Talk about a double punch. A new Washington Post report shows that the US public will pay for the opioid crisis again. Communities across the country have already paid a heavy price for the devastating burden on public health. Now, taxpayers seem to be taking billions in corporate tax breaks as four drug companies exploit a loophole in the Trump GOP tax law and a CARES Act tax rule designed for companies facing pandemic-induced profit losses.
The Post notes that, based on the latest financial reports from Johnson & Johnson, Cardinal Health, McKesson and Amerisource Bergen, these four companies forecast over $ 4.6 billion in corporate tax breaks if they do their part in an opioid crisis $ 26 billion subtract agreement with state and local governments. McKesson, who has agreed to pay $ 8.1 billion in principle, says its after-tax profit will only be $ 6.7 billion, which means the company expects the settlement to be a tax cut of Will make $ 1.4 billion. Amerisource Bergen and Johnson & Johnson each estimate a tax cut of $ 1.1 billion, and Cardinal Health now estimates a tax break of $ 974 million.
Cardinal health is especially egregious. The company is using a controversial provision in last year’s CARES act to boost its tax cut. The quarterly financial report released last week found that the company found a way to get an immediate $ 1 billion tax break from its opioid bill, made possible by its generous Net Operating Loss (NOL) repatriation rules, temporarily created by the CARES Act.
As ITEP has explained, the CARES Act allows companies to use losses in 2020 (which may or may not be related to a pandemic) to reduce taxable income not just in 2020 but into 2015. Since the corporate tax rate was 35 percent in 2015, 2016, and 2017, well above the current 21 percent, this transferability increases the tax cut companies can receive from net operating losses by up to 40 percent.
Cardinal Health plans to apply the loss caused by opioid billing to offset not only reported revenue in 2020, but also revenue reported in 2015, 2016, and 2017[s] claim a federal income tax refund of $ 974 million based on the CARES net operating loss carryforward that we expect to receive within 12 months. “
Corporate wind-up deductibility was a sore point for American taxpayers, as it turned out that BP’s $ 20 billion payment for its role in the Deepwater Horizon ecological disaster would be largely deductible. The Tax Reduction and Employment Act (TCJA) of 2017 included a provision designed to make it difficult for companies to write off such comparisons. However, the TCJA, never the most watertight legal document, contains a loophole: if settlements can be classified as “refunds” they may be tax deductible.
While the language of the $ 26 billion settlement is not yet available, it has been shown that other companies facing opioid-related burdens have carefully used the language of “refund” in their agreements to determine tax deductibility guarantee. The decision of all four of these companies to project tax breaks from the opioid regime suggests they are smart enough to take advantage of the TCJA loophole as well.
The net operating losses have always been a blunt tool for getting cash into the hands of pandemic-hit companies: the benefits of this provision go to retail and service companies whose sales have collapsed last year, but also to companies that have been Faced with long-term difficulties before last year. As the recent Cardinal Health publication shows, the NOL provisions of the CARES Act also provide an opportunity for otherwise healthy businesses to unburden settlements that were paid to repair the grave damage their actions have caused millions of Americans.