As far as I can tell, the article cites two things: $500M tax savings by using an accelerated depreciation schedule (unclear if they saved $500M more by using accelerated vs a regular depreciation schedule, but I assume no) and they claimed $300M in tax credits.
The article doesn't address the other $1.5B, presumably because it's easier to defend. I didn't read through the 10-K to try and figure this out.
I don't really know enough about what an accelerated depreciation schedule implies, but, taken at face value, they'd have to pay more in taxes in a deferred year which doesn't seem like foul play to me. Tax credits seem to make sense for an EV company?
EDIT: I did some learning, woohoo.
Federal corporate tax rate in America is 21%. The $300M in tax credits is post-tax not pre-tax. The $500M is a pre-tax deduction.
$2.3B - $0.5B = $1.8B
$1.8B * 0.21 = $378M
$378M - $300M = $78M
So, I can't really explain why they didn't owe ~$78M in taxes, but I assume rounding and cursory other stuff. The article probably didn't call out other, minor deductions, but it's also fair of them to not have done so. I was wrong when I said, "The article doesn't address the other $1.5B, presumably because it's easier to defend."
I think the real thing here is the weaponization of EV tax credits as some sort of boogeyman. Personally, I'm all for incentivizing EV companies to create in America.
That's one of the things that I've found odd. A lot of people that very strongly support things like tax credits for EV cars, in order to fight climate change, will then turn around and talk about how terrible they are when they're actually used, such as in the article here. A lot of times people don't seem to have a consistent view of what they actually want, and will be outraged by the results of policies they themselves supported.
One can only imagine the headlines if these environmental credits were cancelled ("anti-environmental actions are going to bring about climate change and doom us all").
That's a win-win all around, the consumer saves $7,500 off the list price up front, they have to finance less etc, and Tesla gets a tax credit.
If we want to talk specifically about social media sites like HN, the conversation is really steered by the up/down votes rather than the people in the threads. Every possible perspective tends to get a comment then the gestalt decides which ones they like. The upvoters anonymous and the downvoters are often ... a weird crew with motives that are often hard to divine.
Replacing a 2019 Toyota Rav4 with a 2025 Tesla in North America, or.....
Replacing a 1985 VW Jetta with a 2019 Toyota Rav4 in India?
I see YouTube videos all the time where people in third world countries are using turn of the century hit-and-miss engines to power things like water pumps or machine tools. These countries are leaking countless gallons of oil and fuel into the ground using engines and equipment that are over 100 years old when Habor Freight sells brand new engines for $150.
To me, the ease with which you can sell a new car to a yuppy in the USA (who doesn't even need a new car) is baffling. Dollar for dollar, there is so much low hanging fruit. Don't get me wrong, I want to see first world countries lead the charge, but yuppys need to be more realistic in their "environmental" decision making. There is nothing frugal or environmental about having a 20" touch screen in the dash, or replacing your >5 year old car.
Pre-1925 engines must be a minuscule fraction of all engines in active use, even in poor countries.
This happens becauase the person who buys a new car sells their old one to someone else, who sells their old one to someone else, and so on down the chain.
The oldest cars from America go to other cheaper markets replacing the cars in use there.
Estimating how much value it lost is subjective so the government specifies what percent of the value you can deduct each year. Straight line deprecation is when the depreciation expense is the same percentage of the original cost every year. Accelerated depreciation is when the early years use a higher percentage than the later years. In both cases the total amount of depreciation is the same but accelerated depreciation is often a better approximation for actual value. The true market value of a piece of equipment will decline more in absolute dollars in the first year than the fourth year. It's also what businesses typically pick when given the choice, because a bigger deduction now is better than a bigger deduction later.
It's not any kind of tax dodge at all, it's just an accounting method in the tax code.
I guess the caveat here is that it can be adversarial to short-term investors since the businesses assets are becoming worth less more quickly which gives less time for income to offset those expenses. That makes the company's expense:value ratio look worse.
I don't think the answer is to say that everyone needs to follow a linear depreciation curve. Fancy, new tech depreciates much more quickly in its early years than well-established tech. So the basic concept seems to make sense in some applications and I would assume Tesla has some pretty fancy tech that they're investing in.
On the other hand, this area feels a little fishy to me because a more accelerated curve limits the ability for a government to effectively apply taxation to companies during their administration. If companies were able to instantaneously depreciate their assets for 100%, assuming investors were OK with it, they'd just do that whenever the political winds blew in their favor for maximum savings.
