10-6-17 7:19 AM EDT | Email Article

By Philip van Doorn, MarketWatch

Others, including 7 Dow components, currently pay tax at a rate that is lower than 20%

There's plenty of reading to do to understand President Donald Trump's tax reform proposal (http://www.marketwatch.com/story/how-to-separate-fact-from-fiction-in-tax-reform-2017-09-27), but one major feature is quite simple -- a lowering of the federal income-tax rate to 20% from the current 35%.

Trump has heralded the corporate rate cut as a move that would greatly benefit Corporate America, although many U.S. companies currently pay far less than the top 35% rate. However, it is widely viewed as the main reason many multinationals tend to keep a lot of cash overseas, as they are reluctant to repatriate it as long as it would be subject to such a high rate.

Read:Why tax repatriation won't jolt the U.S. dollar (http://www.marketwatch.com/story/why-tax-repatriation-wont-jolt-the-us-dollar-2017-09-27)

Related:These are the 5 U.S. companies with the biggest overseas cash piles (http://www.marketwatch.com/story/these-are-the-5-us-companies-with-the-biggest-overseas-cash-piles-2017-04-26)

We have compiled lists of companies to review what's at stake as Congress battles over the proposal for the next several months.

Any company's tax situation can change radically from quarter to quarter or year to year, because of such items as major asset write-downs, gains on sales, realization of deferred tax assets, legal settlements, accounting adjustments or other events. So we decided to use quarterly data provided by FactSet to calculate median effective income-tax rates for the past four quarters.

These tax rates include any state and local income taxes the companies might pay. But regardless of whether a company is paying a boatload of non-federal income taxes, having a high combined effective tax rate means the stakes are high for the companies and their shareholders.

If Trump can make a deal with members of both houses of Congress to slash the corporate income-tax rate, analysts will immediately raise earnings estimates for high-tax companies, which can be reasonably expected to light a fire under the stocks.

These are the median effective income-tax rates for the 30 companies in the Dow Jones Industrial Average, over the past five reported quarters:

Company                                Ticker   Median effective income-tax rate - past five reported quarters 
UnitedHealth Group Inc.                US:UNH                                                              40% 
Home Depot Inc.                         US:HD                                                              36% 
Verizon Communications Inc.             US:VZ                                                              34% 
Walt Disney Co.                        US:DIS                                                              33% 
McDonald's Corp.                       US:MCD                                                              33% 
American Express Co.                   US:AXP                                                              32% 
Wal-Mart Stores Inc.                   US:WMT                                                               31% 
Visa Inc. Class A                       US:V                                                               29% 
3M Co.                                 US:MMM                                                              28% 
Caterpillar Inc.                       US:CAT                                                              28% 
J.P. Morgan Chase & Co.                US:JPM                                                              28% 
Goldman Sachs Group Inc.                US:GS                                                              27% 
United Technologies Corp.              US:UTX                                                              26% 
Apple Inc.                             US:AAPL                                                             26% 
Travelers Cos.                         US:TRV                                                              25% 
Boeing Co.                              US:BA                                                              24% 
Procter & Gamble Co.                    US:PG                                                              23% 
DowDuPont Inc.                         US:DWDP                                                             22% 
Intel Corp.                            US:INTC                                                             22% 
Exxon Mobil Corp.                      US:XOM                                                              21% 
Coca-Cola Co.                           US:KO                                                              21% 
Cisco Systems Inc.                     US:CSCO                                                             21% 
Merck & Co.                            US:MRK                                                              21% 
Johnson & Johnson                      US:JNJ                                                              19% 
Pfizer Inc.                            US:PFE                                                              18% 
Chevron Corp.                          US:CVX                                                              14% 
Nike Inc. Class B                      US:NKE                                                              14% 
Microsoft Corp.                        US:MSFT                                                             12% 
International Business Machines Corp.  US:IBM                                                              10% 
General Electric Co                     US:GE                                                               1% 
                                                                                               Source: FactSet 

As the table illustrates, seven of the 30 Dow components currently pay less than a 20% tax rate.

To broaden our horizons, we also looked at S&P 500 companies domiciled in the U.S., for which effective tax rate data is available for at least three of the five most recently reported fiscal quarters. Here are the 10 with the highest median effective income-tax rates:

Company                         Ticker   Median effective income-tax rate - past five reported quarters 
Newmont Mining Corp.            US:NEM                                                              50% 
Hewlett Packard Enterprise Co.  US:HPE                                                              46% 
Nordstrom Inc.                  US:JWN                                                              45% 
CenturyLink Inc.                US:CTL                                                              45% 
Aetna Inc.                      US:AET                                                               44% 
Centene Corp.                   US:CNC                                                              44% 
TripAdvisor Inc.                US:TRIP                                                             43% 
W.W. Grainger Inc.              US:GWW                                                              41% 
Hilton Worldwide Holdings Inc.  US:HLT                                                              41% 
Amazon.com Inc.                 US:AMZN                                                             41% 
                                                                                        Source: FactSet 

And here are the 10 U.S. domiciled S&P 500 companies with the lowest median tax rates over the past five reported quarters:

Company                                  Ticker   Median effective income-tax rate - past five reported quarters 
Mosaic Co.                               US:MOS                                                             -40% 
Apartment Investment and Management Co.  US:AIV                                                             -37% 
Microchip Technology Inc.                US:MCHP                                                            -35% 
Arthur J. Gallagher & Co.                US:AJG                                                             -34% 
Zimmer Biomet Holdings Inc.              US:ZBH                                                             -33% 
eBay Inc.                                US:EBAY                                                            -32% 
Boston Scientific Corp.                  US:BSX                                                             -17% 
Thermo Fisher Scientific Inc.            US:TMO                                                              -4% 
Welltower Inc.                           US:HCN                                                              -3% 
Kimco Realty Corp.                       US:KIM                                                              -2% 
                                                                                                 Source: FactSet 

If a company's tax rate is negative, it indicates a net loss, which means the company can carry the tax loss forward to other years and offset income which would otherwise be taxed.

Read now:Why is Ireland the U.S. government's third-largest creditor? (http://www.marketwatch.com/story/how-did-ireland-become-the-us-governments-third-largest-creditor-2017-09-20)

-Philip van Doorn; 415-439-6400; AskNewswires@dowjones.com

 

(END) Dow Jones Newswires

10-06-17 0719ET

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