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An analysis of select large nonfinancial corporations with total assets greater than $2.5 billion, Tax Years 1998-2002: data release.

Large corporations have a significant impact on the national economy. To get a better understanding of the magnitude of that impact, data were collected on a select group of corporations over a 5-year period, Tax Years 1998 through 2002. The data show that a very small group of corporations holds a large portion of assets, collects a significant amount of receipts from operations and investments, and is responsible for a substantial share of the corporate tax revenues collected by the U.S. Government.

For the sample, a group was first selected consisting of corporations whose end-of-year assets were classified in the highest asset class published by the Statistics of Income Division, those with $2.5 billion or more in end-of-year total assets. Since the financial structures of financial firms differ considerably from the structures of non financial firms, focus shifted solely to non financial corporations, those directly involved in the production and trade of goods, as well as providing services. Additionally, in order to select the very largest corporations, the yearly sample median for total receipts was determined. Returns with reported total receipts lower than the median were excluded. All money amounts were computed in current dollars.

The number of returns meeting these qualifications ranged from a low of 324 in Tax Year 1998 to a high of 382 in Tax Year 2000, representing less than 0.01 percent of all returns filed (Table 1). Over the 5-year period, the sample included a total of 518 corporations. Of these, there are 229 corporations present in the sample in all 5 years, while 86 corporations appear only once in the data. The majority of the corporations included in this sample are consolidated returns [1].

A significant number of these large nonfinancial corporations were classified in the manufacturing sector [2]. On average, 171 of these corporations were manufacturers, representing 47.1 percent of large nonfinancial returns (Figure A). This is in marked contrast to the number of manufacturers as a percentage of all corporations. In Tax Year 2002, corporations classified in the manufacturing sector represented just 5.3 percent of all returns [3]. The next highest number of large nonfinancial corporations was in the wholesale and retail trade sector. Wholesale and retail trade returns accounted for an average of 76, or 20.9 percent, of the large nonfinancial corporations. This is comparable to the percentage for all corporations, where wholesale and retail trade returns amounted to 18.3 percent of all returns in Tax Year 2002.

These large nonfinancial corporations, despite representing such a small percentage of corporate returns, account for an average of 20.5 percent of total assets of all returns, and 54.1 percent of total assets of all nonfinancial returns. The average amount of total assets held by this group of large, nonfinancial corporations has increased from 1998 to 2002 by 32.9 percent. Over the same time period, the average assets for all nonfinancial corporations and all corporations increased by 23.2 percent and 24.3 percent, respectively. More than half of the total assets of large nonfinancial corporations were reported in the manufacturing sector.

This select group of corporations accounted for an average of 29.0 percent of total receipts of all corporations. Overall, corporations reported increases in total receipts through Tax Year 2000, but receipts declined for 2001 and continued declining for 2002. Large nonfinancial corporations did not show declines in total receipts until Tax Year 2002. The decreases in total receipts for Tax Year 2002 were driven by a large decline in the amount of receipts reported in the Utilities sector.

Large nonfinancial corporations accounted for an increasing share of capital gain net income, with a slight decline in share for 2002. The amounts reported for this group of corporations fluctuated greatly, with a low of $24.6 billion for 2002 and a high of $68.6 billion for 2000. By the end of the period, Tax Year 2002, large nonfinancial corporations accounted for 27.1 percent of capital gain net income for all corporations.

By far, the largest deduction item for large nonfinancial corporations was cost of goods sold. Throughout the period, cost of goods sold consistently accounted for more than 60 percent of total deductions. Most of the deductions for cost of goods sold reported by large nonfinancial corporations were in the manufacturing and trade sectors.

