways. Some reconcile by dollar amount; others reconcile by tax rate. A few even reconcile both ways, which is nice.

But this does mean if you want a holistic look at all GILTI disclosures, you need to do some calculations. For example, Merck & Co. ($MRK) reported a GILTI tax payment of $336 million in 2019. Laboratory Corp. of America ($LH), meanwhile, reported that GILTI payments were 1.1 percent of total tax payments — so if you wanted to calculate the dollar amount, you’d need to look at what Lab Corp paid in taxes and do some math.

Financial analysts have another issue: U.S. Generally Accepted Accounting Principles don’t have a standard tag to apply to GILTI payments. That is, all firms report revenue using the same XBRL tag — and ditto for operating income, inventory, future lease payments, and so forth. You can easily find all companies’ disclosure of those items by searching for that tag.

GILTI has no such standard tag. Instead, each company still uses its own extension tag, and that can vary from one firm to the next. We found “GILTI tax,” “GILTI expense,” “GILTI net of foreign tax credits,” and lots of other examples.

In the fullness of time, GAAP might define a GILTI tag that applies to all companies. Today, analysts must still search disclosures and XBRL tags for “GILTI” or closely related terms.

That’s OK. Calcbench still has the data, and the database functionality to find those numbers — quickly and accurately.

Students of corporate tax rates might have seen a front-page article in the Wall Street Journal today exploring how the tax cuts of 2017 have changed effective tax rates for large public filers.

We certainly noticed the article — because it’s based on Calcbench data!

We recommend reading the full article, but the heart of the tale is told in these lines:

[Q1 2019] marked the third straight quarter [with median tax rates] below 20 percent, and is consistent with the goals and structure of the tax overhaul, which lowered the federal corporate rate to 21 percent from 35 percent. The law’s authors wanted to help U.S. multinationals compete in foreign markets and aid domestic companies with high tax burdens, while reducing the value of tax breaks and making it harder to achieve single-digit tax rates.

Much of the decline is coming because fewer firms are paying rates at the highest end, according to the Journal analysis.

Throughout 2018 and 2019, Calcbench has looked at specific examples of that trend. We found some firms with much higher effective rates during transitional periods in 2018; we found other firms with effective rates that plummeted; and still more firms whose effective rates have kinda sorta stayed flat. You can search our blog for “tax reform” and find a long list of posts on the subject.

One fine point: The WSJ article did include a line, “Companies typically don’t make public what they pay the Internal Revenue Service each tax year.”

Calcbench actually does track “Income Taxes Paid” from the Statement of Cash Flows. That is the amount of money a filer hands over to the IRS in a given fiscal year. It’s not the same as Provision for Income Taxes on the income statement, since that provision can include all sorts of deferred items or other adjustments.

But Calcbench has you covered for all things tax, no matter how specific you want to be. We got the data.

The consequences of tax reform in 2017 continue to be seen today, 18 months after Congress cut the corporate tax rate from 35 to 21 percent. Case in point: Casey’s General Stores ($CASY), which filed its latest annual report on June 28.

Casey reported broadly pleasing numbers: revenue growth up by 11.5 percent, cost of goods sold up by 11.7 percent, other operating expenses up by only 8.4 percent. Income before taxes was reported at $263.4 million, a 22.8 percent increase from 2018.

Then we get to the tax line item.

As you can see from Figure 1, below, Casey’s tax payments have bounced up and down over the last three years, and that has had an enormous effect on net income.

Taxes yo-yo’ed from a payment of $92.2 million in 2017; to a benefit of $103.5 million in 2018, the first full year of corporate tax reform; back to another payment of $59.5 million in 2019.

So yes, Casey’s is paying less in taxes from here forward thanks to tax reform — but all of its growth in net income came from that corporate tax cut going into effect in 2018.

Moreover, once we read the details via our Interactive Disclosure viewer, we find that most of that tax benefit ($98.2 million of the $103.5 million total) comes from a one-time revaluation of Casey’s deferred tax assets and liabilities. It’s not as if the firm received a $103.5 million rebate check in the mail, which then went to opening more general stories.

