Last month, the liberal D.C. think tank Institute for Policy Studies released a report outing 25 corporations that supposedly finagled their way into paying their CEOs more than they paid in taxes. The Seattle PI flagged Boeing as one of the local culprits, paying CEO Jim McNerney $13.8 million, which is $800,000 more than the company's  federal tax liability of $13 million reported in 2010. Boeing quickly released a counter-statement to Reuters:
Instead of Boeing’s reported “U.S. federal current tax expense” of $13 million which the IPS used, [Boeing spokesperson Chaz Bickers] said a better approximation of the company’s taxes paid would be the $360 million it reported as its net income tax payments, most of which, he says, was federal.

“On federal cash tax payments last year we paid in the hundreds of millions,” Bickers told Reuters. The company also received a $371 million credit from the government last year for overpayment of taxes in the past, and has added 5,000 U.S. jobs this year Bickers says, in part because of federal tax breaks.

Unless you're a corporate tax specialist, the Boeing explanation probably reads like Elvish. So, I called Boeing spokesman Bickers to unpack his statement and get beyond the dead-end "he said/she said" of the PI story.

Bickers clarified that the $13 million is simply an accounting value (in other words, the best estimate of taxes to be paid), but that the "check written for federal taxes is much higher."

The $360 million "net income tax payments" is an aggregate of state, local, and federal taxes, and while Bickers would not disclose the actual figure for paid federal taxes, he asserted that it is "a substantial amount, and it is a majority [of the $360 million]."

The IPS published a response to corporations that had fired back at its report, pointing out that many of them included deferred taxes (taxes to be paid at an undefined point in the future) in their tax figures. Bickers denied that any portion of the $360 million included any deferred taxes.

However, Scott Klinger, one of the authors of the report, maintains that the report focused exclusively on federal taxes rather than all taxes paid. Ultimately, he says, the $360 million figure that Boeing broke out is "an apples to oranges measurement." (He also points out that Boeing currently has $969 million in deferred taxes which they can "legally put off paying until some point in the future, if ever.")

The filing that the IPS used for its data is here.

Scott Schumacher, an associate professor at the UW School of Law and director of its Graduate Program in Taxation, who gave his independent analysis of the dispute, leans towards Boeing on this matter. Schumacher agrees that the company likely paid more in federal taxes than what the IPS reported, although he concedes we'll probably never know the real numbers:
Boeing is correct that it only booked for accounting purposes the $13 million.  That is an accounting figure, not a real figure.

Why don’t they disclose more information?  Boeing and other public corporations are required to report what they booked as a tax expense and what other expenses they booked for the year.

The problem with saying why don’t they just disclose the actual amount of federal taxes paid is that it’s not that easy.  For example, GE’s tax return for a recent year was 24,000 pages.  How do you disclose a single number that accurately reflects the sum total of 24,000 pages of adjustments?   These corporations have net operating losses, credits for taxes paid in prior years, research and development tax credits, losses from subsidiaries, and numerous other adjustments.  There are also adjustments made when numbers go from book to tax purposes.

Why do I think they paid more than $13 million in federal taxes?  Well, according to reports they paid $360 million in taxes in total, and I doubt that $347 million of that went to the states of Washington and Illinois.  But then again, I am just guessing.

Klinger also provided a link to the official explanation of how federal income taxes for corporations are calculated (on page 59, under the heading 'Income Taxes'), which acknowledges that the reported value differs from the actual value because of numerous adjustments.

 

 
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