Utilities companies pay the lowest effective tax rate of any U.S. business sector, and in 2015 this tax-dodging added up to billions in lost revenue that could’ve been used to fight climate change, according to a just-released report by the Institute for Policy Studies.

The report, Utilities Pay Up, provides detailed information on the 40 publicly held utilities that were profitable in 2015. Key findings:

Utilities Are Even Better at Tax-Dodging than Multinationals

• The utilities industry pays the lowest effective federal tax rate of any business sector. Of the 40 U.S. publicly held utilities companies that were profitable in 2015, 23 paid no federal income taxes and 16 paid no state taxes.
• The most extreme example of utilities tax-dodging in 2015 was Southern Company, a fierce Clean Power Plan opponent, which reaped $210 million in federal and state tax refunds, despite $3.6 billion in pre-tax income.
• The industry’s low IRS bills are largely due to depreciation tax breaks. According to Citizens for Tax Justice, the 23 profitable utilities that paid no federal taxes in 2015 reported $11.5 billion in benefits from special tax rules that allow corporations to write off the cost of their investments faster than they wear out.

Revenue Potential from Fair Taxation of Utilities Companies

• If the 40 profitable utilities had paid the average rate retailers pay, they would’ve paid more than $11.7 billion in additional federal taxes. At the state level, if these firms had paid the statutory rate, they would’ve paid an estimated additional $2.3 billion— for a total of $14.1 billion in additional federal and state revenue.

Energy Efficiency Costs that Could be Covered by Fairly Taxing Utilities

• The $14.1 billion in extra revenue that could have been generated through fair taxation would be enough to create more than 88,000 energy efficiency jobs or weatherize homes for up to 3 million low-income families.

“Our corporate tax system is so broken that large, profitable utilities get away with not paying their fair share and instead channel money into fighting regulation to protect families and the planet from pollution. It’s time for utilities to pay up,” notes Janet Redman, IPS Climate Policy Director and a co-author of the report.

“Domestic U.S. utilities are even better at tax-dodging than the multinationals,” said Sarah Anderson, IPS Global Economy Director and another report co-author. “If we denied these firms costly and ineffective tax breaks, we could substantially increase investment in sustainable job creation and energy efficiency.”

The 21-page report and related graphics are available at https://ips-dc.org/utilities-pay-up/. For more information, contact: sarah@ips-dc.org or janet@ips-dc.org. 

The Institute for Policy Studies (IPS-DC.org) has conducted path-breaking research on corporate tax-dodging and financing for a clean energy transition for more than a decade.  Recent related reports have received significant media coverage, including in The Guardian, CBS, and Yahoo Finance. IPS also provides a constant stream of inequality analysis and solutions through the website Inequality.org.

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