Fundamentally, Casey’s revenue is growing, but quite as fast as cost of goods sold, operating expenses, depreciation and amortization, or interest. Hence pretax income in 2019 ($263.4 million) is down 24.4 percent from where it was in 2016 ($348.7 million).

Only a generous accounting maneuver from tax reform let Casey’s hit last year’s net income out of the park. That maneuver is gone, and now Casey’s is struggling at bat.

Companies report tax payments, and companies make tax payments. Many times, those two things are not the same.

As part of our ongoing look at how the corporate tax cut of 2017 has been affecting net income, we recently tried to quantify just how much those two things are not the same. Studying that gap across several years helps to understand how much corporate tax numbers were distorted in 2017 itself (more on that presently), and whether corporate tax payments today are dramatically different from what companies paid before 2017.

What We Did

We compared the difference in provision for income taxes (what a company plans to pay in taxes for a year) and income taxes paid (what the company actually did pay) for 400 firms in the S&P 500, 2014 through 2018. Then we expressed that difference as a ratio of actual taxes paid to the provision for income taxes.

For four of the five years we studied, the median firm in our population actually paid anywhere from 75 to 85 percent of what it had made provisions to pay. See Figure 1, below.

The exceptional year is 2017, where the ratio spiked to 98.4 percent. That is, almost all the taxes our median company prepared to pay, it actually did pay.

Why? Because when Congress enacted the corporate tax cut in 2017, companies suddenly had to pay large one-time “deemed repatriation taxes” on unremitted foreign earnings; or had to revalue deferred tax assets and liabilities; or do both. And those one-time tax moves had huge effect on companies’ tax payments and tax rates.

Calcbench wrote about this several times in the first half of 2018, as companies were reporting some sky-high effective tax rates in their 2017 annual reports. Our chart above is one aggregate glimpse of that effect.

Table 1, below, shows the tax payments-vs.-provisions for our 400 firms collectively. You’ll notice the percentage ratio here is different from what we have in our chart above. That’s because of outliers at both the top (they paid much more than their provisions) and the bottom (they paid much less), tugging at the average numbers.

That brings us to our final point for today: that individual companies have seen some large differences between tax provisions and taxes paid; and seen large changes in those numbers from one year to the next.

For example, in 2017 Gilead Sciences ($GILD) had provision for income taxes at $8.88 billion, but paid only $3.34 billion — a ratio of 37.6 percent. In 2018, however, Gilead had a tax provision of $2.34 billion but paid $3.2 billion — a ratio of 136.7 percent (because Gilead paid more than it had in its provisions).

Why Are We Doing This?

We do this to amplify a point we made in our previous post about IBM ($IBM) — that drawing conclusions about how the corporate tax cut affects a firm is a complicated, company-specific exercise. You really need to delve into a company’s specific tax disclosures to get a sense of what is going on.

Yes, some companies are experiencing a “tax cut sugar high,” where all their growth in net income for 2018 can be attributed to paying less in taxes, rather than from better operating income. But some also paid so much in one-time taxes in 2017, that they were destined to pay less in 2018, and their tax payments now might be only marginally lower than what they paid in 2016 or prior.

So is that a sugar high now, or was it sour lemons last year? You can use Calcbench to find the answer for whatever companies you follow, but it’s a question that needs thoughtful research to find the right answer.

Avid readers of the Calcbench blog know that we’ve been watching corporate financial data closely here to understand a complicated, subtle question: How much has the sweeping corporate tax cut enacted at the end of 2017 been responsible for growth in net income?

Economists have pondered that question too, wondering whether the tax cut was a sugar high that goosed corporate earnings in 2018 — with the implication that after the sugar high wears off (say, in 2019), growth in net income might stall.

As companies file their annual reports for 2018, we can now start to answer that question. Somewhat to our chagrin, the answer is more complicated than we expected.

In theory, you would see the sugar high in a company where pretax earnings from operations remained flat or fell, but because the company paid so much less in taxes, net income would rise anyway. That is, the company’s net income didn’t increase because sales were growing or costs were kept in check; net income only grew because Uncle Sam decided to take less in taxes.

