Tuesday, February 18, 2014
Forbes: Where's My Refund? General Electric Sues For $658 Million Tax Refund, by Janet Novack:
General Electric, famous for its aggressive tax minimization efforts, filed suit Friday seeking a $658 million federal tax refund. That sum represents the $439 million in taxes and $219 million in interest GE coughed up in 2010 after Internal Revenue Service auditors disallowed a $2.2 billion loss it claimed from the 2003 sale of a small subsidiary, ERC Life Reinsurance Corp., to Scottish Re Group for $151 million.
In a bare-bones 12 page filing in the U.S. District Court for Connecticut, GE is vague about the IRS’ reasons for disallowing the loss, except to describe them as “erroneous.” But the dispute apparently centers on an internal restructuring of GE’s insurance business in December 2002 that manufactured $1.8 billion of the claimed $2.2 billion loss. If past cases are any guide, the IRS likely disallowed the loss on both technical grounds and on the basis that the restructuring itself was a tax motivated ploy lacking sufficient business purpose or economic substance. In its suit, GE insists the restructuring was done in response “to financial and regulatory issues confronting this business.” (Yep, if you’ve got a real business purpose, you can sometimes claim the benefit of an unreal tax loss.)