Comment

Latino Voters Overwhelmingly Rejected Sharron Angle

231
lawhawk11/03/2010 1:27:31 pm PDT

re: #165 Killgore Trout

In a related item, GM is getting a huge tax break because of an IRS determination that certain loss-carryforward limmitation provisions wont apply to companies that received TARP funds.

according 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.

So, depending on how you want to account for this money or your political/economic leanings, GM is getting a $45.6 billion tax break, getting another bailout due to a ruling that shields the company from the usual rules on carryforwards, getting an undue handout from taxpayers, or getting the funds necessary to help turn around the company ahead of its expected offering.

The point of the ruling was to make the company more attractive to potential investors. Not having to pay taxes means that it puts GM at a competitive advantage compared to other carmakers who do have to pay taxes.