this year is pretty much equal to its entire worldwide income tax provision ,” said Matthew Gardner , senior fellow at the Institute on Taxation and Economic Policy , a left-leaning think tank . “ That says to me the main mechanism the company is using to get down to zero is likely depreciation related .”
Jacobs received a $ 37 million rebate at the federal level in 2020 , making its effective federal tax rate -17.4 %, according to Construction Dive ’ s analysis . The company didn ’ t respond to requests for comment for this series .
While in theory , deferred tax expenses are just that — a tax companies will pay in the future — that ’ s not always the case . A study by ITEP that analyzed corporations ’ tax payments over eight years found that deferrals in some cases can be extend into perpetuity .
“ For every year when there ’ s a deferral , there should be another year when deferrals from prior years are getting paid ,” Gardner said . “ But at the same time , there are other cases where it really does seem to be perennial .”
2 . Stock compensation
Of the 12 companies in Construction Dive ’ s analysis that paid less than the statutory corporate rate in 2020 , nearly all of them took advantage of writing off stock-based compensation to employees .
This usually involves companies granting executives stock options — the right to purchase shares at a fixed price in the future .
For example , a company could give an executive the right to purchase 1 million shares of stock at $ 10 each , for a period of 10 years . If the firm ’ s stock price is trading at $ 50 when the executive exercises that right , the company can write down the full value of those shares — $ 50 million — on its taxes .
While that ’ s a valid and legal way for companies to decrease their federal tax liability , Gardner said it can also be an area where corporations get credit on their taxes without actually incurring any real expenses .
Together , the companies analyzed reported $ 197 million in deferred tax expenses for 2020 . That included :
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