The magic of market timing
Most companies want to maximize profits. This year, a lot of them are more interested in maximizing losses.
How it works: As part of the CARES stimulus bill that passed in March, companies' 2020 losses can be "carried backwards" — that is, they can be deducted from previous years' profits, including years when profits were taxed at 35%. (The corporate tax rate now is only 21%.)
- For every $1 of 2020 losses, companies can claim back 35 cents from the taxes they paid in the past.
"Strategies include buying deductible equipment, accelerating bonuses, contributing to pension plans and exploring accounting-method changes," write Richard Rubin and Theo Francis in WSJ.
The bottom line: This is the best possible year for companies to lose money, by any means necessary. Expect a lot of very large contributions to corporate pension plans — even though the stock market is near record highs.