How Businesses Bank on Tax Loopholes

After dealing with filing your own taxes, you probably think companies have to go through a much bigger hassle and have to spend significantly more money. However, this isn’t always the case. Some of the company’s biggest businesses have used loopholes to decrease their required taxes and have even lowered it to 0. A few others have managed to actually make tens of thousands of dollars through tax exemptions and not have to pay a dime. Here’s a breakdown of four major scenarios that might surprise you.

International Income



Interest has surrounded General Electric’s supposed tax cutting maneuvers for years. The New York Times reported that G.E. paid very little in American taxes and claimed $3.2 billion in tax benefits, but a CNNMoney Fortune blog stated that there were inaccuracies in this data (stating that the company said it would not be receiving any tax refund).

Despite the debate and confusion, even that same CNN article says that G.E. “has been an aggressive tax-minimizer” for decades, so this behavior isn’t much of a secret. So how does the company accomplish this drastic feat? By concentrating its profits offshore, G.E. doesn’t qualify for typical U. S. profit taxes.

According to ABC News, Google has used similar tactics. In three years, Google saved $3 billion in income taxes. The profit made overseas never came back to the U.S. and thus didn’t get taxed here. Google funneled its overseas profits through Ireland, The Netherlands, and Bermuda to avoid even overseas taxes.

The Greatest Saver



Pepco Holdings had a company tax rate of about minus 118% in 2010, according to a Washington Post article about a report compiled by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Pepco claimed $270 million in federal tax credits, and paid the lowest rate of all firms investigated in the report.

An author from the study said one way the company could have accomplished this amount of savings was by using accelerated depreciation, but the CFO of Pepco responded in a column stating that while accelerated depreciation reduced taxes, the company paid many other taxes like real estate taxes, payroll taxes, etc.

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Made in America




Just because a car has a foreign label doesn’t mean it was built in another country. Many manufacturers based in different parts of the world have plants in the U.S. and assemble many of their vehicles here. The Honda Accord was the first Japanese-branded vehicle built in the U.S. This was back in 1982, and people criticized the decision to start assembling cars here.

Why were people so critical? Because they saw the action as way for the company to avoid taxes and tariffs that would have applied if they were importing the cars instead of building them in the U.S. (whether this was true or not). In theory, it is possible to avoid taxes by simply building the cars in the U.S.

Sign it on the Sea




Some companies can sign documents on international waters, at a certain altitude in the air, or cross state lines to avoid paying tax. In theory, to avoid paying the documentary stamp tax in the state of Florida, someone could possibly send the documents to a person located outside of Florida’s jurisdiction using an online faxing service and complete the transaction there. The tax applies to documents that transfer an interest in real Florida property. Examples include warranty deeds, contracts for gas and oil rights, assignments of contract or agreement for deed, and more.


Gaps in tax law have allowed many companies to make money and sparked many controversies about whether or not laws should be amended. Do you know of any other instances of major tax loopholes leading to major profit? Feel free to share them in the comments.