‘Preferential Treatment’: GM Scores ‘Sweetheart’ Tax Deal
- Posted on May 3, 2012 at 6:29pm by
Becket Adams
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Thanks to a “sweetheart” tax deal worked out between General Motors and government, the Detroit auto manufacturer won’t have to pay $45.4 billion in taxes on future profits, according to recent reports from the Wall Street Journal and CNN Money.
As it turns out, not only did the feds give the failing company billions of taxpayers dollars, all while firing executives and replacing them with government-backed officials, but they also gave what some call “preferential treatment” in the form of tax breaks, according to documents filed with federal regulators.
“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,” Randall Smith and Sharon Terlep write in the WSJ.
“In GM’s case, the losses stem from years prior to when GM entered bankruptcy,” the report adds.
Normally, when a goes through major restructuring (especially at the executive level), restrictions are put on certain tax benefits, according to tax analysts.
“GM even warned it expected to lose those tax breaks shortly before filing for Chapter 11 protection,” CNN Money reports.
Therefore, because the feds bailed out GM and took a 61 stake in the company, those tax benefit restrictions should have applied to GM, right?
“Should” is the operative word here.
“The federal government, in a little-noticed ruling last year, decided that companies that received U.S. bailout money under the Troubled Asset Relief Program won’t fall under that rule,” the WSJ reports.
Simply put, the automaker was allowed to keep most of its tax breaks, essentially receiving a multi-billion “gift” from the government, as CNN Money puts it.
“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, Robert Willens, a New York tax consultant, told the WSJ.
So where did that $45.4 billion figure come from?
“The $45.4 billion in future tax savings consist of $18.9 billion in carry-forwards based on past losses,” the Journal reports, “The other tax savings are related to costs such as pensions and other post-retirement benefits, and property, plants and equipment.”
How do the feds explain why bailed out companies are exempt from the restructuring/tax benefit rule?
“The government’s rationale…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,” the Journal reports.
Some insist GM was given special treatment.
“A lot of things were done differently here,” Heidi Sorvino, head of the bankruptcy practice at Lewis Brisbois Bisgaard & Smith, told CNN Money, adding that the tax break is further proof that the “rescue” of GM was unlike anything anyone has ever seen.
Treasury Department officials disagree with Miss Sorvino’s analysis and insist GM being allowed to keep its various tax breaks was not special treatment.
GM’s ability to hold on to its pre-bankruptcy tax breaks “depends on the application of long-standing tax rules to GM’s particular facts. The Treasury Department did not publish any guidance during the economic downturn that changed these rules either in general or for corporations that received government assistance,” Treasury spokesman Mark Paustenbach said.
But many believe GM was allowed to keep the tax breaks because it “made it easier to sell shares,” or so says Linus Wilson, finance professor at the University of Louisiana at Lafayette.
Not a bad break for a company that made a $1 billion profit in the last quarter, according to the Detroit Free Press.
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Comments (87)
PapaJohannesPatriot
Posted on May 3, 2012 at 7:58pmObama and the rest of the dumocraps fuss about oil profits and such, and then screw over the American people by treating GM like royalty.
Report Post »gperky
Posted on May 4, 2012 at 9:05amYeah, what happened to the big campaign speach by our “Leader” ( I use that term as a joke) about give big corporations tax breaks while they rake in millions in profits? He said it’s time to stop giving away money to the rich corporations while screwing over the poor and working class. I guess it depends on whether you suck up to him or not! I would also imagine the Union having a big stake in GM has a lot to do with it too.
Report Post »Marci
Posted on May 4, 2012 at 9:52amConsidering all the b.s. hype about taxing billionaires—this should be the top news story for all the Commie News Channels, shouldn’t it??
Report Post »JRook
Posted on May 4, 2012 at 10:08amSo what exactly is the value of the $ billions tax credits that Exxon and the other oil companies have been getting for years and years. You know the most profitable companies in the world.
Report Post »Open Mind
Posted on May 3, 2012 at 7:55pmI wouldn’t buy a GM car no matter what. They should have filed for bankruptcy and dumped the union. That was their only chance to fix what is really wrong. Instead they come up with a albatross called the Chevy Volt.
Someone needs to tell volt owners that the electricity, to recharge the volt batteries, comes from coal powered plants.
