SpaceX Internal Documents Obtained by NYT
Offsetting Losses Against Taxable Income Through Tax Benefits
The New York Times (NYT) reported on the 16th (local time) that Elon Musk's space company, SpaceX, has secured billions of dollars in federal government contracts over the past two decades, but appears to have paid little to no federal corporate income tax.
According to the NYT, which obtained and reviewed internal SpaceX documents, the company has paid almost no federal income tax since its founding in 2002, and has privately told investors that it may continue to avoid paying such taxes in the future.
The documents indicate that by the end of 2021, SpaceX had accumulated losses exceeding $5 billion. By leveraging these losses, the company can legally offset a portion of future taxable income, thereby reducing its tax liability. As a result, SpaceX does not have to pay federal corporate income tax until it generates profits that exceed its accumulated losses. Previously, there was a time limit on how long such losses could be used to offset taxable income, but the Trump administration in 2017 eliminated this expiration period.
Gregg Polsky, a tax law professor at New York University School of Law, explained, "Given the scale of SpaceX's operating losses, it is almost certain that the company has paid little to no federal tax for several years," adding, "Even if the company had positive taxable income in recent years, the magnitude of its losses makes it unlikely that any taxes were paid."
Daniel Brian, director of the Project on Government Oversight, an organization that investigates government corruption and waste, commented, "These tax benefits are intended to encourage companies to stay afloat during difficult times," and pointed out, "It is unusual for SpaceX to take advantage of them, as the system was clearly not designed for such a highly successful company."
SpaceX has operated at a loss since its inception. It began with a $4 million loss in its first year, 2002, then reported a $341 million loss in 2020 and a $968 million loss in 2021. While SpaceX may have paid some taxes in the past, the NYT noted that these were likely paid to foreign or state governments, not the federal government. The report estimated that in 2021, SpaceX paid $483,000 in income taxes to foreign governments and $78,000 to state governments.
SpaceX Relies on Federal Contracts for Most of Its Revenue
The NYT highlighted that it is noteworthy for SpaceX, which relies on federal contracts for the majority of its revenue, to pay no federal corporate income tax. According to the documents, federal contracts accounted for $1.4 billion in 2020, representing about 84% of SpaceX’s total revenue. In 2021, SpaceX earned $1.7 billion through federal contracts, which made up 76% of its revenue.
Musk stated that SpaceX's revenue is expected to reach $15.5 billion this year, more than double the $7.4 billion recorded in 2023. A significant portion of this revenue comes from its satellite internet service, Starlink. Starlink currently has 6 million subscribers, more than doubling from 2.5 million in 2023. In 2023, Starlink generated approximately $8 billion in revenue.
As a privately held company, SpaceX is valued at $350 billion, making it one of the most valuable private companies in the world. SpaceX works closely with the Department of Defense and NASA, performing missions related to national security.
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