Bernie Sanders says ExxonMobil paid no taxes in 2009, but that's inaccurate

On Nov. 30, 2010, Sen. Bernie Sanders, an independent from Vermont, made a Senate floor speech about the gap between rich and poor in America. It soon went viral on the Internet. After receiving a number of requests by readers to fact-check it, we're doing so. (This predated Sanders' filibuster on Dec. 10, but he made many of the same points in both speeches.)

We'll take a look at two of the claims Sanders made in the Nov. 30 speech. In this item, we'll look at whether Sanders is correct about the tax bill paid by oil giant ExxonMobil. In a separate item, we examined how Sanders characterized the income earned by the top 1 percent of Americans.

In the Nov. 30 speech,  Sanders said that the government wasn't doing enough to hold companies such as ExxonMobil accountable. "These people want to cut back on the powers of the EPA and the Department of Energy so that ExxonMobil can remain the most profitable corporation in world history while oil and coal companies continue to pollute our air and our water. Last year, ExxonMobil made $19 billion in profit. Guess what. They paid zero in taxes. They got a $156 million refund from the IRS. I guess that is not good enough. We have to give the oil companies even more tax breaks."

When we asked Sanders' office for a source of his claim that the company "paid zero in taxes," they pointed us to page 92 of the company's "10-K" form filed with the Securities and Exchange Commission on Feb. 26, 2010. The form does indeed include a line that suggests that the company was refunded  $156 million in income taxes to the federal government in 2009. But there are two caveats that need to be included when citing this figure.

What does the number actually mean?

Douglas A. Shackelford, a tax professor at the Kenan-Flagler Business School at the University of North Carolina told PolitiFact that the $156 million number refers "to the U.S portion of the current and deferred income tax expense." But he added that this number does not refer to the cash taxes paid by Exxon to the U.S. government.

"It is a (Generally Accepted Accounting Principles) number, not a figure from their U.S. corporate tax return," Shackelford said. "The actual income taxes paid by the Exxon to the U.S. government is confidential information. It is not reported in their financial statements."

The company agreed with that description. "The U.S. income taxes reported in the financial statements include more than ExxonMobil’s tax bill for 2009," said Exxon spokesman Alan Jeffers. The financial statements, he said, "reflect financial transactions related to U.S. federal income taxes booked by the corporation during the year and include finalization of the taxes for prior years."

For instance, the liberal Center for American Progress quoted Jeffers saying that the company's tax figure for 2009 was heavily influenced by a holdover tax issue from 2008 that was technically recorded on its 2009 books. "ExxonMobil was required to bolster its pension plan by $3 billion when the market went down in 2008," wrote CAP's Sima J. Gandhi. "This overpayment reduced the amount of taxes owed in 2008, but the tax adjustment wasn't made until one year later, which led to an overpayment and the refund in 2009."

The three-year tax numbers listed on the 10-K do seem to suggest that the company's 2009 tax bill was unusual. In 2007 and 2008, the equivalent tax totals on the 10-K were $4.5 billion and $3.4 billion, respectively, which suggests that some unusual factor reduced the ExxonMobil tax bill into negative territory for 2009.

While the company is not obligated to publicize its tax return, and thus the actual amount it paid in taxes, ExxonMobil has voluntarily released a figure for its actual federal income tax bill in response to media requests that questioned why the company reported a negative tax liability in 2009. Jeffers told PolitiFact that the "U.S. income tax expense for 2009 activities was approximately $500 million." The company declined to provide documentation for this number, however.

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U.S. income taxes aren't the only taxes ExxonMobil paid

According to the 10-K, ExxonMobil remitted $6.3 billion in sales taxes, $110 million in state income taxes, and $1.5 billion in "other taxes and duties." All told, the company's tax liability according to its 10-K was $7.7 billion. (These numbers are not necessarily totals actually paid but derived using generally accepted accounting principles.) And that only counts taxes paid in the U.S. It paid an additional $70 billion-plus in taxes to foreign governments in 2009, $15 billion of which was for income taxes.

The company does receive credit on its U.S. taxes for many of these foreign tax payments, which helps keep its domestic tax bill lower than it would otherwise be -- a complaint of many of its critics, who would like to see a curtailment of such benefits. Another criticism is that the company is (legally) able to shield some of its income by steering it through subsidiaries based offshore.

Sanders spokesman Will Wiquist said that "some have argued that these facts are not accurate because the company paid state and foreign taxes and because they lawfully wrote off the foreign taxes when paying their American federal taxes. Clearly, that is not the point of this statement by Sen. Sanders. He is arguing that the law should be changed to make companies like Exxon pay U.S. income taxes on their massive profits."

We agree that the tax policy toward companies like ExxonMobil is a fair subject for debate, but we do think that Sanders' articulation of the facts in his floor speech was misleading, because he omitted several important caveats, including a failure to note that the $156 million number only refers to one specific type of tax -- U.S. income taxes. To his credit, Sanders did make that distinction in a June 9, 2010, speech, saying that ExxonMobil "reported to the SEC that not only did it avoid paying any federal income taxes, it actually received a $156 million refund from the IRS."

Still, while focusing on the negative-$156 million figure and saying that the company "paid zero in taxes" in 2009 was eye-catching, it is, at best, misleading. And it ignores the fact that the company paid hundreds of millions in state income taxes, sales taxes and other types of taxes. We can't verify the company's claim that its net tax was $500 million in 2009, but it's incorrect for Sanders to say "paid zero in taxes." We rate his claim False.