Report Post »AmericanBorn
Posted on May 3, 2012 at 10:05pmMost folks don’t make the connection – electricity to run the car comes of coal. BTW in many states, the Volt can’t hold a charge to make a round trip to work and home. I’m sure most companies are willing to let their employees suck electricity from the corporate parking garage, correct?
Report Post »osgeek
Posted on May 4, 2012 at 2:34amOpen Mind, really?
Report Post »Did you know that electric motors are 96-98% efficient at converting energy to propulsion? Gas/Diesel engines are lucky to get 13%. So electric vehicles are extremely more efficient. A person can drive 100 miles on about $2-$4, around 22kwh, of electricity ($1.54 for me @ $0.07/kwh). Around 70% of Americans commute less than 30 miles a day so most are capable of using successfully electric vehicles daily given current technology and within 5-10 years electric cars will probably be able for fulfill the remaining 30% needs.
1 gallon of gasoline (6.3 pounds) when combined with 21 pounds of air makes 20 pounds of C02 and 7 pounds of water vapor. The average US MPG is around 20 MPG, so it would take 5 gallons to reach 100 miles which is 100 pounds C02 made during the trip. Avg gas price is 3.80 so it would cost about $19.00 for gas.
Assuming 100% of electricity comes from coal, reality is about 50%.. 1 pound of coal creates about 2.47 lbs of C02. EPA states that 1.1 pounds of coal make 1kwh, so 22 kwh= 24.1 lbs of coal which equals 59.5 lbs C02 generated for 100 miles in a 100% electric car. I could go into breaking don C02 by natural gas, etc but the electric care already beats the gas powered car. Although not a 100% clean source, it is still cleaner than gas/diesel powered vehicles.
So gasoline= $19.00 and 100lbs C02, electric = $1.50-$4 and 59lbs C02 for 100 miles of travel.
Which is more efficient?
justangry
Posted on May 3, 2012 at 7:43pmI USED to be a Chevy man. My mid-life crises car was supposed to be a Corvette. I’ll NEVER buy another Chevy.
Report Post »lukerw
Posted on May 3, 2012 at 8:08pmI had a Vette… Jag, Charger, SL, FireBird, 2 & 4 seater T-Birds, MG, etc… but there is nothing sweeter than something that looks Normal, yet is all Custom inside!
Commie GM & Chrysler SUCK… and are Stealing Our Money!
Report Post »Stoic one
Posted on May 3, 2012 at 8:49pmnever again gm nor chrysler.
Report Post »FortySixand2
Posted on May 3, 2012 at 10:13pmMy Silverado has been falling apart piece by piece since the day i brought it home (most recently the tailgate latch came off in my hand). My old F-150 had 250,000 hard working miles on her 302 and she still got better gas mileage than the chevy. I miss my old workhorse. Never again will i buy GM or Chrysler. The next truck will be either Ford or Toyota.
Report Post »justangry
Posted on May 3, 2012 at 10:16pmI had a Mitsibishi Eclipse, Ford Escort, Chevy Cavalier and a S10. They call me the lady killer. :)
Report Post »pastorrick
Posted on May 3, 2012 at 10:32pmI am th esame way. I had a silverado that got me half a million miles without a single engine isue. normally I would go to th esame make, but my next one will be a ford, you know, the company that fixed itself! I wonder if the liberal media and politicials will now jump on GM the way they do th eoli industry for their LEGAL tax breaks. GM not only got a bailout, but now don’t have to pay their“fair share” Just another union payoff!
Report Post »GUT CHECK
Posted on May 4, 2012 at 12:00amGM is not a car company. It is a slush fund to pay the bloated union pensions that earlier CEO’s foolishly negotiated with the blackmailing thugs that retire on outrageous poof pillows generated with tricks in the last year of employment, complete with paybacks to bosses for setting them up. THE WHOLE INVESTMENT WORLD CHANGED WHEN OBAMA PULLED THE RUG OUT FROM UNDER THE PRIMARY INVESTORS OF CHRYSLER. Who would ever invest another large chunk in a company ever again? Good bye to the basics of econ101. I will loosely quote Bill Ayers…US IS DONE.
Report Post »jerimiah41
Posted on May 4, 2012 at 7:44amWhere would GM be if they had to compete under a competitive base. This is totally unfair to all of those companies that have to compete without all of these freebies. GM should have been given to failure if they could not compete on fair terms. It is all about union payoffs and fraud and corruption on the largest scale being committed right in front of us. What a disgrace GM is. I would never buy one of their cars.
