US corporate profits are at record levels, but federal corporate income tax receipts have fallen. An analysis by the Institute on Taxation and Economic Policy (ITEP) found that 706 profitable companies paid current federal income taxes equal to an average of 10.4% of their profits last year, well below the statutory 21% rate. Among them, 114 paid no current federal income tax. ITEP says the broader effect of tax breaks across many companies is more significant for federal revenue than the number of firms reporting no current tax.
The Treasury Department recorded about $381 billion in corporate income tax receipts in the fiscal year ended September 30, down roughly 15%, or $70 billion, from the prior year. ITEP estimates that tax breaks saved the 706 companies in its analysis a combined $198 billion last year. The figures have sharpened debate over corporate tax provisions as the federal government faces persistent deficit pressure.
114 companies reported no current federal income tax
ITEP based its calculations on annual financial reports filed with the Securities and Exchange Commission (SEC), rather than Internal Revenue Service (IRS) data, which are released with a longer lag. The analysis found that more than 700 profitable companies paid current federal income taxes equivalent to an average of 10.4% of profits last year—less than half the statutory rate. More than 250 companies had an effective rate below 7%.
The 114 companies that paid no current federal income tax included Tesla, Walt Disney, United Airlines and DoorDash. But Matt Gardner, an ITEP senior fellow and author of the report, cautioned against focusing solely on those firms. Many large companies did pay tax, but at rates below 21%; taken together, the resulting tax savings have a greater effect on federal receipts, he said.
Profits are concentrated among a relatively small number of large companies. When those firms pay less than the statutory rate, the tax savings can have a substantial impact on corporate tax revenue. Gardner said the reduced tax bills of highly profitable companies matter more to the federal government's fiscal capacity than the tally of companies with no current tax liability.
Tax receipts fell as corporate profits climbed
Treasury monthly data show that corporate income tax receipts fell to about $381 billion in the fiscal year ended September 30, a decline of roughly 15% from the previous year. The source article also notes that receipts have dropped by more than 25% cumulatively since 2024.
Corporate profits moved in the opposite direction. In the 12 months through mid-2026, US corporate profits reached a record $4.7 trillion, up 17% from the preceding 12-month period.
The Congressional Budget Office (CBO) estimates that President Donald Trump's One Big Beautiful Bill Act (OBBBA) will add $3.4 trillion to federal deficits over the next decade. The estimate includes a $4.5 trillion reduction in revenue, partly offset by $1.1 trillion in lower spending. Corporate tax cuts are one part of the wider fiscal debate, though views differ on how tax reductions affect investment and economic growth.
R&D and depreciation provisions drive major tax savings
Corporate tax breaks predate the current administration. In 2018, the Trump administration lowered the federal corporate tax rate from 35% to 21%. The OBBBA, passed last July, kept the 21% rate and made some tax provisions permanent while adding new incentives. These include immediate expensing for domestic research and development costs and 100% bonus depreciation for qualifying business assets acquired after January 2025.
Gardner said companies make particularly extensive use of incentives tied to R&D and depreciation. ITEP estimates that Alphabet, Microsoft, Amazon and Meta saved a combined $46 billion through those two types of provisions. The tax breaks coincided with major technology companies' large-scale investment in AI infrastructure, but the report did not conclude that all of the savings funded those projects.
Meta's claims for R&D tax incentives have drawn questions from lawmakers. Citing allegations, senators questioned whether the company classifies AI data centers as experimental “pilot models” to qualify for the R&D credit. This month, Democratic members of the Senate Finance Committee—Ron Wyden, Sheldon Whitehouse, Elizabeth Warren, Catherine Cortez Masto, Maggie Hassan, Ben Ray Luján and Peter Welch—wrote to Meta CEO Mark Zuckerberg seeking an explanation by October 31. They asked how the investments claimed for the incentive differ from ordinary costs of equipping data centers.
The senators said the federal R&D credit can support innovation and frontier research, but questioned whether subsidizing AI data center construction meets that standard. Meta said it is one of the largest R&D investors in the United States, having spent more than $200 billion over the past five years, including $57 billion last year.
A Meta spokesperson said AI-optimized data centers are novel compared with traditional facilities and require extensive testing and experimentation. The company argues that such domestic investment is the kind of activity Congress intended to encourage through the tax incentives. The dispute centers on which data center costs qualify for R&D treatment.
Gardner expects companies to continue using depreciation and R&D incentives because the relevant provisions are permanent. Unless a future Congress or administration changes the policy, they will continue to shape corporate tax bills and federal receipts.
Economists and policymakers disagree over the trade-offs
Supporters of higher corporate taxes argue that additional revenue could help narrow deficits, lower interest rates and support future borrowing and economic growth. Opponents say higher business taxes could discourage investment, weaken US competitiveness in global markets and ultimately limit growth.
Adam Michel, director of tax policy studies at the Cato Institute, has defended some of the incentives. In an April article, he noted that the R&D credit has had bipartisan support since its introduction under the Economic Recovery Tax Act of 1981. Depreciation provisions can reduce a company's taxable income in the near term and improve its capacity to invest, he argued, without necessarily reducing the total nominal tax owed.
Michel said that using tax provisions allowed by law is not, by itself, improper. The policies have support across party lines and may encourage the investment lawmakers intended. The debate therefore extends beyond which companies pay tax: it also concerns whether the incentives effectively promote R&D and capital spending, and whether those gains justify the resulting loss of federal revenue.