So if Washington had not enacted that tax cut in 2017, and the company paid 2018 taxes at the same effective rate as it did in 2017 — then net income might have held steady or fallen, but it wouldn’t have grown. That would be the sugar high.

Do we see that phenomenon at play when comparing 2018 to 2017 numbers? Yes, but with an asterisk. And that asterisk says a lot about how financial analysts need to look at a company’s numbers carefully if you want to get a correct read on its situation.

Example: IBM

A good example of this situation is IBM ($IBM). We hopped over to our Data Query page and pulled up Big Blue’s earnings before taxes, income tax provision, and net income for both 2017 and 2018. The results were as follows in Figure 1, below.

As we can see, IBM’s pretax earnings actually drifted downward last year, but its income tax provision plummeted by more than $3 billion — an amount larger than $2.98 billion increase in net income.

Therefore, all of IBM’s growth in net income can be ascribed to the company paying less in taxes. And sure enough, when you look at IBM’s numbers on the Company-in-Detail page, they’re pretty mopey. Revenue, gross profit, and expenses for 2018 are all within 1 percent of 2017 numbers. That’s what stagnant growth looks like.

The tricky part, however, is in IBM’s effective tax rate. Yes, technically speaking, if IBM paid a 49.5 percent tax rate again in 2018 — that would have meant an income tax provision of $5.6 billion, and net income essentially unchanged at $5.73 billion.

Except, why was IBM’s effective tax rate that high in the first place? Because its effective tax rate in 2016 was only 4 percent (thank you again, Data Query page), and its effective tax rate in 2018 is 23.1 percent. Clearly IBM’s effective tax rate fluctuates quite a bit.

So you can’t assume that without the corporate tax cuts arrived in 2018, IBM would have faced the same higher effective tax rate as 2017, and therefore stalled on net income growth. The 2017 effective tax rate may have been an artificially high number itself.

How would you unravel that mystery? By studying IBM’s numbers on our Company-in-Detail page, and then tracing the tax provision line-item back to our Interactive Disclosure page, which lets you see the narrative explanation for that 49.49 percent.

Sure enough, when we trace the line-item back to the source, we find that IBM recorded a one-time charge of $5.5 billion in fourth-quarter 2017 — the famed “deemed repatriated earnings” tax that so many firms paid that quarter, as part of corporate tax reform. That $5.5 billion charge accounted for 48 points in that 49.49 percent.

More or Less Sugar?

IBM shows us the importance of tax management to a company’s bottom line — not really one-time sugar high this year, as much as an ongoing effort to minimize tax payments every year, which can leave net income growth divorced from operational reality.

We’ll keep looking at the sugar high phenomenon here, and try to draw broader conclusions about how real it may be.

Calcbench subscribers, meanwhile, can zigzag from our Data Query page, to the Company-in-Detail page, to the Interactive Disclosure page — all to connect the numbers companies report to the narrative they offer.

Then you can see how much those things do, or do not, align over time.

2018 was the first full year of life with dramatically lower corporate tax rates, and now we’re getting early data on exactly how much less companies expect to pay.

Surprising nobody — they are paying a lot less.

We examined 214 firms in the S&P 500 that have already filed their annual reports for 2018. First we pulled their reported earnings before taxes and provision for income taxes; and then compared those numbers to the same line items the firms reported in the prior three years.

Taken altogether, those firms saw their effective tax rates fall nearly in half, from 27.3 percent in 2017 to 14.2 percent in 2018. Their revenues rose briskly in 2018, while provisions for income taxes tumbled. See Figure 1, below.

We also have a year-by-year breakdown, for those who want to delve into the data. See Table 1, below.

For all you alternative history buffs: these firms had an average effective tax rate of 26.8 percent in 2015-2017, before Congress enacted its corporate tax cut at the end of 2017. If Congress had never enacted that tax cut, and we applied that same 26.8 percent rate to 2018’s pretax earnings of $832.9 billion — that would be an additional $104.4 billion in corporate tax payments.

