I was going to go to bed and I read this in the Wall Street Journal and, well, I just got mad. The government is giving tax breaks to GM that it doesn’t give to companies it hasn’t taken over. This is what happens when a president decides he’d like to own an auto company. He gives that company breaks that the bailed out companies competitors don’t get. And if that doesn’t steam your beans, wait until you hear about how it’s a scheme to bail out the auto workers’ pension plan. Don’t you wish you could retire at the age of 50 with a nice, fat, taxpayer sponsored pension?
The new GM will be allowed to claim a tax benefit from some $16 billion of net operating losses carried over from the old company, allowing it to avoid paying taxes on future profits, perhaps for years. The issue is a common accounting practice called “tax-loss carry forward,” under which businesses can write off losses against future profits for up to 20 years.
The losses are considered important assets on any company’s balance sheet, but they typically don’t survive bankruptcy. Under a longstanding section of the tax code passed to prevent companies from buying other companies for the purpose of assuming their tax losses, a business that undergoes a change in ownership usually has to forfeit the old company’s net operating losses.
That would normally be the case for GM, except that the government is its new majority shareholder. [...]
According to Duke law professor Jeffrey Coyne, nothing in the tax code permits the preservation of tax attributes like net operating losses in the context of an outright sale like GM’s. “The result seems to retain the cake while eating it,” he says. “They get to sell quickly and without the many procedural protections because this is not a plan. They get to keep the [net operating losses] using a provision that requires the transfer to happen as part of a plan.”
Some insist this doesn’t matter because the government owns 60.8% of GM, and so any tax collection would merely move funds from one federal pocket to another. But the other 39.2% belongs to others who will also benefit from the special exception. And who might that be? Well, after the feds, the biggest stakeholder in the new GM is the United Auto Workers retiree health-care trust, which holds 17.5%. GM says the tax-loss exception will help its “cash position to the benefit of all parties,” and no doubt the tax shelter makes the company more valuable to investors. But it also ensures the company has more cash on hand to pay union retirees, who will vote in 2012.
This is just another slap in the face to the hard working, tax paying Americans who aren’t on the government dole.
Boycott Government Motors!
Karen,
Federal tax receipts are plummeting and this is the Oblama teams concept of a “logical” idea. Reason #10,000,001 to despise this administration and the UAW. May I be so bold to use your site to give a shout out?
SCREW YOU GETTLEFINGER!!!!!!!!!!!!!!!!!
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I would take the ankle express before I would buy a GM or Chrysler vehicle. This failed cash for clunkers is just tax payers funding someone else a new car. Have we become so wrapped up in this welfare state we see no shame in suckling at the government tit.Hey Barry O let me keep my hard earned and I’ll stimulate the economy. You should have stuck to muck raking in the hood. You look far more at home at a ACORN rally hating on working people than you do ghettoing up the white house with your whitey hating buddy Skippy, with your beer fest.Just suprised it wasn’t a 40 and ya’ll took the bags off.
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We should have let them fail.
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