Pretax corporate profits, shown in the tables as net income (less deficit), increased steadily from 1998 through 2000 before experiencing a decline for 2001 that continued for 2002 (Figure B). During the analysis period, large nonfinancial corporations accounted for an average of 31.6 percent of pretax profits for all corporations. Large nonfinancial corporations reported sharper declines than corporations as a whole. This group of corporations reported an average decline in pretax corporate profits of 53.2 percent from Tax Year 2000 to Tax Year 2002. Average pretax profits for all corporations fell 41.8 percent for the same period. Large nonfinancial corporations accounted for approximately half of the total decrease in pretax profts for all returns. The number of large nonfinancial corporations reporting positive pretax profits decreased starting for Tax Year 2001 and continued to decline for 2002. The number of large nonfinancial corporations reporting a deficit, or negative pretax profits, held steady for 1998 and 1999, and has increased for every other tax year in the period.

Large nonfinancial corporations were responsible for widely varying proportions of net operating loss deductions of all corporations, ranging from 11.6 percent tbr 1998 to 47.7 percent for 2000. In general, net operating loss (NOL) deductions, as defined in these statistics, include a portion of net losses from prior-year returns (excluding those of S corporations whose deficits were allocated to their shareholders for the year in which they occurred) [4]. Therefore, since NOL deductions can only be taken against positive net income, the higher amounts were taken in years when net income was higher and could offset prior-year losses.

Income subject to tax for large nonfinancial corporations grew from Tax Year 1998 through Tax Year 2000, before showing significant declines starting in Tax Year 2001, following the pattern of all corporations. These large nonfinancial corporations were responsible for a relatively stable percentage of income subject to tax for all corporations, averaging 39.7 percent during the period, ranging from a low of $223.4 billion for 2002 to a high of $326.1 billion for 2000.

Large nonfinancial corporations reported the majority of total tax credits for all corporations. On average, these corporations claimed 62.2 percent of credits claimed by all corporations. The majority of these tax credits were reported by large nonfinancial corporations in the manufacturing sector, which accounted for an average of 81.7 percent of credits for large nonfinancial returns and 50.9 percent of all returns. The foreign tax credit is responsible for an average of 83.4 percent of credits claimed by large nonfinancial corporations during the period, and these corporations claimed an average of 67.9 percent of the total foreign tax credit for all corporations.

Income tax after credits is the amount paid to the United States Government. The amount of income tax paid by large nonfinancial corporations was consistent with amounts reported for income subject to tax, rising in the beginning of the analysis period and then dropping off starting in Tax Year 2001. On average, large nonfinancial corporations were responsible for slightly more than one-third of income tax after credits reported by all corporations. These large nonfinancial returns also accounted for a large portion of alternative minimum tax (AMT) reported by all corporations. These corporations were liable for an average of 34.2 percent of the AMT paid by all corporations. For each tax year of the period, a higher percentage of large nonfinancial corporations with net income had tax liability when compared with all corporations. On average, 64.5 percent of all nonfinancial corporations with net income (excluding passthrough entities) had income tax liability, while 97.3 percent of large nonfinancial corporations with net income reported a tax liability [5].

Data Sources and Limitations

Estimates for Tax Years 1998-2002 are based on samples of corporation income tax returns with accounting periods ending July of one year through June of the following year. For example, Tax Year 2002 includes accounting periods of July 2002 through June 2003. A stratified probability sample was used to produce the statistics. Returns in the sample group of large nonfinancial corporations were sampled at a 100-percent rate, and the coefficient of variation is zero.

Footnores

[1] Since financial returns were excluded from this analysis, corporations filing forms 1120-L, 1120-PC, 1120-REIT, and 1120-RIC were not included. Some corporations filing Forms 1120-L and/or 1120-PC were included if they were filed as part of a consolidation under section 1504(C) of the Internal Revenue Code, with a nonfinancial parent company. Corporations filing Forms 1120A and 1120F did not meet the financial requirements.

[2] The primary business activity of large nonfinancial corporations is based on the business activity that produces the largest amount of total receipts.

[3] Detail for individual years is available in Statistics of Income, Corporation Source Book, Publication 1053.

