A little over two months ago, GE Chairman Jeffery Immelt was appointed to an economic panel by the Obama Administration. This was the same conglomerate who lobbied for cap & trade back in 2009 and who's subsidiary TV networks of NBC and MSNBC acted as unabashed cheerleaders for Obama during his 2008 Presidential campaign. Now it's been learned that General Electric will pay nothing in taxes for 2010 and will in fact be getting $3.2 billion in tax breaks from the US government thanks in part to concentrating most of its $14.2 billion in profits offshore. More than half of GE's current workforce is outside the United States as well.
Back in November the Wall Street Journal reporteda few weeks before GM's stock was set to be re-listed in the NYSE that General Motors could wind up with tax breaks worth an estimated $45 billion thanks in part to lossesincurred prior to the bailout.
GM, which plans to begin promoting its relisting on the stock exchange to investors this week, wiped out billions of dollars in debt, laid off thousands of employees and jettisoned money-losing brands during its U.S.-funded reorganization last year.The pricetag for the GM bailout was thought to have reached at least $30 billion. The fact that the government was still a stakeholder in General Motors at the time could help explain the DOT's aggressive pursuit of Toyota Motors for a number of safety issues last year.
Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits.
The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy.
Usually, companies that undergo a significant change in ownership risk having major restrictions put on their tax benefits. The U.S. bailout of GM, in which the Treasury took a 61% stake in the company, ordinarily would have resulted in GM having such limits put on its tax benefits, according to tax experts.
"The Internal Revenue Service has decided that the government's involvement with these companies, both its acquisitions plus its disposals of their stock, means they should be exempt" from the rule, said Robert Willens, a New York tax consultant who advises investment banks and hedge funds.
The government's rationale, said people familiar with the situation, is that the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail.