GE reports profits of $14 bill, pays $0 in US taxes

[SlyPokerDog]

General Electric, the nation’s largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

http://www.nytimes.com/2011/03/25/business/economy/25tax.html?hp

 

[Sug]

Obama is a socialist......

 

[andalusian]

They must be rioting in the streets of Aman.

 

[Denny Crane]

Profit is not the same thing as cash flow. If you look at their balance sheet from a year ago and today, I'm sure they don't have $14b more in the bank.

Companies keep three sets of books. One to show investors, lots of profit! One to show the IRS, little net income. And one that they really run the company from, with accurate information on their cash and assets.

If an oil company shows $5b in profit but spends $5b on land and exploration, it will pay $0 in tax because the capital expense washes with the profit.

 

[SlyPokerDog]

Profit is not the same thing as cash flow. If you look at their balance sheet from a year ago and today, I'm sure they don't have $14b more in the bank.

Companies keep three sets of books. One to show investors, lots of profit! One to show the IRS, little net income. And one that they really run the company from, with accurate information on their cash and assets.

If an oil company shows $5b in profit but spends $5b on land and exploration, it will pay $0 in tax because the capital expense washes with the profit.

You mean 4 sets of books. You forgot the one they showed they government when they asked for a secret bailout.

 

[BLAZER PROPHET]

Profit is not the same thing as cash flow. If you look at their balance sheet from a year ago and today, I'm sure they don't have $14b more in the bank.

Companies keep three sets of books. One to show investors, lots of profit! One to show the IRS, little net income. And one that they really run the company from, with accurate information on their cash and assets.

If an oil company shows $5b in profit but spends $5b on land and exploration, it will pay $0 in tax because the capital expense washes with the profit.

I understand what you're saying, but there's too much money floating here for this to happen.

 

[Wheels]

 

[Denny Crane]

I understand what you're saying, but there's too much money floating here for this to happen.

A list of some of the companies GE acquired in 2010: Opal Software, Wellstream, Dresser Inc., Smart Grid, Lineage Power Holdings, Clarient, the ECS business unit of SNC Lavin, etc. All capital expenses.

 

[Denny Crane]

Later on in the NYTimes article:

The shelters are so crucial to G.E.’s bottom line that when Congress threatened to let the most lucrative one expire in 2008, the company came out in full force. G.E. officials worked with dozens of financial companies to send letters to Congress and hired a bevy of outside lobbyists.

The head of its tax team, Mr. Samuels, met with Representative Charles B. Rangel, then chairman of the Ways and Means Committee, which would decide the fate of the tax break. As he sat with the committee’s staff members outside Mr. Rangel’s office, Mr. Samuels dropped to his knee and pretended to beg for the provision to be extended — a flourish made in jest, he said through a spokeswoman.

That day, Mr. Rangel reversed his opposition to the tax break, according to other Democrats on the committee.

The following month, Mr. Rangel and Mr. Immelt stood together at St. Nicholas Park in Harlem as G.E. announced that its foundation had awarded $30 million to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district. Joel I. Klein, then the schools chancellor, and Mayor Michael R. Bloomberg, who presided, said it was the largest gift ever to the city’s schools.

 

[SlyPokerDog]

Later on in the NYTimes article:

And you're fine with that?

 

[jlprk]

Profit is not the same thing as cash flow. If you look at their balance sheet from a year ago and today, I'm sure they don't have $14b more in the bank.

Companies keep three sets of books. One to show investors, lots of profit! One to show the IRS, little net income. And one that they really run the company from, with accurate information on their cash and assets.

All irrelevant. Companies sold on a stock exchange can't hide things that way. Financial statements from all perspectives you listed are required to made public. The company is worth $14B more than a year ago, including inventory, decreased liabilities, etc., not just the change in bank accounts.

If an oil company shows $5b in profit but spends $5b on land and exploration, it will pay $0 in tax because the capital expense washes with the profit.

True, that trick is allowed. The point is, if you can make $14B in profits vanish from the IRS like a rabbit in a hat, then that magic trick shouldn't be legal. You would have been more credible to (falsely) argue that maybe GE just delayed its tax obligation with a carryover. (They didn't.)

 

[Denny Crane]

And you're fine with that?

No.

 

[jlprk]

Even O'Reilly was ranting against GE not paying any tax. Then he said that he tells his accountant Swifty that when in doubt about taking some deduction, just pay it. He said he feels he should pay some tax, and also must protect his reputation. He went on and on.

I only saw 5 seconds because I never watch Fox. I was just looking for the game.

 

[jlprk]

Since 2009, America’s most profitable companies such as ExxonMobil, General Electric, Bank of America and Citigroup all paid a grand total of $0 in federal income taxes to Uncle Sam. Tax havens alone account for up to $1 trillion in tax revenue lost every decade.

2008 article - 2/3 of corporations pay no tax
http://money.cnn.com/2008/08/12/news/economy/corporate_taxes/

 

[maxiep]

Close the loopholes, lower the corporate tax rate. Crony capitalism leads to suboptimal outcomes and a less efficent and competitive economy.

 

[jlprk]

I'm surprised that you, Denny, and O'Reilly all take the socialist, anti-business position. For years I've heard that this would be double taxation--that the consumer pays sales tax, and gets no deduction on his income tax for ordinary expenses, so why should the corporations pay income tax on profits. Also, this will raise prices, so consumers will pay corporate tax through those prices, so why not keep the current mode of consumers supporting the government through personal income tax.

Something like that. Then they would quickly change the subject to value added tax and flat tax, which is why I don't remember the exact rationale.

I could almost go for no corporate income tax, since passing through corporate income tax to consumers is regressive like sales tax. I'd rather have the government rely on personal tax so the rich pay more.

 

[Denny Crane]

Corporations write big checks to the govt. every pay period. They're paying 1/2 of the Social Security taxes collected, as well.

Whether they pay $0 in corporate income tax or not.

 

[Denny Crane]

I heard a clarification about GE paying $0 in taxes this year. They lost $38B last year and are allowed to carry those losses forward and write off profits against those losses until they match that $38B.

GE has paid $0 in taxes in the past, and that's a different issue.

 

[jlprk]

No, they made a big profit last year too, bringing down their carryover this year to $3 billion, not $38B. I speculated in Post #11 that the reason wasn't a carryover, because I knew there couldn't have been one big enough to cause zero tax on $14B. Turns out, the reason even a small $3B one can exist is that $9B of the $14B profit is untaxed due to overseas origin.

http://personalfinancebulletin.com/...but-what-about-the-14-billion-in-profit/8411/

 

[maxiep]

I heard a clarification about GE paying $0 in taxes this year. They lost $38B last year and are allowed to carry those losses forward and write off profits against those losses until they match that $38B.

GE has paid $0 in taxes in the past, and that's a different issue.

Denny, GE has 14 separate divisions. Of course they play zero in income taxes. They simply have a division or two "take a bath" every quarter, keep profits overseas, use subsidies and tax shelters to increase NI without the corresponding tax penalty. The problem is the tax law and the amount of loopholes imbedded in it. Lower the corporate tax rate and eliminate the loopholes. GE will still pay a lower percentage of taxes compared to individuals and other companies, but that's why a diversified corporation and terrific accountants will get you.

 

[MARIS61]

Close the loopholes, raise the corporate tax rate. Crony capitalism leads to suboptimal outcomes and a less efficent and competitive economy.

Fixed.