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This Could Be the Year Bank of America Pays Income Tax

Amanda Alix
March 19, 2013

It's the time of year when spring is in the air, and the first quarter is about to close, giving us an idea of how the new year will be treating our favorite companies. As an added treat -- with April 15 just around the corner -- we also begin to hear whispers regarding what these entities paid in taxes in previous years.

For investors, this information is often less irksome than for Main Street at large, since a smaller tax bill should result in more capital to share with stockholders. This is not necessarily the case, of course, particularly with the banking sector -- which has just begun to blossom again in the wake of the Great Recession.

Taking a look at income taxes paid by big banks clearly points up the fact that those that pay the most in federal taxes also have the most income. This can be seen clearly by taking a look at Bank of America (NYSE: BAC).

Tax refunds?
Since the financial crisis of 2008, the tax burden has been non-existent for B of A and Citigroup (NYSE: C), neither of which has paid federal income tax since that year. Banks and other corporations enjoy tax benefits by holding money offshore and being able to deduct their own pay, which can pave the way for tax refunds. In the case of Citi, this was because of special tax treatment for past losses, lobbied for by then-CEO Vikram Pandit. For Bank of America, it was because of its purchase of the ticking time bomb called Countrywide.

Debt is a bona-fide tax write-off, as are legal expenses. With approximately