- Besides the standard array of tax breaks described above, the 2020 data introduce a new factor driving down corporate tax bills: the CARES Act, ostensibly designed to help people and businesses to stay afloat during the pandemic. Some companies used a CARES Act provision to "carry back" 2018 or 2019 losses to offset profits they reported in prior years, resulting in a rebate that reduced their 2020 taxes, in some cases to less than nothing.
- The CARES Act loosened rules for the treatment of losses not just in 2020, but also retroactively for losses reported in 2018 and 2019, which have nothing to do with the pandemic. Even worse, it allows corporations to carry back losses as far as five years. This means losses incurred in 2018, 2019, and 2020 can offset income taxed at the higher 35 percent tax rate in effect before 2018. Taxing profits at one rate while allowing losses to produce savings at a higher rate is an invitation for companies to play games, moving profits and losses around from one year to another on paper to reduce their tax bills.
. . . I'm not sure what you mean by carry back. Carry forward losses are real. No one likes losses. No rational person would create a $1 loss in order to get a $.40 write-off. That doesn't make sense.
I'd never heard of carry-BACK losses either. Apparently, a corporation can carry a 2019 loss BACK and get a rebate on the tax paid in 2017. This would be preferable to carrying FORWARD to a year when the tax rate was less than in 2017.
As for nonsensical losses: (a) Some companies did in fact lose money during the pandemic, (b) corporations can structure transactions to move profits from one year to another.
Anyway, IIUC the new law doesn't prohibit some of these loopholes — the article just gave them as examples of what corporations do. The law bypasses the loopholes by imposing a minimum tax. Obviously the tax is NOT on sales, but how they define taxable income I don't know.
Trying to analyze the details of loopholes, countermeasures, and counters to the countermeasures is beyond our scope here.
The key point is that some corporations are very profitable yet pay little or no taxes. The law tries to find a way to circumvent that. Did they do a perfect job? It would take huge expertise and hundreds of hours for us to answer that here, but the answer is probably: Imperfect, but it sounds like they did a pretty good job toward their goal:
getting large PROFITABLE corporations to pay a "fairer" tax.
It almost sounds like you are unhappy with that goal.