REPORT: New GM entitled to $16 billion in federal tax breaks courtesy of Old GM
Due to what appears to be a slight (additional) bending of the rules, the "new," post-bankruptcy General Motors has been allowed to carry the $16 billion net operating loss that was created by the "old" GM. That means that New GM will not have to pay taxes on its profits for a while, because the profits can be written off by the losses.
The issue is that the move, called a "tax-loss carry forward," isn't supposed to be available to the automaker. The tax code contains provisions that prohibit a profitable company from buying an unprofitable company for the sole purpose of claiming the unprofitable company's tax losses – and the type of bankruptcy GM went through should have precluded The General's ability to use the tax loss practice.
Except for the fact that GM was bought by the government, and since the government writes the tax code and collects said taxes, it can decide how it wants to handle the companies it owns. General Motors says the move will bolster its "cash position to the benefit of all parties." Critics, on the other hand, say that GM got a $16 billion unfair head start on Ford. Hat tip to Adrian.
[Source: The Wall Street Journal | Image: Jim Watson/AFP/Getty]
Reader Comments (Page 1 of 4)
Bobmarley 8:35AM (8/04/2009)
...i think i just sharted
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notYou 9:21AM (8/04/2009)
No wonder tax revenue is down a record 57%.
Again, the real shaftees are 1)yes, the tax payers (youNme!) and 2)Ford who wouldn't be allowed to do this and is just now seeing how unfair the playing field is.
It's shenanigans like this that allow a government position in a private sector to dominate unfairly. Private medial insurers should take note of this as representation of just how their environment is going to be manhandled. You can't compete against a team that writes the rules, re-writes the rules, moves the goalposts, bends reality, and then sticks you with the bill at the end.
notYou 9:31AM (8/04/2009)
ps. Here's hoping whatever medical bill we do get shafted with (you don't _really_ think any Dem is actually going to be the one to hand Obama a legislative defeat, do you?) includes plenty of breaks for proctologists - the tax payers are going to need them.
Big Mola 9:26AM (8/04/2009)
The gov't is majority owner of GM, so any tax GM pays will go . . .
back to its owner.
:-p
Rich 9:55AM (8/04/2009)
Thank you Big Mola.
Doesn't anyone else get it? The government holds a significant stake in GM. Why on earth would it want to tax itself!?
The type of "shock horror", feigned or otherwise, is typical of the finacially-witless short-termist communists in the republican party. Yes! Bloody communists -- because you want everyone treated the same bloody way. Well, that's not the way a free market operates. Especially in a recession.
merlot066 11:01AM (8/04/2009)
Hmmm.... what's Matt's take on this? This sounds an awful lot like another HANDOUT to me (unlike the LOAN that Ford took, that will be paid back by 2010).
PJ 5:08PM (8/04/2009)
LOL @ government tax breaks for one of the world's largest businesses being branded a "liberal handout."
You guys do know this stuff is the cornerstone of Republican policy, right?
the4thheat 9:42PM (8/04/2009)
Don't worry, it won't actually cost us anything because in order to use this tax break they would actually have to be profitable.
John 8:38AM (8/04/2009)
Fritz is such a dumbass. He is holding up the wrong finger to the taxpayers.
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Protzenegger 9:48AM (8/04/2009)
A few minutes of Photoshop will fix that!
Will 11:24AM (8/04/2009)
Done...
http://imgur.com/zLqP0.jpg
Protzenegger 11:55AM (8/04/2009)
+1, Will! I didn't think anyone would actually do it.
John 12:50PM (8/04/2009)
Great job Will.
I just got to get me a copy of Photoshop one day.
anders 8:41AM (8/04/2009)
They just keep making up the rules don't they... the sad thing is 16billion is dismissed as not even that much these days
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alex 9:49AM (8/04/2009)
it's not $16 billion. You and who ever wrote this article for autoblog need to go read a book on finance.
JSams4131 8:38AM (8/04/2009)
oh boy here we goo
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ebleyes 9:24AM (8/04/2009)
I'm really surprised that everybody is surprised, this is a known fact since bankruptcy started. GM and to a lesser degree Chrysler must succeed or the other political party will use it as a political issue, and in order to lessen the favoritism charges I expect more loans for Ford to build fuel efficient vehicles.
From My Cube 8:39AM (8/04/2009)
I love how Ford, who made responsible decisions, gets screwed the most becuase it didnt go into bankruptcy....
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Chris 8:44AM (8/04/2009)
You can say the same for responsible people who didn't buy gas gusslers and now have a 'clunker' that they would like to trade in
geo.stewart 9:13AM (8/04/2009)
you can say the same for responsible homeowners who now get to foot the bill for those who need a bailout and mortgage assistance ...
Welcome to Obama land where the goal is to redistribute your wealth.