Report Post »Netsurfer2
Posted on May 3, 2012 at 7:39pmThat is why my next car won’t be GM! There lower price models are designed so cheaply that once they get enough miles on them, they won’t be worth fixing anyways! I had a Saturn to where the parts were made so cheaply that I couldn’t believe my eyes! I bought a water pump for it and they just had a hole in the housing with no Zerk fitting to put the grease in. One of my co-workers said he had one also and put 3 transmissions in it by the time he got rid of it.
My next new car will probably be a Ford or Chrysler. I really like the looks of the Chrysler 300 models and now they have a v6 all wheel drive model.
Report Post »osgeek
Posted on May 4, 2012 at 1:25amThat is a weep hole so if and when the bearing seal starts to fail you will hopefully pickup on the fact that there is a small puddle of coolant under your care before it fails totally and causes other problems. No manufacturer since probably the 40s has made grease-able water pump bearings for light duty cars and trucks.
Report Post »IMCHRISTIAN
Posted on May 3, 2012 at 7:34pmWhat a bunch of evil doers. They will pay someday as it is nothing but thievery on taxpayers and favoritism for the unions. He says that Republicans want to hurt old people, etc and then they get by with this.
Report Post »crusaderx9
Posted on May 3, 2012 at 7:28pmGM = communist party. I will proudly never buy a GM product. It is a government enterprise that is a faux business using taxpayer dollars to stay afloat.
What business couldn’t survive with BILLIONS of dollars pumped into it from an outside source that has nothing to do with running a viable auto making company.
Once GM fails to build cars at a profit like a real auto company – they just take money from the government like a teenager who has no responsibility AND the democrats get the votes they just purchased… Hmmm, GM is bringing down America as the largest ward of the state unable to support itself yet demanding that taxpayers pay to keep it in business…
Report Post »Miami Bob
Posted on May 3, 2012 at 7:17pmI would think without tax forgiveness, GM will go down and be history.. Then Obama and his idiot administration will have another bailed out company go belly up after the fact. Not good for his election or his union worshipers
Report Post »soybomb315
Posted on May 3, 2012 at 7:12pmthis is why some democrats get all communist. this is not capitalism – this is facism
Report Post »disenlightened
Posted on May 3, 2012 at 7:07pmahhhhhh…Hitler would be soooooo proud of today’s Democ*nt party…long live the National Socialists!
Report Post »soybomb315
Posted on May 3, 2012 at 7:05pmAre you going to vote for a corporatist in november? If you vote R or D, the answer is yes
Report Post »kspatriot
Posted on May 3, 2012 at 7:02pmIf this doesn’t upset you, you better check your pulse! Illegal Immigrants are stealing $4 Billion A YEAR from the IRS in the form of Child Tax Credits, FOR KIDS THAT LIVE IN MEXICO! http://www.wthr.com/video?clipId=7054149&autostart=true
Report Post »IDONTTHINKSO
Posted on May 3, 2012 at 7:01pmBet I know who the auto workers union is going to be required to vote for!!!!
Report Post »Prochef
Posted on May 3, 2012 at 6:59pmFair Share?
Report Post »redneckgenius
Posted on May 3, 2012 at 6:56pmso where is our tax break…. if they don‘t pay we shouldn’t pay…..
Report Post »whathappenedtomycountry
Posted on May 3, 2012 at 6:55pmobama is a lying commie and he with ALL his minions should be in prison……WHY AREN’T THEY?
Report Post »barber2
Posted on May 3, 2012 at 7:49pmno. no. the Obama people are just trying to be nice to ” the little people.” You know those 99%ers The Working people. The OWS crowd. Their union comrades. Oops. Slipped. The non evil rich. The non evil capitalists. Oops. Slipped again ! Oh, shucks, it’s just so hard to “ vote present” when you are campaigning. It’s so hard to talk out of both sides of your mouth when you are campaigning. But Mr. “I, ” Barack Obama will sure keep on trying. So grab your pitchforks, comrades, and let’s keep moving “forward”…
Report Post »SUPPLY_SIDE
Posted on May 3, 2012 at 6:53pmAnd the millionaire surtax to pay their fair share will will only bring in how much?
