The two largest private prison firms in the United States are exploiting a loophole in the tax code to secure millions of dollars in corporate tax breaks.
Corrections Corporation of America (CCA) and GEO Group avoided a combined $113 million in federal income taxes in 2015 alone, according to an analysis of federal financial filings by the racial and economic justice group Enlace.
The prison business is booming despite efforts to reduce the nation’s prison population, which has exploded in recent decades and forced the government to contract with private prison companies to meet demand. Last year, CCA reported $222 million in net profits, and GEO Group reported $139 million.
CCA and GEO Group have enjoyed increased profits per prisoner housed in their facilities since 2012, when both companies began converting themselves into special real estate trusts that are exempt from the federal corporate income tax, at least in the eyes of the IRS.
The conversion has effectively lowered each company’s tax rate by 30 percent or more, according to annual reports submitted to investors and regulators. CCA, which owns 66 jails and prisons nationwide and runs an additional 11 facilities on behalf of the federal and state governments, reported a net income tax benefit of nearly $138 million in 2013 alone.
The massive tax breaks have enraged prison reformers and advocates for communities impacted by incarceration, and they are currently petitioning Congress to remove them.
Federal law requires the bulk of these tax benefits to be paid out to shareholders in dividends, so the benefits do not trickle down to average private prison employees unless they are stockholders themselves. From 2012 to 2015, the average hourly wage for correctional officers at both companies dropped from $16.47 per hour to $15.53, according to an analysis by the watchdog group In the Public Interest…