Wednesday, November 3, 2010
General Motors Co. will drive away from its U.S.-government-financed restructuring with a final gift in its trunk: a tax break that could be worth as much as $45 billion. ... [A]ccording 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.
But 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.
- TaxProf Blog, GM's Tax Shelter Not Available to Other Car Makers (or Other Taxpayers)
- Barron's, GM Will Avoid Taxes on Up to $50 Billion in Profit
- Reuters, GM's Tax Break Worth as Much as $45 Billion
- WSJ Heard on the Street, GM's Latest Incentive Plan