WASHINGTON - CSX Corp, the big railroad company headed by Treasury Secretary-designate John W. Snow, paid no federal income taxes during at least two of the past four years despite recording more than $1 billion in pretax profits.
Over the same four-year period, the company gave Snow $36 million in salary, bonuses, stock and options, and forgave a $24 million loan so he wouldn't lose money along with other shareholders as the company's stock price declined.
Although CSX's tax and compensation practices appear to be legal, these and other aspects of Snow's career suggest the man President Bush has chosen to head his revamped economic team may have plenty of explaining to do before he takes the oath of office.
"Treasury is supposed to make sure that the taxes are collected fairly," said Robert McIntyre, director of Citizens for Tax Justice, an advocacy group that opposes many corporate tax breaks. "Bush has just nominated a guy who thinks it's dandy that his company's contributing nothing to help support the country."
Snow's defenders dismiss most of the criticism as politically motivated cheap shots, and express confidence he will convince Congress, and the nation, of his suitability to serve as the nation's chief financial officer.
"The president is very confident that all the investigation that is relevant on this issue has been looked at thoroughly and fully, and that the Senate will take a look at all this as well, and that this nominee will be confirmed," said White House press secretary Ari Fleischer.
Yet even if Snow successfully defends CSX's tax returns and his own pay, other issues are sure to be raised on Capitol Hill. Among them: the cancellation of loans he received to buy company stock, and his sale of CSX shares shortly before the disclosure of financial setbacks.
Snow's private-sector resume bears a striking similarity to those of his new bosses, Bush and Vice President Dick Cheney. The president has been bedeviled by persistent questions about his stock sales while serving on the board of Harken Energy Corp. 12 years ago. Cheney has drawn fire for his actions as CEO of Halliburton Co., an oil services firm under investigation for its accounting practices.
Even Snow's critics concede they have no evidence that he and his company have not played by the rules governing corporate accounting and compensation. But that may only reinforce perceptions that big business is allowed to engage in practices and enjoy tax breaks not available to ordinary taxpayers.
The company has made clear its desire to pay the government as little as possible.
"CSX will pursue all available opportunities to pay the lowest federal, state and foreign taxes, consistent with applicable laws and regulations and the company's obligation to carry a fair share of the cost of government," management said in its 2001 report to shareholders.
Snow made the same basic argument on behalf of the nation's biggest corporations when he lobbied on Capitol Hill as chairman of the Business Roundtable in the mid-1990s.
According to an analysis of corporate disclosure documents by McIntyre's advocacy group, which posted the results on its Internet site, CSX paid no federal income taxes in 1998, 2000 and 2001. Instead, it received federal rebates of more than $150 million by claiming a number of tax breaks, including accelerated depreciation of equipment purchases.
McIntyre's figures appear to square with footnotes contained in CSX annual reports for the four years in question. In its itemization of the company's income tax accounting, CSX listed federal rebates of $103 million in 1998, $53 million in 2000 and $64 million in 2001, and a tax payment of $65 million in 1999.
The company said it deferred $474 million in federal taxes over the four years, which suggests it ultimately may be required to pay that amount to the government. In the meantime, it has been able to use the money for other purposes.
Over the same period, Snow received salary, bonuses and other cash compensation totaling $15.6 million, CSX stock worth $8.4 million, and stock options valued at $12.5 million, for a total pay package of $36.5 million, according to CSX's filings with the Securities and Exchange Commission.
CSX is by no means the only company that has deferred taxes by taking advantage of the many deductions and credits created by Congress to boost corporate cash flow and encourage investment. In fact, the White House is expected to propose expanded business write-offs as part of a new tax-cut initiative it will unveil next year.
CSX and White House officials disputed some aspects of McIntyre's analysis, saying the company had avoided paying federal taxes in only two years, 1998 and 2001. They said they could not explain the discrepancy, but insisted the company had done nothing wrong.
White House officials, congressional Republicans, political analysts and financial experts were quick to defend Snow's record at CSX.
"He did nothing wrong," said Charles Gabriel, senior Washington analyst for Prudential Securities. "This is a publicly traded company that's using the congressionally enacted tax laws to try to ... advance its cause and take care of its stakeholders. What's wrong with that?"
Warren Vieth and Richard Simon write for the Los Angeles Times, a Tribune Publishing newspaper.