Microsoft’s latest annual financial report shows the company achieved record profitability while it avoided federal income tax on almost all of its U.S. income for fiscal year 2026. The company’s 2.44 percent federal tax rate on over $100 billion of U.S. income is largely attributable to tax breaks that were either created or expanded by Republican tax cuts enacted at the behest of President Donald Trump in 2017 and 2025.
Microsoft’s $101 billion of pretax U.S. income dwarfs its previous all-time high of $65 billion, recorded the previous year. And instead of paying $21 billion of current federal income tax, as the 21 percent statutory federal income tax rate should require, Microsoft reports just $2.46 billion of current federal tax. That’s an effective federal income tax rate of 2.44 percent. This means the company reduced its federal income taxes by $18.7 billion last year.
Fully two-thirds of the company’s tax breaks last year are due to one provision, accelerated depreciation. This tax break was turbocharged by the “bonus depreciation” measure passed initially by Congressional Republicans and President Trump in 2017 and made permanent by Republicans as part of Trump’s 2025 corporate tax cuts.
While Microsoft does not disclose how much of these depreciation tax breaks are tied to its AI investments, there is no doubt that many are tied to new data centers, chips, servers, and other such property. This all comes at a time when many workers are being displaced due to advancing AI capabilities, and when Microsoft itself is laying off thousands of workers.
The other one-third of Microsoft’s 2025 tax breaks are due to a mix of new and old tax provisions. The R&D expensing provision pushed through by Congress last year saved Microsoft $1.5 billion, and R&D credits reduced its income taxes by close to $1.5 billion as well. The “Foreign Derived Intangible Income” deduction created by the 2017 Trump tax cuts saved the company $600 million.
Thanks to the new detailed disclosure requirements implemented by the Financial Accounting Standards Board earlier this year, Microsoft is forced to disclose that it reduced its worldwide tax rate by 2.6 percent last year by booking income in Ireland. Its Irish tax savings of $4.3 billion come as little surprise in the wake of the company’s new EU tax disclosure, which shows the company booked 38 percent of its worldwide income in Ireland in 2025 despite having only 3 percent of its employees there.
Microsoft also appears intent on continuing to conceal its use of a dizzying array of offshore subsidiaries from its shareholders. As it did in its fiscal 2025 annual report a year ago, the company disclosed the existence of only eight subsidiaries worldwide. But the company’s initial filing under the European Union’s new “country by country” reporting requirement, submitted less than one month ago in accordance with the new EU rules, identifies 201 subsidiaries, 193 more than are acknowledged in Microsoft’s new report to shareholders. Among the 193 subs that appear to have slipped Microsoft’s mind are 19 Irish companies, six in Luxembourg, eight in Malta, 21 in the Netherlands and one each in Cyprus and Trinidad and Tobago, all known tax havens.
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So, That’s Why Fauci Pled the Fifth, Despite a Blanket Pardon From Biden
Dr. Anthony Fauci was not happy that Sen. Rand Paul (R-KY) exposed the real side of him before his appearance before the Senate Homeland Security and Governmental Affairs Committee. Paul posted his diary entries, which are not private; they’re government records, Tony. We get why you didn’t want them to become public; they expose you as a narcissistic loon.
He read the opening remarks and then got scorched, pleading the Fifth, which is not applicable here: he’s already been pardoned. In some 250 appearances before Congress during his career, Fauci invoked the Fifth over 100 times. It was pathetic, and it won’t go unpunished. Paul is mulling and likely will carry out a contempt vote over the doctor’s refusal to answer questions about how he bungled the COVID pandemic (via The Hill):
Sen. Rand Paul (R-Ky.), the chair of the Senate Homeland Security and Governmental Affairs Committee, said Wednesday he would push to hold Dr. Anthony Fauci in contempt of Congress after the former head of the U.S. COVID-19 pandemic response invoked his Fifth Amendment right at a hearing on Capitol Hill.
“That’s a vote that will happen in committee next week. It will be in contempt of Congress,” Paul told reporters after the hearing.
“We believe that with his … immunity from criminal liability, that he didn’t need to hide behind the Fifth Amendment and that maybe the Fifth Amendment doesn’t attach when you have a pardon in place,” he continued. “That’ll be a legal question, but the question on contempt will be voted on, and then there’s a question of whether or not the Department of Justice will take that up.”
Fauci has no fear of prosecution due to Biden’s pardon, but that doesn’t cover this hearing, so yeah, the guy’s public relations nightmare continues. What are you hiding, Fauci? And there’s still the matter of the destruction of federal records, too.
Also, remember, the pardon might not be bulletproof, as Catherine Herridge reminded us today:
Before the hearing Sen.Rand Paul a former senior Justice Department prosecutor told me there are three, viable legal strategies to challenge the preemptive Biden pardon.
But there is no easy path.
One strategy calls for charging Fauci with a crime, with the expectation he would file a motion with the court to dismiss based on the pardon. This could open the door to challenging the sweeping pardon’s viability and years of litigation.
Another strategy involves Congress. Because Fauci has theoretically been preemptively pardoned against past and future criminal charges related to his NIH work, it can be argued that Fauci has no plausible claim to the 5th Amendment, the right against self-incrimination.
If Fauci takes the Fifth at Senator Paul’s hearing (which he has) the committee could seek to compel Fauci’s testimony. A finding of contempt could follow.
Finally, one of Fauci’s closest associates has been criminally charged. With pressure and the right incentives he might be flipped and become a cooperating witness.
Dr. David Morens, who was a senior advisor to Fauci at the National Institute of Allergy and Infectious Diseases, was indicted on multiple charges including conspiracy and obstruction, including destruction, alteration or falsification of federal records.
Along with allegations that personal email accounts were used to evade the Freedom of Information Act, this could be a powerful motivator.
From media reports: Dr. David Morens has pleaded not guilty to all five federal criminal counts.
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