Study shows corporate tax receipts are dwarfed by tax reserves

WASHINGTON, Sept. 10, 2012 /PRNewswire/ -- A study released today by The Ferraro Law Firm of annual SEC disclosures showed that collectively the Fortune 500 companies believe that they have underpaid their corporate income tax by $187.5 billion, which is ironically more than the $181 billion in total U.S. corporate income tax that the Treasury Department said was actually paid last year by all corporations.  In other words, last year companies paid less than half of the taxes that they think they owe.  Individual taxpayers should once again be disappointed to hear that corporate taxpayers continue to play games with their tax returns to avoid paying their share of taxes.  The Ferraro Law Firm compiles the annual "Ferraro 500" list, which is a reorganization of the Fortune 500 by the size of the companies' Unrecognized Tax Benefit reserve ("Tax Reserve").  The Tax Reserves of the top five companies are Pfizer, which set aside $7.309 billion to cover potential taxes; J.P. Morgan Chase & Co., $7.189 billion; Microsoft, $6.935 billion; General Electric, $6.384 billion; and AT&T, with $5.853 billion.

"The accounting rules require that public companies must hold back, or reserve, earnings for tax positions for which the company thinks the IRS has a greater likelihood of prevailing than the company," said Scott Knott, a Tax Partner at The Ferraro Law Firm. Gregory Lynam, also a Tax Partner at the firm, said, "This reserve amount for uncertain tax positions can be substantial, especially when compared to the annual profits of the company.  For example, AT&T, on $3.944 billion in profits maintained a $5.853 billion Tax Reserve, compared to Wal-Mart, which had $15.699 billion in profits and a more modest reserve of $0.611 billion."

Through detailed submissions to the IRS Whistleblower Office, The Ferraro Law Firm has brought to the U.S. government's attention taxpayers who have collectively underpaid their taxes by more than $100 billion.  The IRS established the Whistleblower Office in 2007 to collect information about tax cheats and must, by law, pay a reward of up to 30 percent of the amount collected to the tax whistleblower.

The Ferraro Law Firm's tax lawyers have represented some of the world's largest companies and wealthiest individuals and have learned first-hand about the extent of tax underpayments.  Knott and Lynam joined the firm in 2007 from prominent Washington D.C. tax practices to focus exclusively on tax whistleblower cases.  For more information on The Ferraro Law Firm's tax group and tax whistleblower submissions, call 1-800-275-3332 or visit www.tax-whistleblower.com.  The full study can be found at http://www.tax-whistleblower.com/ferraro500/

SOURCE The Ferraro Law Firm