It doesn't seem like there's any perfect, one size fits all solution. Accelerated depreciation seems fine, and can reflect the reality of investing in certain tech, but can also be abused by giving companies the ability to cash in when the time is right.
https://cointelegraph.com/news/tesla-600-million-bitcoin-gai...
Ideas which conceptually make accounting “better reflect” the real word, but in reality add a lot of complexity for very little benefit. Getting rid of accrual accounting and simply allowing full expensing of asset purchases with losses to carry over to the next tax period would save everyone a lot of headaches, for a negligible reduction in government tax revenue.
It would also make a lot of accountants redundant, which is probably the main reason they oppose streamlining accounting practices.
$2.3 billion was the income, not the tax bill.
Presumably $500M accelerated depreciation and $300M of tax credits covered the effective tax bill on $2.3B income.
EDIT: Oh, apparently tax credits aren't pre-tax. So if their tax liabilities on $2.3B were $300M then they'd owe $0.
Yes, tax credits reduce the tax bill, not the taxable income.
It's a hot topic right now since Trump just ended the EV credits. Which you'd think Musk would want to keep.
And beyond this article, Musk has "quiet quit" on Tesla as a car company, based on his earning calls. They said little about cars and instead deflected the hype to "AI robots" in 2027. It's all just so weird.
The goal of a good CEO is to be forward thinking and that's what he's doing. Tesla continues to grow on many fronts and is still accumulating money in the bank.
Meanwhile most other car companies are in big, big trouble. (Volkswagen, GM, etc)
> No mention of reinvestment
> "Tesla was able to avoid paying ... taxes ... by claiming ... tax credits" (presented as bad somehow)
> "We're not backing down"
Where or where is the media coverage that attempts to speak to people who don't already buy in to the premise? This isn't journalism it might as well be blogging. Congratulations, you've made the world more polarized!
1. Tax credits are illegitimate
2. Accelerated depreciation is illegitimate
3. Ownership of productive companies is "hoarding wealth"
4. Journalism is in a battle with the current administration
5. Paying taxes is a good thing
If you _don't_ buy into these premises, for which there is no argument given for or against, you'll be tilted against the author. If you do, you'll be tilted against Tesla. This is polarizing. There is no nuance, there is no learning, there is no insight.
1. I should be able to deduct the same sorts of things from my individual income that corporations routinely deduct from their income.
If a corporation can legally shield all of their income from taxes, why can't I shield all of my income from taxes? Corporations can deduct the costs of all the things they have to do to make money and do weird depreciation tricks, but I cannot deduct the costs of all the things I must pay for in order to make my own income.
Is this controversial?
1. tax credits are legitimate. But who is using it and on what matters. getting hundreds of millions of tax credit to make horribly constructed cybertrucks does not inspire confidence. But I did want more EV benefits (those are gone now. Alas. "Drill, baby, drill"
2. I don't really know enough about accelerated Depreciation to comment
3. Ownership of productive companies is good. Keyword: "productive". Tesla has been cutting staff, closing dealerships, and again with the cybertruck. "profitable" does not equate to "productive" in my eyes.
4. Yes, Journalism for the most part is in a battle with the current administration
5. Always the fun topic to talk about. As a concept, paying taxes is good. Any more deliberation into reality may as well be its own separate topic. I do personally think corporate needs to provide more taxes, but Trump clearly disagrees this year (corporate tax cut from 21% to 15%, I believe).
$300M in tax credits is basically the same as them paying $300M in tax and then getting a big check from the government for meeting some goal. I don't think it should be treated as any kind of avoidance on behalf of the company. Instead, check if the government paid that money for something useful, and if they didn't then blame the government.
Given the level of corruption in the US government in general and the role of Musk in the current administration in particular that doesn't seem unlikely to me
This is specifically corporate income taxes.
I mean they didn't just decide not to pay taxes. They followed the tax law. They accelerated some depreciation to take it now at the expense of a higher tax bill later. They took advantage of some government credits.
Corporate taxation is only one point of taxation. They pay payroll taxes, they pay sales tax on equipment they purchase at their factories, their employees pay taxes when they get paid.
Low corporate tax rates are unpopular because the optics are bad, but it doesn't actually mean that money is flowing through the company and into their employees without taxation anywhere. As soon as they do nearly anything with that money other than buy more parts to sell, taxes are being paid.
Most states exempt equipment purchased by manufacturers from manufacturing their products from sales tax. I believe many also exempt raw materials that go into those products.
