Microsoft, Amazon use the same tax tool as Trump to cut federal income tax
Microsoft, Amazon and many other companies utilize the same tax tool Donald Trump may have used to legally avoid paying federal income taxes for up to 18 years after reporting a $916 million business-related loss in 1995.
The Internal Revenue Service has long allowed companies to claim losses to offset some of their tax liability. The tool – called “net operating loss carryforwards” – would have allowed Trump to wipe out more than $50 million a year in taxable income over 18 years.
While it isn’t always possible to tell how much the mechanism offsets income taxes, Microsoft (Nasdaq: MSFT) and Amazon (Nasdaq: AMZN) each reported net operating loss carryforwards in their most recent annual filings.
Earlier this year, Microsoft reported $8 billion in net operating loss carryforwards, including $6.3 billion in foreign losses. The amount Microsoft reports has grown since 2013, when the company reported $2.7 billion in net operating loss carryforwards.
Microsoft declined to comment on when and why the company first claimed the carryforwards or how much it saved the company in taxes. The increasing amount could be due to acquisitions, which would allow Microsoft to claim a startup’s losses for tax purposes.
Microsoft still paid income tax of $3.9 billion, $4.4 billion, and $5.5 billion in fiscal years 2016, 2015, and 2014, respectively.
Amazon in December 2015 reported a federal net operating loss carryforward of around $1.1 billion. The Seattle company did not respond to a request for comment.
Taxes have become an important part of the presidential race as candidates decide whether to end tax loopholes for the wealthy. During Sunday's debate, Trump and Hillary Clinton each mentioned “carried interest,” a separate tax loophole.
Ashley Stewart covers technology and finance for the Puget Sound Business Journal.
