SpaceX, the space exploration company founded by Elon Musk, has reportedly paid minimal to no federal income taxes since its establishment in 2002, despite receiving billions in federal contracts.
SpaceX Uses Net Loss Rule To Offset $5 Billion In Taxes
SpaceX has been able to leverage a legal tax benefit to offset future taxable income using more than $5 billion in losses incurred by late 2021. This benefit, which was made indefinite for all companies by President Donald Trump in 2017, allows SpaceX to avoid paying tax on nearly $3 billion in future taxable income, according to The New York Times.
SpaceX, which has a significant reliance on U.S. government contracts, has not paid federal income tax on its $5 billion in taxable income, a fact that tax experts find noteworthy.
Despite its financial success, SpaceX can continue to utilize the tax benefit. The company, valued at over $350 billion, has been investing heavily in its business, incurring losses from the start. The tax advantage, called a net operating loss carryforward, allows SpaceX to offset an equivalent amount of future taxable income and thereby avoid federal income taxes.
SpaceX’s tax strategy has drawn attention from tax experts, who note the significant benefit of not having to pay tax on $5 billion in taxable income. Danielle Brian, the executive director of the Project on Government Oversight, called this “quaint” and stated that the tax benefit was “clearly not intended for a company doing so well.”
Federal Deals Make Up Over 75% of SpaceX's Earnings
The documents reviewed by the publication provide the first insights into the extent of SpaceX’s dependence on federal contracts. In 2020, these contracts generated about $1.4 billion, or 83.8% of the company’s total revenue. The following year, federal contracts contributed 76% of the total revenue.
SpaceX’s revenue is expected to reach $15.5 billion this year, up from about $7.4 billion in 2023. The documents showed that SpaceX informed investors that Starlink had 2.5 million users in 2023 and generated roughly $8 billion in revenue last year, more than double the previous year's revenue and outpacing SpaceX's rocket division in both years.
Documents also show SpaceX paid some income taxes in recent years, including $483,000 to foreign governments and $78,000 in state tax in 2021, plus $6,000 in 2020–21 without specifying the jurisdiction, whether local, state or federal.
The Wall Street Journal reported that the company generated $55 million in profit on $1.5 billion in revenue in the first quarter of 2023. Companies can simultaneously report profits to shareholders and tax losses to the I.R.S. in any given year due to differences in how certain items are treated.
Musk Criticizes Trump Even As SpaceX Gains Benefits
This news comes in the wake of Musk’s recent criticism of President Trump’s energy policies. In July, Musk slammed Trump for axing subsidies on renewable energy, stating that SpaceX won NASA contracts by doing a better job for less money.
On the other hand, Trump has also made moves that have benefited SpaceX. In August, Trump eased space regulations, signing an executive order that could boost SpaceX’s operations. This move came shortly after the Pentagon announced that Trump’s $175 billion Golden Dome missile defense system would feature satellite and ground-based defenses, potentially impacting SpaceX’s future contracts.
READ MORE:
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