That Tax Foundation says [1] that both California and Texas (which I believe are the states where Tesla has factories) are states with such an exemption, although I'm seeing other sources that say that California's is just a partial exemption.
[0] https://www.npr.org/sections/money/2012/10/18/163106924/a-ta...
That's just, like, your opinion, man.
Seriously, they're two entirely different classes of things. One is an inert physical object, the other is a legal instrument that can collect and retain money, and shelter its shareholders and employees from legal and financial outcomes.
If I asked the average person on the street, which of these two things do you think would be more likely to pay taxes, they would look at me like an idiot.
But corporations are people..? Can't have it both ways right :/
Unless I'm missing something here.
The citizen's united ruling of 2010 disagrees with you, in the US at least.
>So who pays the corporate tax?
I don't know. the same one who pays for campaign donations. IANAL.
Don't get me wrong - I don't there the media landscape should tolerate only one or a narrow range of viewpoints. We are healthier when there is a diversity of angles being pursued in journalism. And ideally, high enough media literacy in society to recognize lies and low-effort garbage.
I completely sympathize with the desire for nuance, the problem is, there's an inherent tension between reporting facts and providing a nuanced view and galvanizing people into action. I think this venue is clearly trying to do the latter. This is not meant to convince anyone that this is a problem, it's meant to fuel the fire of people who do think it's a problem. Authors have different rhetorical aims whenever they write. You can challenge their use of the word journalism as a descriptor on these grounds, but it's not as though they presented any falsehoods. They are clearly writing to an audience. And, honestly, when problems really are as blatantly severe and bordering on catastrophe as they are today, there's really very little value in trying to convince stodgy people who still refuse to acknowledge a problem.
I think it better money goes into the economy, in a reasonably efficient way, rather than being taken by the State, and used in an unreasonably inefficient way.
Depending on which line on the income statement this is about, it is either money that could be sent to shareholders as dividends or buybacks, or money going into the cash reserves of the company.
And you are pushing a lot of opinion on the "unreasonably inefficient way". Governments are often very efficient spenders when you look at outcomes, often making private industries look awful. Medicare is a great example. It has a expense ratio of about %1.3, whereas the estimate for the Medicare Advantage plans (where they get to play games about who they let in) is that most of those private companies have an expense ratio of about %17. Private insurers are generally a bit better, usually at about %8.
To put more of a point on this, in the Affordable Care Act it was felt necessary to put a cap on the expense ratio of private insurers at %20 (%15 for large providers). That right there defines the "unreasonably inefficient way" we should be talking about.
I am not arguing that there is no waste in government, that would be silly. But the notion that government spending is generally a waste is not supported by the facts, and is more of a religious statement.
As if the roads just pay for themselves.
Not in a small amount, we talk about more than 1B USD.
https://techcrunch.com/2022/07/20/elon-musk-discloses-that-t...
From a tax perspective, they are spending to acquire assets, which is very convenient.
Otherwise all companies would just buy gold with their profits and never pay taxes.
In fact, when Tesla bought Bitcoin accounting rules for Bitcoin were very unfavorable in that the bitcoin wasn't valued at the price in a given quarter but, and it's hard to believe, only at the lowest ever price. So on paper the company could only loose money by holding Bitcoin.
That idiotic rule was part of Democrat's lawfare against Bitcoin.
This accounting rule was changed recently.
Also, Tesla never bought Dodgecoin. That Techcrunch article is just wrong.
Not in this case: https://electrek.co/2024/12/30/tesla-replaced-laid-off-us-wo...
Pretty sure that wasn't even the only layoff this year.
Edit: I legitimately don't know (and am a bit confused as to the exact thing the article calls income). I just know as often an R&D expense I think my salary is taken out before net income
that's when I learned I'm playing the wrong game by trying to provide private services instead of targeting gvt.
quite an understatement: they broke it whlie Obama was still in office.
regardless, the idea was good but good ideas always have bad actors. It's easy to forget that Musk of 2008 had a very different image compared to Musk of today.
It's the same logic people use to suppress minimum wage. But prices keep going up. Almost like that's not as big a factor as we thought.
You can't even see you contradict yourself.
If all companies were supported by Obama but they all failed, but not Tesla, it wasn't Obama who made companies succeed but Musk who made Tesla succeed.
Not to mention you fail to enumerate those supposed subsidies.
The only significant think I know about is $465 million LOAN in 2010, which Tesla quickly and fully paid off.
Compare that to $13.4 billion loan to GM in 2008 from Bush and additional $50 billion in 2009 to bail them out from bankruptcy.