Then again, if Corporate America were paying higher taxes, its collective net income would be lower, and stock prices would likely be lower too.

That’s how the data looks so far. More to come later this spring.

Another annual report, another glimpse into how much last year’s corporate tax cut is inflating net profits. Today’s example is J.M. Smucker & Co.

Smucker’s filed its latest annual report this week, and if you look at the top lines of the income statement the company seems like it’s in a bit of a jam. (Yep, we made that joke.) Annual revenue fell 0.48 percent compared to 2017, gross profit was essentially flat, and operating income rose a measly 0.45 percent.

Meanwhile, interest expenses rose and other income fell — all of it adding up to Smucker’s income before taxes falling 1.98 percent.

All that might lead you to conclude that Smucker’s is spread pretty thin. (Yep, we made that joke too.) But then we get to Smucker’s income tax disclosure, and suddenly all starts to turn around.

First, as we’ve seen elsewhere, Smucker’s had the chance to revalue its deferred tax assets and liabilities. That added more than $790 million back to the company’s coffers. Then the company had to pay an additional $26.1 million in the one-time deemed-repatriation tax. The net change: a: $765.8 million benefit.

Add that benefit into all the other taxes and deductions Smuckers is claiming, and the company ends up with a net refund of $477.6 million. Which means its net income after taxes actually increases to $1.34 billion. See Figure 1, below.

Presto. Smuckers reports net income up 126 percent compared to 2017, even though gross profit and operating profit stayed flat, and pre-tax income actually declined by nearly 2 percent.

That’s one way to get out of a sticky situation.

Deere & Co., maker of farm equipment with that little yellow and green deer logo, reported its latest quarterly results last Friday — and gave us yet another example of the see-saw numbers financial analysts will see this year as Corporate America reports the implications of tax reform.

The numbers were for Deere’s fiscal second quarter, ending on April 29. The earnings release was filled with the usual flowery language: $10.7 billion in revenue, up 29 percent from the prior-year period; net income of $1.21 billion, up 50 percent from one year ago. What’s not to love, right?

Then we noticed this disclosure: “Affecting results for the second quarter and first six months of 2018 were provisional adjustments to the provision for income taxes due to the enactment of U.S. tax reform.”

Ah. Let’s dig into that.

Deere reported second quarter results including net income of $1.21 billion. But net income for the first half of fiscal 2018 — which includes those rosy results from Q2 — is only $673 million. (See Fig. 1, below.) Which therefore means Deere reported a loss in its fiscal first quarter.

So searched Deere’s report for its fiscal first quarter, and sure enough, we found this:

Primarily as a result of those provisions of tax reform, the Company recorded a net provisional income tax expense of $965 million in the first quarter of 2018… The discrete tax expense related to the remeasurement of the Company’s net deferred tax assets to the new corporate income tax rate was $715 million and the deemed earnings repatriation tax was $262 million. The discrete tax expense was partially offset by a net benefit of $12 million, primarily related to the lower income tax rate on the first quarter of 2018 income.

And if you view Deere’s results on our Company-in-Detail page (be sure the setting is for quarterly results; not annual results which are the default), you can see that Deere increased its provision for income taxes from $129 million in first quarter 2017 to $1.06 billion in first-quarter 2018.

What’s more, Deere estimates that its provision for income taxes in the second quarter will be only $177 million — less than half the $371.9 million it paid in Q2 2017. (See Fig. 2, below; relevant line flagged in red.)

In other words, like many companies we’ve already noted previously on this blog, Deere had to swallow a large one-time adjustment in its first quarter 2018 thanks to tax reform, largely due to the revaluation of tax assets and paying a one-time repatriation tax. Now we’re seeing what the next numbers look like, after that one quarter’s worth of pain — and those numbers look pretty good.

Whether they’re good because of fundamentally strong growth, or good because the income statement is high on tax cuts, is another question. But Calcbench can always help you find the data to answer it.

Loyal readers of the Calcbench blog know that we follow corporate tax disclosures closely — you know, with tax reform being the biggest financial reporting issue of 2018 and all. We have a few research projects in the works related to tax disclosures, and you can expect much more coverage in months to come.

