Musk's SpaceX doesn't pay federal taxes, thanks to Trump
What's the story
Despite receiving billions of dollars in federal investments over its two-decade-long existence, Elon Musk's SpaceX has paid little to no federal taxes. The New York Times reported that the company has privately told its investors that it may never have to pay these taxes, thanks to a 2017 law change by US President Donald Trump.
Tax advantage
Trump's 2017 tax law change crucial for SpaceX
The 2017 tax law change, part of Trump's Tax Cuts and Jobs Act, removed the expiration date for a tax benefit that lets companies offset future taxable income with heavy losses. This means SpaceX can apply nearly $3 billion of its losses indefinitely against future profits. The company had reported losses of some $5.4 billion by late 2021, which created this net operating loss carryforward benefit.
Tax anomaly
SpaceX's unusual situation
Experts have called SpaceX's situation unusual, considering the company's heavy reliance on US federal contracts for profits. The company was running at a loss for its first two decades of operation, much like other companies such as Uber and Tesla. However, it turned profitable in 2022 after reporting losses till 2021.
Future prospects
Musk expects $15.5 billion in profits this fiscal year
Musk had said in June that SpaceX could make over $15.5 billion in profits this fiscal year. However, it's still unclear how much tax the company will pay back to the federal government, given its ability to use the tax benefit even during prosperous times. The NYT's review of documents covering 23 years found that while SpaceX may have paid some income taxes over the years, they were unlikely to be federal taxes.