The Government (i.e. tax payers) lost $10 billion.
GM would surely not exist if not for the tens of billions of loans.
Musk would probably find a way to make Tesla work even without the $465 million loan.
I hope you see how biased your take is.
You harp on Tesla benefiting from gov support while ignoring that many other companies also get support and direct competitors like GM got 20x more support.
But yeah, the guy that runs that company is a grifter.
if all you care about is raw numbers, you'll fall for the grift everytime.
When those decisions were made, Tesla's CFO didn't know who'll win the election.
Trump will likely cancel the $7.5k EV credit so I don't see the "policies favorable to Tesla".
Trump was campaigning on renewing his previous corporate tax cuts and making more tax cuts. It's not a secret and not specific to Tesla.
Tesla's earning calls tell me he should have just paid the taxes this year, in that case. Welp, hindsight.
1. Companies see downwinds of a recession, so they want to wait for good times to do anything. Actually grow, pay off debts, make lateral moves.
2. companies were banking on administration changes to help bailed them out. So far, they seem to have won that gamble.
so there's general truth and then there's speculation about used to influence decisions.
In other words, no experience with how corporate taxes work.
I the person am taxed on revenue.
If instead I have a corporation handle everything then I can come up with (relatively simple) systems so that I don't pay taxes and the corporation doesn't pay taxes either.
If a company invest $3B to become profitable, it seem entirely logical that they can use those expenses to offset any future profit.
If you don't don't do that, companies that require large investments to become profitable simply won't exist.
The extent to which I can invest in myself is using business supplies or equipment for personal tasks here and there. Like, print some things or use some software I didn't pay taxes on.
I know some people go as far as driving their work vehicles around, but that's totally illegal both in terms of insurance and tax purposes here.
We could solve the deficit, pay down our debts and many people would pay less in taxes, if we eliminated all taxes and replaced them with a Land Value Tax.
If an acre of land in New York City was 1 million dollars per year with a LVT, a high rise apartment with 100 units would have people paying 10,000 per year for their share. That would be a tax cut for many people.
Yes, grandma in the Bay Area in a massive McMansion on a fixed income would be displaced but that land use was inefficient and they were not paying their share of property taxes today under our current system anyway thanks to California property taxes.
The introduction of income tax fundamentally changed the size and scope of government. With the current size of federal spending, much of it driven by entitlement programs, defense, and interest on debt, there is plenty of room to trim the fat. Bureaucracy, inefficiencies, and bloated administrative costs are all ripe for re-evaluation and the axe.
There were of course lots of other taxes being levied in the USA, poll taxes, property taxes, but the money went to state government rather than federal.
But why make sense when you can opine. It's so much easier.
EDIT: I guess that your Meta income number is yearly and it checks out. The article says that Tesla "reported $2.3 billion in income" but I think they got that number for the last quarter, because even in the SEC document linked in the article[0], page 49, I see $7B net income, the same number as in their earnings release[1]. But the SEC document also lists $1.8B taxes for the year 2024, so that seems to contradict the headline of the article, but they're talking only about US federal taxes, I guess most of these taxes is non-US or state.
EDIT2: Yes, on page 81 it's listed that they paid 0 federal taxes, $45M state taxes, and $1.3B foreign taxes. $2.3B in income for whole 2024 is US only, $7B is global.
[0] https://www.sec.gov/Archives/edgar/data/1318605/000162828025...
[1] https://digitalassets.tesla.com/tesla-contents/image/upload/...
Tesla is barely profitable at all, and if Trump ends EVs subsides Tesla will be severely bleeding money.
It's the quintesential meme stock.
The system IS rigged, and everyone knows it. https://www.youtube.com/shorts/lNi9DIVkXpo?feature=share
What kind of bullshit is this? If Musk didn't follow the "guidelines" (i.e. laws, there are no "guidelines" when taxes are concerned, there are laws), why won't you point out where he doesn't and provide evidence? If he does follow the laws, but you don't like what these laws allow him to do (which is a legitimate opinion, of course), then don't tell "it's optional for him to follow tax guidelines" - he follows the guidelines, that is, laws, it's just that the laws, in your opinion, need to be changed. Don't vaguely accuse people in being criminals without any evidence of any crime.
Then in the ending blurb they are vaguely implying Trump is somehow threatening their lives, without again providing any evidence. I suspect this source is not at all trustworthy and is worried more about raising money on sensationalized clickbait than informing people.