Meanwhile, for those just joining the Calcbench fan base, here’s a recap of our tax reform posts since the start of 2018.

Jan. 23: Tax Reform Disclosures: Five Easy Examples. Tax reform was signed into law on Dec. 22, 2017, and the disclosures started almost immediately. This post has examples from CHS Inc., Amcon Distributing, Nike, and others.

Feb. 8: Wha? One-Time Taxes and Effective Tax Rates. We soon noticed that thanks to the one-time deemed repatriation tax, companies were reporting effective rates higher than the statutory rate of 35 percent.

Feb. 15: Tax Reform Disclosures: Getting Started. As the disclosures started to pour in, we cooked up this primer about how to use Calcbench to find said disclosures, even if companies are tagging them in hard-to-find ways..

Feb. 20: Deferred Tax Assets and Tax Reform. Much of the change in corporate income, at least in this first year, is due to companies reassessing the value of deferred tax assets and liabilities. That’s such a complex subject we cooked up a Q&A on just that alone.

March 14: A Qwest for Insight on Effective Tax Rates. Thank you to Qwest for its 2017 filing, which gives us a fascinating example of how tax reform can goose a company’s 2017 operating income even as revenues decline.

April 11: Tax Reform Totals Among Big Filers. Our first actual study of 2017 tax reform disclosures! We studied the reconciliations of 95 large companies, which collectively expect to pay $40.3 billion less in taxes even as the average payment goes up.

April 26: Kraft-Heinz’s Crazy Tax Rate. Another thank you to Kraft-Heinz, first for its superior amount of detailed disclosure (more than 1,600 words); and also for showing us how a filer can report an effective tax rate of almost 100 negative percent.

May 4: Tax Reform: Who’s Up, Who’s Down, in Relative Terms. Another study, this time reviewing the disclosures of more than 120 firms that reconciled in percentage times— showing us that Kraft and its -98.7 percent effective rate ain’t even close to the craziest one out there.

If you have suggestions for what else we should examine, of course drop us a line at info@calcbench.com. Otherwise, stay tuned here for more analysis from now until Dec. 31!

Last month Calcbench did a quick analysis of which large companies were reporting large swings in tax expense (either increases or decreases) as a result of tax reform, in absolute dollar terms.

Today we’re taking another look at big swings in tax expense in percentage terms — and through that lens, the numbers can be huge.

This time we looked at the 2017 filings of more than 120 large companies that reported some effect of tax reform. As we’ve noted previously, all companies must reconcile the effective tax rate they are really paying after adjustments, to the statutory rate. Some companies reconcile in dollar terms, others in percentages. For this exercise, we examined the filings of those 120 companies, which all reconciled by percentage, and searched for adjustments labeled as related to tax reform.

We ranked the 1o companies with the largest upward adjustments below.

The exact reasons for these adjustments may vary from company to company. To compile the list, we simply searched for adjustments tagged “Tax Act Impact,” “Impact of TCJA, percent,” or similar language like that. Within that broad heading, however, any number of reasons could drive the specific adjustments.

For example, AIG booked a $6.7 billion increase in tax expense primarily due to revaluations of its deferred tax assets and liabilities. That increase is larger than all of AIG’s $1.46 billion earnings before taxes — hence the percentage adjustment of 453 percent. (That’s simply the lion’s share of AIG’s effective rate. Include all the other usual adjustments, and its effective rate is actually 513.4 percent! We didn’t track all those items in this analysis, but you can find them on our Interactive Disclosure page.)

Other firms can report high percentage swings if, say, they pay a large amount in the one-time deemed repatriation of foreign earnings; and those earnings are a large portion of total earnings. We’ve seen other examples of the deemed repatriation leading to some whacky effective rates, too. But don’t worry, after this year, companies will resume making gobs of money and reporting eye-popping low tax rates.

As to the companies with the largest downward swings — that is, they are cutting their tax bill — they are…

Calcbench will continue to monitor interesting tax disclosures. Lord knows, we’ll see plenty of them this year.