Power Players

Amazon will pay $0 in federal taxes this year — and it's partially thanks to Trump

Amazon CEO Jeff Bezos, founder of space venture Blue Origin and owner of The Washington Post, participates in an event hosted by the Air Force Association September 19, 2018 in National Harbor, Maryland.
Alex Wong | Getty Images

Amazon is one of the world's most valuable companies, valued at nearly $800 billion, and the e-commerce giant pulled in $232.9 billion in global revenue in 2018.

And yet, Amazon's federal tax bill this year: $0. For the second year in a row.

In fact, Amazon is actually getting a federal tax refund of $129 million this year, due in part to a combination of tax credits and deductions. This is despite the fact that Amazon nearly doubled its taxable income in 2018 to $11.2 billion, from $5.6 billion a year earlier.

In other words, Amazon is basically paying a -1 percent federal income tax rate this year after reportedly paying a federal rate of more than 11 percent between 2011 and 2016, according to The Week.

Sen. Bernie Sanders, I-Vt., who has criticized Amazon in the past for not paying higher federal taxes, took to Twitter on Thursday to point out that any Amazon Prime member paid more for that program's annual fee ($119) than the company paid in federal taxes.

Prime has 100 million subscribers.

"Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years," an Amazon spokesperson said in a statement provided to CNBC Make It.

Amazon reported its sizable federal refund in a recent corporate filing for the company's fourth-quarter earnings report. However, Amazon also notes in that filing that it will pay $756 million in total taxes this year, between state and international taxes.

A report this week from the Institute on Taxation and Economic Policy, or ITEP, a nonpartisan and nonprofit tax policy think tank, pointed out the fact that Amazon will not pay federal taxes for the second year in a row. In fact, last year, Amazon received an even larger refund, getting $137 million from the federal government.

One reason for Amazon's nonexistent federal tax bill is the Tax Cuts and Jobs Act that Congress enacted in 2017, which lowered the statutory corporate tax rate from 35 percent to 21 percent. In addition to the lower tax rates for corporations, the new tax law also "failed to ... close a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits," ITEP senior fellow Matthew Gardner wrote in a report on Wednesday.

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The fact that the new tax law, which was strongly backed by President Donald Trump and his administration, has helped Amazon and other companies lower their federal tax obligation is somewhat ironic considering that the president has railed against Amazon, in particular, for paying "little or no taxes to state and local governments."

Gardner's report also notes that Amazon's own income tax disclosure in its quarterly report shows that the company's lack of federal tax payment this year is at least partly owed to "various unspecified 'tax credits'" along with the fact that Amazon and other corporations are able to deduct the value of vested shares the company gives to its employees, including stock options given to executives.

Because Amazon's actual tax filings to the IRS are not public, there is no way to know exactly how large of a deduction the company gets from writing off those vested stock options, or the value of the tax credits it receives from the government, Gardner told CNBC Make It.

For what it's worth, Amazon said in its recent corporate filing that those federal tax credits "are primarily related to the U.S. federal research and development credit," a common tax credit for companies that spend money on research in the U.S. in order to grow their businesses.

Amazon famously went on the hunt for tax incentives in last year's search for sites for the massive company's second headquarters, or "HQ2," which initially led the company to announce plans to open large, new corporate locations in New York City and Virginia. However, Amazon this week canceled its plans for HQ2 in New York City due to local opposition.

Correction: This story was revised to correct Amazon's valuation to nearly $800 billion.

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Amazon CEO Jeff Bezos, founder of space venture Blue Origin and owner of The Washington Post, participates in an event hosted by the Air Force Association September 19, 2018 in National Harbor, Maryland.
Alex Wong | Getty Images
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