Did The New York Times pay zero federal income tax in 2017 on earnings of $111 million? It's entirely possible, but open to interpretation: Public filings with the Securities and Exchange Commission include tax estimates. While those estimates may be an accurate representation of what a company pays, they may not be, especially given the fact that tax changes in 2017 complicated the question. Corporate tax returns are not public.
Did you know?
The New York Times paid zero federal income tax in 2017 on earnings of $111 million dollars.
This is what the post looked like at the time of writing:
(Source: Facebook screenshot taken on Tue Sep 29 15:34:01 2020 UTC)
The claim first appeared in the news last year, after The New York Times published a story saying that FedEx had cut its tax bill to zero. In response, FedEx CEO Frederick Smith accused the newspaper of doing essentially the same thing. He said, in part:
Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, the New York Times paid zero federal income tax in 2017 on earnings of $111 million.
The New York Times fired back, saying that the company's "colorful response does not actually challenge a single fact in our story." You can see that exchange on Twitter here:
The New York Times did not specifically address Smith's claim that it paid no federal income tax in 2017. That claim reappeared in September 2020 in the wake of the newspaper's reporting on President Trump's tax records.
Danielle Rhoades Ha, vice president of communications for The New York Times, described the revived claim as an "attempt to distract from our newsroom's on-going investigation into President Trump's taxes, which has provided the most comprehensive picture yet of the president's finances."
Responding to Lead Stories via email, she pointed out the following about The New York Times's tax payments and liabilities:
From 2014 through 2019, the Company made total (or cumulative) cash corporate income tax payments of approximately $138 million. In 2017, our corporate income tax liability was reduced principally because the Company made approximately $120 million in discretionary, deductible cash payments to our pension plans, which improved the funded status of the plans.
The question of exactly how much a company pays in federal income tax each year can be complicated. Why? Well, for starters, business tax returns are not public.
Public companies are required to file certain statements with the Securities and Exchange Commission. Those filings may include tax estimates. But whether or not those estimates are an accurate representation of what a company actually pays can be debated -- especially for 2017.
Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, told Lead Stories that it's nearly impossible to make sense of The New York Times's taxes for that year because new rules were enacted at the end of 2017, lowering the corporate tax rate from 35% to 21%. He wrote:
While my organization routinely tabulates the effective income tax rates paid by large publicly traded corporation (as disclosed in 10-K reports) each year, we chose not to make these tabulations for 2017 because of the difficulties in interpreting the data.
The reason we made this choice is because whenever events take place that materially alter the financial circumstances of a company (like a change in their tax liability), the company is required by accounting rules to make an immediate estimate of the effect on the company's bottom line, and adjust current-year income (and tax) accordingly. This means that when you look at reported corporate income and tax provisions in any company's 10-K for 2017, what you're really looking at is two separate things folded together: the income the company earned in 2017 (and the associated tax on that income), and the company's estimate of how the 2017 tax cuts are likely to affect both earnings and tax down the road.
So, does all this mean the claim isn't true? No, but it's complicated. Again, here's Gardner:
While it is narrowly true that the NYT's 10-K reports $111 million of pretax income and no current federal income tax -- and while that would be a sensible way of calculating the company's effective tax rates in most years -- for 2017 it's hard to know what it really means.
To place the claim in context, Gardner looked at the years around 2017: 2015, 2016, 2018 and 2019. He wrote:
You see that in those four years, The New York Times reported $458 million of pretax income and $112 million of current federal income tax, for a 4-year average tax rate of 25%. During two of these years (2018 and 2019) the statutory tax rate was 21%, and in the other 2 years it was 35%. So that four-year rate is pretty close to what you'd expect from a company paying right at the legal statutory rate during the period as a whole.
To reiterate, I think most people who analyze corporate tax data have recognized the difficulties in interpreting the 2017 data and have chosen not to use it. The numbers you're quoting are certainly not a fabrication, but they also don't tell us what we really want to know.
Last year, when the claim first surfaced, CBS spoke to tax expert Robert Willens about why the Times's taxes "remain a mystery." Like Gardner, he referenced the changes in tax law that took place in 2017 as being significant. Those changes made it harder to estimate what companies are actually paying, Willens said.
Citing Willens, CBS reported:
When the tax law changed, the Times Co. had a tax asset, meaning it had a credit, likely because it had lost money in the past, that it could use to lower its future tax bills. But once the tax rate dropped, the Times Co. acknowledged that that tax benefit wasn't worth as much as it thought. It therefore had to lower the value of those assets for the 2017 tax year.
The drop in the value of those assets appears to have resulted in a nearly $69 million tax gain, wiping out (and then some) the nearly $42 million that the Times Co. reported as its tax expense in 2017. But again, that tax gain, like with FedEx, was almost entirely on paper.
He expressed annoyance at the real-life situation. Willens reportedly said:
It's very frustrating, but currently there is no way to get an accurate number for what companies are actually paying in taxes.
Lead Stories reached out to Willens for clarification on his comments and to see if anything changed since last year. We will update this story, as necessary, if he responds.