Duke Energy Among 55 Companies That Paid No U.S. Taxes Last Year
A new analysis of corporate earnings finds that Duke Energy is among at least 55 large publicly traded U.S. companies that paid no federal income tax in 2020, a year in which it turned a more than $1 billion profit.
An analysis by the Institute on Taxation and Economic Policy, a progressive think tank, finds that Duke and other large companies used lower tax rates and tax incentives to eliminate their federal liability. In Duke's case, those measures turned what could have been a $176 million income tax bill into a tax credit.
When companies don't pay taxes, it leaves a gap in federal revenues, said the institute's Matthew Gardner, who co-authored the report with Steve Wamhoff.
"When those revenues aren't there because companies are avoiding tax, despite being profitable, that money has to come from somewhere else," Gardner said. "It could come from hiking taxes on everybody else. More probable in the current climate, is that it'll come from mortgaging our future (by) passing these costs on to the next generation, or maybe cutting spending-side initiatives."
In other words, borrowing. Or the government could make up for tax breaks with spending cuts.
Among the federal tax changes that have helped big companies is the 2017 reduction in the corporate tax rate, from 35% to 21%. Gardner and others have noted that many companies used the extra money to buy back their own shares, which typically helps increase stock prices.
The report's analysis says Duke had taxable U.S. profits in 2020 of $826 million. If it paid the straight 21% corporate income tax, it would have owed $176 million. But after tax breaks and other adjustments, including a $110 million credit for renewable energy investments, it wound up with a federal tax benefit — or refund — of $281 million.
By Gardner's calculation, that works out to a tax rate of negative-34%.
"Measuring these effective tax rates is pretty much the best barometer we have of whether our tax system is tilted in favor of big business, against small business, in favor of businesses, against individuals," Gardner said.
Gardner is quick to say that it doesn't appear Duke or other companies are doing anything illegal. They're just taking advantage of tax breaks as well as lower corporate tax rates. And that's how Duke Energy sees it.
"Duke Energy fully complies with all federal and state tax laws," said Duke spokeswoman Catherine Butler.
She says the company is benefiting from federal tax law changes, including one passed during the Trump administration that allows companies to write off the value of big investments more quickly — including solar and wind farms.
"They were actually developed to incentivize companies to invest in infrastructure," Butler said. "And so a lot of the infrastructure investments that Duke Energy has made over the last 10 years — including many, many renewables — are included in that."
Butler also noted that Duke pays other kinds of taxes at the state and local levels — more than $2 billion in 2020.
In many cases those federal taxes aren't wiped out, just deferred to future years. The company has about $9 billion of deferred federal taxes on its books.
That's true, said Gardner, but Duke has found ways to avoid federal taxes for a while. According to his analysis, Duke has paid no federal taxes in all but one of the past dozen years.
He questions whether the tax breaks are actually needed.
"There's every indication, I think, that what these companies are doing is simply claiming tax breaks for what they would have done anyway," he said.
Annual Meeting Thursday
The report comes as Duke shareholders prepare to gather virtually for their annual meeting Thursday at 12:30 p.m. Critics are turning up the volume on the company's environmental and financial practices.
The agenda includes a nonbinding vote on pay for Duke executives, including CEO Lynn Good, whose total compensation last year was $14.5 million. Shareholders also will elect the board of directors and vote on several shareholder proposals.
One, from a collection of New York State retirement funds, would require the chair of the board to be an independent director. Good currently holds both titles. Another would require the company to report its political contributions.
And there's a campaign by an activist shareholder groupurging shareholders to remove Good and lead independent director Michael Browning from the board. That group, Majority Action, argues they aren't doing enough to align Duke's plans with its goals of reducing carbon emissions to deal with global warming. The group also notes that the board doesn't include anyone with significant experience in large-scale renewable energy projects. And it points out that 12 of Duke's 13 board nominees are white.
Also this week, a watchdog group called the Duke Energy Accountability Coalition staged a "public hearing" with statements from environmental and economic justice activists. Cathy Buckley, an organizer with the NC Alliance To Protect Our People and the Places We Live, criticized Duke's long-range plans to add more gas-fired power plants in the coming years, even as it talks about reaching net-zero carbon emissions from its plants by 2050.
"Switching from coal to fossil gas is going backwards," Buckley said. "Fossil gas, given present leakage rates, is a worse climate pollutant than coal."
She said that's one of the reasons some are calling for Good and Browning to be removed from the board.