[4] The Job Creation and Worker Assistance Act of 2002 allowed net operating losses for taxable years ending 2001 and 2002 to be carried back to reduce any taxes paid for 5 years previous to the loss. The act also allowed net operating losses arising in or carried forward to taxable years ending in 2001 and 2002 to offset 100 percent (from 90 percent) of a taxpayer's Alternative Minimum Taxable Income (AMTI). For other tax years, net operating losses could have been carried back to reduce any taxes paid in the 2 years previous to the loss year, and any remaining amounts could be carried forward 20 years to reduce income subject to tax. The statistics for net operating losses represent only amounts carried forward from prior years and applied to reduce taxable income of the current year.

[5] Passthrough entities are regulated investment companies (filing Form 1120-RIC), real estate investment trusts (filing Form 1120-REIT), and S corporations (filing Form 1120-S). These corporations pass through allocated profits and losses to their shareholders and, in general, pay no Federal income tax directly.

This data release was prepared by Heather R. Duffy, an economist with the Corporation Returns Analysis Section, under the direction of Marry Harris, Chief.
Table 1.--Returns of Selected Large Nonfinancial Corporations, All
Nonfinancial Corporations, and All Active Corporations

[All money amounts, except cutoff for total receipts, are in thousands
of dollars]

 Number of returns

 Large Cutoff for
 nonfinancial total
 corporations' receipts
 Large percentage of (whole
Tax nonfinancial All all dollars)
year corporations corporations corporations

 (1) (2) (3) (4)

1998 324 4,848,888 0.007 4,230,360,014
1999 357 4,935,904 0.007 3,886,246,623
2000 382 5,045,274 0.008 3,811,223,967
2001 378 5,135,591 0.007 3,714,904,956
2002 374 5,266,607 0.007 3,753,286,197

 Total receipts

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (5) (6) (7) (8)

1998 4,529,682,603 14,415,444,839 17,323,955,004 26.15
1999 5,105,499,450 15,365,722,693 18,892,385,693 27.02
2000 6,203,408,405 16,996,815,123 20,605,808,070 30.11
2001 6,282,385,334 16,863,123,503 20,272,957,624 30.99
2002 5,985,006,877 16,454,054,972 19,749,426,052 30.30

 Total assets

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (9) (10) (11) (12)

1998 6,882,142,090 14,006,184,599 37,347,352,986 18.43
1999 8,124,470,809 15,703,522,075 41,464,152,853 19.59
2000 10,118,010,564 18,296,791,781 47,026,871,874 21.52
2001 10,580,897,992 18,708,674,012 49,154,424,202 21.53
2002 10,558,161,593 18,737,190,229 50,413,501,942 20.94

 Total liabilities (net of shareholders' equity) (1)

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (13) (14) (15) (16)

1998 4,542,414,628 9,210,910,454 24,239,077,750 18.74
1999 5,261,945,274 10,218,236,603 26,101,291,858 20.16
2000 6,482,716,148 11,694,435,745 29,678,221,505 21.84
2001 6,629,650,225 12,039,360,036 31,539,681,028 21.02
2002 6,811,717,801 12,097,431,742 32,868,392,767 20.72

 Net worth

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (17) (18) (19) (20)

1998 2,339,727,462 4,795,274,145 13,108,275,236 17.85
1999 2,862,525,535 5,485,285,472 15,362,860,995 18.63
2000 3,635,294,416 6,602,356,036 17,348,650,369 20.95
2001 3,951,247,767 6,669,313,976 17,614,743,174 22.43
2002 3,746,443,792 6,639,758,487 17,545,109,175 21.35

 Capital gain net income

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (21) (22) (23) (24)

1998 28,337,713 74,521,490 162,315,026 17.46
1999 58,802,604 108,543,527 241,433,552 24.36
2000 68,555,289 126,027,819 258,761,885 26.49
2001 44,098,769 83,645,388 138,213,791 31.91
2002 24,591,127 55,874,061 90,921,898 27.05

 Net income

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (25) (26) (27) (28)

