Companies that pay no income tax on the rise

By Marisa Taylor

An increasing number of U.S. companies don?t pay a dime in income taxes to the federal government because of a special structure that passes profits along to investors who then pay the taxes,? according to a story in Tuesday?s Wall Street Journal.

These companies are called pass-throughs, and rather than taking advantage of tax loopholes by hiring a brigade of accounts, they instead are structured to shuttle?company profits along to investors, who subsequently pay taxes on their individual tax returns, according to the WSJ.

The story said?pass-throughs, which have been around for decades,?are legal and have been encouraged by Congress and state governments, but have been broadened recently to spur entrepreneurship.

The Wall Street Journal reported?that 69 percent?of U.S. corporations were organized as nontaxable businesses in 2008, up from 24 percent in 1986, and that the percentage is actually higher when including partnerships and sole proprietors. Large companies are often structured as pass-throughs, with an estimated 60 percent of U.S. businesses with profits of $1 million comprising this category,?the largest such percentage in any developed country.?

The U.S. corporate tax rate is 35 percent, but pass-throughs are a major reason why federal corporate tax collections made up only 1.3 percent of U.S. GDP in 2010, down from 2.7 percent in 2006, according to the story.?

Source: http://bottomline.msnbc.msn.com/_news/2012/01/10/10094176-companies-that-pay-no-federal-income-tax-on-the-rise

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