Tesla, Amazon Are in Line for a Tax Hit From Inflation Reduction Act

The bill includes a 15% minimum cash tax on income as reported under generally accepted accounting principles. Called the “Amazon Tax,” it is expected to raise  $222 billion over 10 years and $35 billion in 2023, Chris Senyek, chief investment strategist at Wolfe Research, said in a Thursday research note. “Based on our bottoms up work across large publicly traded companies, we struggle to find how this provision will raise anywhere close to this amount,” Senyek said. 

The tax, set to take effect in 2023, imposes a 15% minimum tax rate on income as reported in GAAP financial statements. It applies to companies that report an average of more than $1 billion of pretax profits for three years. 

For companies with foreign parents, the tax will apply at the U.S. subsidiary level if there is $1 billion of consolidated profit and also more than $100 million of U.S. profits, according to the note. Senyek listed
Shopify
(ticker: SHOP) and
UBS Group
(UBS) as likely to feel the impact. 

Senyek produced a screen of 35 U.S. companies, with cash rates of less than 15%—cash paid in taxes divided by pretax financial statement income—that would potentially be affected. “To be sure, as currently written, the provision is complicated and somewhat unprecedented, making estimated impacts inherently difficult,” he wrote in the note. 

Here are 10 companies on Wolfe Research’s list that will likely face effects from the bill.

First up is Amazon.com (ticker: AMZN), which enjoyed a 7.1% median cash rate from 2019 to 2021, according to Senyek. Its estimated profit from 2020 to 2022 was $21 billion.

Tesla (TSLA), which had a median cash tax rate of 9.4% from 2019 to 2021, also made the list. The EV maker’s estimated profit from 2020 to 2022 was about $7.2 billion, Senyek said in the note.

There’s also
American International Group,
or AIG (AIG), which had a median cash tax rate of 6.1% and an estimated profit of $4.6 billion from 2020 to 2022, the note said.

Nvidia’ss (NVDA) median cash tax rate was 9.3% from 2019 to 2021, while its estimated profit was $8.4 billion 2020 to 2022. 

The  median cash tax rate for Advanced Micro Devices (AMD) was 5.2%. Its estimated profit for 2020 to 2022 was about $3 billion. 

The screen also listed three energy companies that have a median cash rate of 0% for 2019 to 2021, suggesting that they paid little in taxes in recent years, Senyek said. The three companies include
Pioneer Natural Resources
(PXD), which had an estimated profit of about $4.6 billion from 2020 to 2022;
Diamondback Energy
(FANG), with an estimated profit of $1 billion for the three years; and
California Resources
(CRC), with an estimated $1 billion in profit. 

Moderna
(MRNA) has a median cash rate of 3.6% and an estimated profit for 2020 to 2022 of $8.6 billion. 

Zoom Video Communications
(ZM) has a 7% median cash rate while it is estimated profit was $749 million.

Write to Luisa Beltran at luisa.beltran@dowjones.com