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Tesla Will Reportedly Pay Nothing in Federal Taxes After Record Profit Year

Despite hitting record profits to the tune of $7.2 billion, Tesla won’t be paying anything in federal taxes this year. In fact, soon enough the company may not have to pay taxes at all. To break down the numbers, they made $5.5 billion in income and $7.6 billion in adjusted income.

This interesting news is straight from Tesla’s most recent financial filing with the Securities and Exchange Commission (SEC). The filing revealed that the company’s federal tax bill was zero. The EV company still has to pay state and foreign taxes, however. In state taxes, they owe $9 million. Their foreign tax bill is $839 million.

On a more personal scale, Tesla CEO Elon Musk will be paying about $11 billion in taxes this year. According to him, this is the largest tax bill that a singular person has ever gotten from the IRS. He’s worth almost $245 billion.

Tesla’s Nonexistent Tax Bill Is Due to Loopholes

How does Tesla, a multi-billion dollar company, manage to pay no federal taxes? One word: loopholes.

According to the company, they actually lost about $130 million pre-tax in U.S. operations in 2021. The company also says that over $6 billion of its pre-tax profits come from operations overseas. However, 45% of their revenue comes from U.S. sales.

Yep, you read that right. The majority of Tesla‘s sales come from the U.S., yet they report that most of their income is from overseas. It doesn’t make sense. However, according to chief economist Martin Sullivan, “it does not defy U.S. Tax Code.” Sullivan thinks that Tesla may be following a pretty common practice that lets them report overseas income.

For example, let’s say that a company assigned its IP to a foreign arm of the country. The U.S. unit would then pay a fee to use the foreign arm. Thus, the U.S. part of the company would be able to report losses or a minimal amount of revenue come tax time. Of course, that’s a very simplified version of the process, but that’s essentially how businesses like Tesla avoid corporate federal taxes.

Jalopnik reports that Tesla will even be open for a future tax break. This is because of the technical “losses” the company had in 2021. In fact, the EV company has had many “losses” throughout the years. As it turns out, they all accumulate and allow Tesla to get tax breaks.

Other Big Companies Do the Same

Tesla isn’t the only U.S. company to evade federal taxes like this. Amazon, General Motors, and Stellantis all do similar things, if not the exact same thing. In fact, the U.S. Department of Treasury reports that 61% of international profits are recorded in companies that have less strict tax codes. According to Sullivan, “It’s a US multinational thing.” He added, “It’s very common. It’s almost malpractice not to do that.”