1998 258,401,575 712,042,651 1,091,150,050 23.68
1999 309,601,910 772,353,145 1,229,295,910 25.19
2000 365,018,798 830,154,139 1,336,619,605 27.31
2001 279,468,373 694,349,600 1,112,480,550 25.12
2002 245,575,051 654,087,870 1,053,126,217 23.32

 Deficit

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (29) (30) (31) (32)

1998 17,697,071 215,724,374 252,926,459 7.00
1999 18,972,361 262,163,427 300,340,383 6.32
2000 28,673,632 359,854,446 409,094,087 7.01
2001 82,571,919 442,084,606 508,857,198 16.23
2002 91,299,014 422,016,344 489,469,659 18.65

 Net income (less deficit)

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (33) (34) (35) (36)

1998 240,704,504 496,318,277 838,223,591 28.72
1999 290,629,548 510,189,718 928,955,527 31.29
2000 336,345,166 470,299,693 927,525,517 36.26
2001 196,896,454 252,264,994 603,623,352 32.62
2002 154,276,037 232,071,526 563,656,558 27.37

 Net operating loss deduction

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (37) (38) (39) (40)

1998 6,117,024 45,669,249 52,678,450 11.61
1999 16,803,796 54,676,740 64,928,288 25.88
2000 36,831,313 67,682,764 77,196,579 47.71
2001 12,436,099 51,182,418 60,514,064 20.55
2002 17,870,100 55,705,437 65,800,288 27.16

 Income subject to tax

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (41) (42) (43) (44)

1998 243,231,919 493,301,149 663,385,528 36.67
1999 276,948,095 522,459,892 693,735,694 39.92
2000 326,113,443 560,847,824 760,404,334 42.89
2001 260,233,608 444,358,053 635,257,416 40.97
2002 223,424,659 396,640,718 600,553,516 37.20

 Total credits

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (45) (46) (47) (48)

1998 29,828,822 42,344,248 49,854,525 59.83
1999 28,932,752 39,927,204 48,959,947 59.09
2000 40,271,597 50,513,072 62,238,012 64.71
2001 34,772,991 44,004,525 54,162,256 64.20
2002 35,069,871 44,772,229 56,078,260 62.54

 Alternative minimum tax

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (49) (50) (51) (52)

1998 886,552 2,630,592 3,324,799 26.66
1999 840,484 2,293,979 3,051,869 27.54
2000 1,789,874 3,065,477 3,874,845 46.19
2001 416,780 1,056,652 1,800,595 23.15
2002 1,055,116 1,563,730 2,532,224 41.67

 Income tax after credits (2)

 Large
 nonfinancial
 corporations'
 Large All percentage of
Tax nonfinancial nonfinancial All all
year corporations corporations corporations corporations

 (53) (54) (55) (56)

1998 56,053,182 129,126,841 181,545,146 30.88
1999 68,743,899 141,608,231 193,027,641 35.61
2000 75,571,371 145,358,784 204,043,788 37.04
2001 56,541,836 109,265,893 166,711,988 33.92
2002 44,121,763 92,606,819 153,612,870 28.72

(1) Total liabilities (net of shareholders' equity) is calculated by
subtracting net worth from total assets.

(2) Income tax after credits includes amounts paid for alternative
minimum tax.

NOTES: Active corporations are those that reported any income or
deduction items. Selected large nonfinancial corporations are those
with $2.5 billion or more in year-end total assets and with total
receipts equal to or greater than the dollar amounts shown in column 4
(i.e., the median value for total receipts of the nonfinancial
corporations with at least $2.5 billion of assets).

Figure A

Average Distribution of Selected Large
Nonfinancial Corporation Returns, by Industrial
Sector, Tax Years 1998-2002

Manufacturing 47.1%
Trade 20.9%
Utilities 10.2%
Information 8.8%
All other 12.9%

Note: Table made from pie chart.

NOTE: Detail does not add to 100 percent because of rounding.
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Publication:Statistics of Income. SOI Bulletin
Date:Sep 22, 2005
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