> Income tax expense: $5.2 billion
> Earnings before taxes: $27.1 billion (6th most)
> Revenue: $77.8 billion (29th most)
> 1-yr. share price change: +36.2%
> Industry: Technology
Microsoft is one of America’s largest tech companies, with nearly $78 billion in revenue and $22 billion in income during its most recent fiscal year. Because of its size, it was also one of the nation’s largest corporate taxpayers. However, due in large part to foreign earnings taxed at a lower rate, the company’s effective tax rate was just over 19%, compared to the federal government’s statutory rate of 35%. In all, the company paid slightly less than $3.5 billion to U.S. federal, state and local authorities, and slightly more than $1.7 billion internationally. The company has been criticized for stashing cash in several tax havens. In 2012, a Senate report used Microsoft as a case study to demonstrate how U.S. companies avoid paying taxes.
> Income tax expense: $5.3 billion
> Earnings before taxes: $21.9 billion (9th most)
> Revenue: $104.5 billion (18th most)
> 1-yr. share price change: -2.4%
> Industry: Technology
IBM reported a total tax expense of nearly $5.3 billion in its most recent annual report, more or less in line with what it paid the year before. This amounted to 24% of its pre-tax income, less than the 35% federal corporate tax rate. IBM often pays less than the federally required rate because it pays some of its taxes internationally at a lower rate. In November, India demanded the tech company to pay the equivalent of $866 million U.S. for taxes it owed in fiscal 2009. The Armonk-based tech giant is currently challenging India’s claim.
8. Berkshire Hathaway
> Income tax expense: $6.9 billion
> Earnings before taxes: $22.2 billion (8th most)
> Revenue: $162.5 billion (6th most)
> 1-yr. share price change: +25.1%
> Industry: Conglomerate
Berkshire Hathaway Inc. (NYSE: BRK-A) is helmed by Warren Buffett, often considered one of the greatest investors of all time. Among the company’s rigorous goals are to grow net worth faster than the S&P 500 can rise in price. However, like every company, the conglomerate must pay its tax expenses, which totaled nearly $7 billion in 2012. Of this total, roughly $5.7 billion was payable to the U.S. government, although the company deferred a total of more than $2 billion in tax payments to a later year. Due to a number of tax credits, deductions and foreign taxes, Berkshire Hathaway’s tax expense was $700 million less than the $7.7 billion it would have owed if all its pre-tax income had been charged at the U.S. corporate tax rate of 35%.
7. J.P. Morgan
> Income tax expense: $7.6 billion
> Earnings before taxes: $28.9 billion (4th most)
> Revenue: $91.7 billion (22nd most)
> 1-yr. share price change: +28.7%
> Industry: Banking
J.P. Morgan Chase & Co. (NYSE: JPM) earned nearly $29 billion before taxes in its most recently reported fiscal year. In all, the company reported a tax expense of $7.6 billion. Recently, however, taxes have hardly been the biggest drain on the mega bank’s profits. Last year, J.P. Morgan agreed to pay $13 billion to the U.S. government. The fine was a result of the bank’s own actions — as well as those of its acquired banks, Bear Stearns and Washington Mutual — in selling poor quality mortgages to investors prior to the financial crisis. After tax deductions, the fines should cost the bank a total of $9 billion. It also set aside a whopping $23 billion to cover potential litigation costs.
> Income tax expense: $7.9 billion
> Earnings before taxes: $15.4 billion (11th most)
> Revenue: $60.3 billion (45th most)
> 1-yr. share price change: +19.1%
> Industry: Oil and gas
ConocoPhillips is one of three oil and gas companies that reported among the 10 highest tax expenses. The company, which focuses on exploration and production, had more than two-thirds of its proved reserves in Alaska, Canada and the lower 48 states as of 2012. It also has sources for potential future production around the world, especially in Asia. In fiscal 2012, the company reported more than $15 billion in pre-tax income and recorded nearly $8 billion in tax expenses. Yet very little — less than $1 billion — of this expense was due to taxes charged by U.S. federal, state or local governments. Most of the company’s taxes were paid to foreign governments that charged the company a higher rate than the U.S.’s 35% corporate tax rate. As a result, the oil and gas giant’s effective tax rate was 51.5% of its pre-tax income.