How FedEx Cut Its Tax Bill to $0

[Zorro]

In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

Four months later, President Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed, as Mr. Smith said businesses like his would.

Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.

https://www.nytimes.com/2019/11/17/business/how-fedex-cut-its-tax-bill-to-0.html

[Wellstone ruled]

1. Interesting.

You could see this coming if you have any interest in the Freight Business. First off,Amazon had warned Fed Ex that they would be dumping their Contract with them and in-housing their Deliveries and maintaining their USPS as well as UPS contracts.

Fed Ex has not put profits back into their Business. Instead,they have used their profits to screw their Employees and Lobby for Right to Work for Less laws.

Noticed that Fed Ex has warned about their Fourth Quarter Earnings miss.

[SWBTATTReg]

2. This is wrong. That's why they passed alternate minimum tax laws, to catch this...why ...

should any of us pay a dime in taxes too, when a giant company like this gets away w/ paying ZERO in taxes? I still see the same trucks go down the streets, I don't see 1000s of shinny new trucks being manufactured for FedEx, thus entitling them to such significant tax breaks, I don't see them hiring 100s of thousands of new workers, I don't see anything that stands out in my mind or via reading at the library, etc. over the last several years, if anything, lay offs.

[Turbineguy]

3. I don't know why we get riled up about that.

Why blame a company or business for using the tax law to their advantage?

The problem lies with the people who wrote and legislated it. Lobbyists thrive because politicians are crooked or stupid.

Kudlow's view of the world is that companies and the rich should pay no tax, in fact the government should give them free money.

[Igel]

4. The thing about writing off 100% of depreciation in one year

is that it can't be written off the following year.

So you'd expect the biggest hit to be in the first year. With personal federal income taxes, that's how changes showed up back in the '50s through '70s--year 1 is a big windfall (or loss), but over the next 2-3 years things adjust and mostly return to normal. The business tax is a bit different, so I'm not sure income'll return to baseline levels, but I doubt this year is all that predictive of future results.

It'll be interesting to see what happens next year--the future tax liabilities will have been written down, depreciation expensed.

As for tax avoidance, that's a given. I do you, you do it. In fact, when a tax avoidance strategy was limited by the tax law revision, people accustomed to it really raised a ruckus.