CMS Energy headquarters in Jackson.Last year, CMS Energy earned $587 million in profits. It didn’t share a penny with Uncle Sam.
In fact, it received a refund check from the federal government of about $15 million.
That’s thanks to tax credits, loopholes and incentives Congress and the president have granted to companies such as CMS to spur investment during the recession.
If the Jackson-based company had paid the federal corporate tax rate of 35 percent, it would have paid $471 million in taxes over the past three years as it recorded $1.3 billion in profits.
But the last time it paid federal taxes was 2008. That year, it paid $4 million.
John Bedient, associate professor of economics and management at Albion College, said CMS is doing what any corporation is allowed to do.
“These companies are using perfectly legal mechanisms to lower their taxes,” he said. “This is available to everyone, right down to your local hairdresser.”
Bedient said companies have an obligation to do what they can to the maximize return for their investors.
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Ted Vogel, vice president and chief tax counsel for CMS and its principal subsidiary, Consumers Energy, said lower taxes for the company also have meant lower utility rates for customers.
“The benefits of tax reductions go to our customers to help keep rates low,” Vogel said.
But in a time of record federal deficits, Bedient said this revenue will continue to be lost unless the public pushes Congress to change the tax code.
“Our tax laws are a combined mish-mash of special attachments,” he said.
Vogel said much of what has helped companies such as CMS to pay little or no federal taxes has been the a policy called “bonus depreciation.”
Bonus depreciation allows companies to earn credit on their tax bill for investments faster.
Congress put the policy into place for several years after the Sept. 11, 2001, terrorist attacks. It was extended again in the federal stimulus plan.
Vogel said Congress did so to help companies get through the recession by giving large, up-front tax deductions for making investments.
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Last year, Consumers invested more than $1 billion in the state, including environmental upgrades at its coal plants, a plan to invest $400 million over 10 years at its Ludington Pumped Storage facility and construction on its first wind farm.
“It returns cash to the company earlier,” Bedient said. “It is believed that the faster a company can recoup its investment, the easier it is to take that investment and put it back in the company.”
CMS and other companies actually can bring down the amount of taxes they owe to the point where they don’t owe anything. And when they lower their tax bill to below zero, rather than receive a refund, they are allowed to carry forward such amounts.
“We have a large tax loss carry-forward,” Vogel said.
But it doesn’t always work out to the company’s benefit.
From 2005 to 2007, CMS did not earn a profit, recording a loss every year. But it still paid federal taxes in each of those years, totaling about $132 million.
While the company has not had to pay any federal taxes the past two years, it still has paid state and local taxes, too.
The company paid about $26 million in state and local income taxes in 2010. It paid another $185 million in property taxes and personal property taxes.
“Consumers Energy is one of the very largest payers of personal property taxes in the state,” Consumers spokesman Dan Bishop said.
Because it provides gas or electricity service in every county in the Lower Peninsula, the utility is the largest taxpayer in some municipalities, Bishop said.
“That’s money that goes for better roads and local services,” he said.