Report Post »lbk
Posted on May 3, 2012 at 6:52pmUn-FLIPPEN REAL!!!
Report Post »barber2
Posted on May 3, 2012 at 6:50pmBig Brother makes a ” deal.” It is all part of Obama Democrats ‘ fuzzy 99% math and the “ not special treatment ” fuzzy rhetoric. So much “ fuzzy” / aka untruths / aka lies . Gosh, guess we don’t need those tax funds. Guess that’s why we need to further soak those nasty rich people !
Report Post »PoliticalTs.com
Posted on May 3, 2012 at 6:49pmThe tax payments absolutly would exist if we let GM fail, the only difference is that they would be coming from Ford or Toyota, or one of the many other auto makers that knows how to keep their bussiness afloat and make a profit.
Report Post »Baddoggy
Posted on May 3, 2012 at 6:46pmNever ever EVER will I buy a GM product. NO WAY!
Report Post »MAMMY_NUNN
Posted on May 3, 2012 at 7:34pmNo matter how much money is thrown at GM they will not survive any logical business man would tell you so the fox is guarding the hen house. But the tax payer shouldn’t be on the hook for their fruitless venture sink or swim.
Report Post »BuG
Posted on May 3, 2012 at 7:35pmDidn’t we pay for it already !! and not by choice !!
Report Post »RJJinGadsden
Posted on May 3, 2012 at 6:45pmWow! Must be nice to have friends in high places. Had the Bush administration offered to help a failing manufacturer with such a tax deal we would have seen Nancy Pelosi literally explode. Likely many other drama queen Dems too.
Report Post »soybomb315
Posted on May 3, 2012 at 8:16pmyea bush did the noble thing and bailed out the banks. you know what they say….‘gotta abandon the free market in order to save it’
Report Post »randy
Posted on May 3, 2012 at 6:40pmThis is not right!
The Government deciding Government Motors (GM) does not owe taxes?
Whaddya wanna to bet, this is a just Union payback?
They have already screwed the preferred shareholders!
This administration needs to to be tossed in JAIL!
Report Post »Plan B
Posted on May 3, 2012 at 6:49pmRediculous
Report Post »IDONTTHINKSO
Posted on May 3, 2012 at 6:39pmYou have to be kidding me! And why should this happen when our country is in the shape it is! This administration justs keep given our money away!
Report Post »kaydeebeau
Posted on May 3, 2012 at 6:38pmahhh operative word in all of the words in the story – pensions….
Report Post »randy
Posted on May 3, 2012 at 7:01pmExactly! UNION PENSIONS!
Report Post »Mark0331
Posted on May 3, 2012 at 7:15pmThis morning the UAW — the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America — issued an official endorsement of Occupy Wall Street, which they deem “a movement for economic and political justice.” They‘ve said they’ll commit resources to the movement and also activate their membership nationally “in support of reclaiming the American economy on behalf of working men and women, the poor, the elderly, the unemployed and our nation’s youth.” UAW members have already been showing solidarity at Occupy Wall Street protests and rallies in New York and in Boston on an individual level; this announcement puts the full support of another union behind the protesters at Zuccotti Park.
This announcement comes on the same day as a Community/Labor march to Wall Street that nearly 3,000 people have said they will attend (Facebook page here), many from organizations including the Coalition for the Homeless, Working Families Party, MoveOn.org, The Job Party, TWU Local 100, Communication Workers of America, United Auto Workers, United Federation of Teachers, Writers Guild East, Greater NYC for Change. Marchers will assemble at Foley Square at 4:30 p.m., then head past City Hall and to Zuccotti Park to “unite in solidarity.”
..Dated from October 5,2011…Barry and his supporters….NEVER forget what has happened and how we have gotten to this point.
Report Post »Snowleopard {gallery of cat folks}
Posted on May 3, 2012 at 6:36pmOf course Government Motors would be given preferential tax treatment; most of it is owned now by the unions who are Obama’s allies.
Report Post »godlovinmom
Posted on May 3, 2012 at 7:05pmAppparently they were’nt kidding when they were called government motors…unfortunately I bought a GM right before all this nonsense…but next time…no way!
Report Post »dublinthewagons
Posted on May 4, 2012 at 6:38amIt’s because they named the presidential limo after his wife. “THE BEAST”
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