114 Profitable Firms Paid Zero Federal Tax. The Bigger Threat Pays Less Than 21%

By Olivia Hart

More than 700 profitable U.S. corporations paid an effective federal income tax rate of 10.4% last year — less than half the statutory 21% — according to a report from the Institute on Taxation and Economic Policy (ITEP). Within that group, 114 companies, including Tesla, Walt Disney, United Airlines and DoorDash, paid no current federal income tax at all.

The numbers come from ITEP's analysis of annual financial reports filed with the Securities and Exchange Commission, not IRS data, which lags behind SEC filings. That methodological choice matters: the figures reflect what companies report, not what tax authorities ultimately collect. ITEP is a progressive think tank, and its framing carries that orientation.

What happened to corporate tax revenue?

Corporate tax receipts have fallen about 15% — roughly $70 billion — to $381 billion for the fiscal year ended Sept. 30, according to Treasury Department data released earlier this month. Since 2024, the final year of the Biden administration, corporate tax revenue has dropped by more than 25%. The decline coincides with corporate profits reaching a record $4.7 trillion for the 12 months through mid-2026, up 17% from the prior period.

The Congressional Budget Office projects the One Big Beautiful Bill Act (OBBBA) will add $3.4 trillion to the federal deficit over the next decade. That figure nets a $4.5 trillion decrease in revenues against a $1.1 trillion decrease in spending.

The takeaway in plain words: corporate profits are rising while the tax take from them shrinks, and the deficit math absorbs the difference.

Why aren't the zero-tax companies the real problem?

Matt Gardner, ITEP senior fellow and co-author of the report, argues the 114 zero-tax corporations are not the main drain. The 706 companies ITEP examined saved a combined $198 billion last year through corporate tax subsidies; the zero-tax firms accounted for only a fraction of that total.

"There's a real concentration of profits at the top, and when those companies pay anything less than 21%, that's really what is knocking a hole in our corporate tax laws right now," Gardner told Fortune. "Their profits were so huge that their tax avoidance is way more consequential for the federal government's capacity to function than the zero tax corporations are."

In other words, the story is scale, not symbolism.

Which breaks are the big ones?

Trump first cut the federal corporate rate from 35% to 21% in 2018. OBBBA, passed last July, extended the 21% rate, made several breaks permanent and added new ones — including immediate expensing of domestic R&D costs and 100% bonus depreciation for qualifying business property acquired after January 2025.

Gardner identified those two provisions as the most heavily used. The four companies with the largest tax breaks — Alphabet, Microsoft, Amazon and Meta — saved a collective $46 billion through them, in part to fund massive AI infrastructure buildouts.

Meta's use of the R&D credit has drawn particular scrutiny. The company reportedly classified AI data centers as experimental "pilot models," according to reports cited by senators, which would qualify the spending for the break. Seven Democratic senators — Ron Wyden, Sheldon Whitehouse, Elizabeth Warren, Catherine Cortez Masto, Maggie Hassan, Ben Ray Luján and Peter Welch — wrote to Meta CEO Mark Zuckerberg earlier this month demanding answers by Oct. 31 on how the claimed investments differ from routine data center costs.

"The federal research credit can be a useful and necessary tool to support our nation's innovation economy and cutting-edge research," the senators wrote. "Subsidizing your A.I. data center build is not close to meeting this standard."

Meta pushed back. The company said it invests more in U.S. R&D than almost anyone — over $200 billion in five years and $57 billion last year alone.

"Unlike traditional data centers, AI-optimized data centers are inherently new and require extensive testing and experimentation that cannot be simulated in order to get the design and build right," a Meta spokesperson told Fortune. "This is precisely the kind of domestic investment Congress encouraged when it established these tax incentives decades ago."

Gardner expects heavy use of depreciation and R&D bonuses to persist because OBBBA made them permanent. "There's every reason to expect this to be the new normal going forward, unless the next Congress, the next presidential administration, decides to reverse them," he said.

Is a low corporate tax rate actually bad?

Not everyone reads these numbers as a scandal. Adam Michel, director of tax policy studies at the libertarian Cato Institute, argued in an April Substack post that the R&D credit has had bipartisan support since its 1981 introduction under the Economic Recovery Tax Act — the Kemp-Roth cut tied to Reagan-era coalition-building. He contended that depreciation breaks lower immediately taxable income without cutting nominal tax payments, freeing capital for investment.

Tax breaks "don't reveal a scandal," Michel wrote. "They are a list of popular, bipartisan policies. Companies using them are doing what the law intends, often for good reason."

Deficit hawks counter that higher corporate revenue could shrink the deficit, lower interest rates and support growth; skeptics reply that higher taxes would deter investment and weaken U.S. competitiveness. The unresolved question is which effect dominates — and with the breaks now permanent, the answer will arrive only when the next Congress or administration chooses to test it.