Anyone watching Super Bowl XLVI last night was treated to a host of television ads singing the praises of America’s largest corporation, General Electric (NYSE: GE). The ad blitz, tied together under the umbrella/theme of “GE Works,” came complete with a website and ‘#WhatWorks’ Twitter hashtag.
The advertising campaign (~$10.5 million spent in one night, alone) would lead viewers to believe General Electric is single-handedly carrying our country out of the economic abyss by creating countless jobs and saving entire communities. In reality, #WhatWorks for GE is a longtime record of tax dodging that has lead to painful job cuts, service reductions and school closures – both in Massachusetts and across the country.
As the New York Times revealed nearly a year ago, General Electric has managed to avoid taxation altogether, despite the company’s incredible profitability. In 2010, for example, GE posted an enormous $11.6 billion profit, yet somehow managed to rake in a $3.2 billion federal tax refund [“benefit” — is there a difference? – ed]. The direct loss in federal spending and aid totaled more than $140 million in Massachusetts alone – a figure that could have created or saved the jobs of thousands of construction workers, teachers, and firefighters.
Hundreds of demonstrators in Massachusetts, Wisconsin and elsewhere have already gathered to raise awareness of General Electric’s now-notorious tax avoidance. But with GE’s latest attempt to paper over its true record, we can expect to see much more citizen pushback on the company’s “#WhatWorks” campaign in the months to come. Stay tuned.
Where does it say that (besides on the sign)?
What a deal! I get tax refunds too, but that comes out of what was originally withheld from my paycheck.
Mentions a “tax benefit”. Not the same thing as a tax refund in the accounting world. A poorly written article.
So they can figure this thing out.
Though the whole refund/tax break (or tax favoritism, I would call it for what it is) issue that others point out is germane.
I’d like to see a more detailed analysis (rather than a math challenged reporter’s take) on this issue from an accountant. Most of these companies had their hats handed to them in 2008-2009. May not play well, but the concept of tax loss carryforwards has been around forever and is the most likely explanation of how this occurred.
Is there evidence to that effect? Agreed that would change the perception.
but everything I’ve read in the press doesn’t touch on it; but I don’t think there is a box on the 1120 that says “you’re a big corporation – here’s your money back”. I would hope that if GE was doing something illegal in their return the IRS wouldn’t be just blithely sending out rebate checks.
However, my gut feeling considering how bad 2008 and 2009 was for everyone (corporations included) that there were significant losses incurred by companies, so it seems a little specious to me to focus solely on 2010 without considering the prior 2 years of losses. Doesn’t quite play as well if you say, yeah, they got to go back and take advantage of these massive losses in the last two years that they incurred to cancel out their earnings for this year.
It’s kind of like the “news” last week about how the Dow was “back” to the pre-melt down level of 12,800, neglecting of course to consider that the Dow was over 14,000 in October 2007 (and also ignoring lost growth during that over 4 year time).
Do not operate heavy machinery for at least an hour.
Disclaimer: I don’t do corporate tax work for a living but understand some of the basic concepts.
First off tax accounting and financial accounting (i.e., generally accepted accounting principles, or GAAP accounting) are two completely separate systems. Tax accounting is what one does when filing an income tax return. GAAP is what companies use to prepare their financial statements and earnings estimates.
Companies record tax assets and liabilities in their GAAP financial statements based on differences in the timing of recognition of income and expenses between tax accounting and GAAP accounting. For example, if a company recognized income in its financial statements in the current year but such income is not taxed in that year, it would record a tax liability because it will owe income tax at some point in the future. If a company has losses (including loss carryforwards) or expenses that it cannot deduct for tax purposes in the current year, but will be able to deduct in the future, it would record a tax asset. A company would also record a tax liability for the amount it expects to pay to a tax authority in any given year.
At the end of each year a company adds up all the things that cause it to have tax assets and all the things that cause it to have tax liabilities and the result is a net asset or liability on its balance sheet. The change in the value of that asset or liability from one year to the next results in either a tax expense (if liabilities go up or assets go down) or a tax benefit (if assets go up or liabilities go down).
Companies, just like individual taxpayers, get tax refunds when the amount of tax they have paid to the government is greater than the tax that they owe on their annual income tax returns. Corporations are required to make quarterly estimated tax payments to the IRS. If they overestimate how much tax they owe in these quarterly filings they will get a refund when they file their income tax return.
GE’s business is enormous and diverse. It is next to impossible to tell from their financial statements (available on GE’s website – very large file) why they recorded a tax benefit in 2010 related to US income taxes. There is some discussion that they resolved some disputes with the IRS favorably, which would cause them record to tax assets they may have led to a tax benefit.
So you lose money in one year but that doesn’t entitle you to get cash back, you get a Loss Carryforward.
The next year when you make money, that profit is netted out with the loss and you owe nothing.
Much too complicated for the American voter however.
There’s a lot more going on than that (because even when they don’t have carryforwards their effective rate is lower than most companies), but it’s the Government’s fault for making a very complicated business tax code, not GE’s for hiring smart tax lawyers and accountants to figure out ways to avoid taxes.
There is also the issue of foreign earnings- GE makes profits in low tax countries, but doesn’t pay taxes until they bring the cash to the US. So they might make a BOOK (the whole company, what you see in SEC filings) profit, but their tax liability is not based on that number.
Under the “Truth in Government Act” of 1936 we should change the National Anthem. It’s been quite a while since the flag flew over “The land of the free and the home of the brave.” Laws, tax and otherwise are written in corporate legal departments based on boardroom wants and those that “donate” the most get the biggest bite. Ask former Senator Dodd. He tells it like it is, upfront.
So let’s change our national anthem and add it to our ringtones.
Don’t it make a fascist proud?
/snark
Over the years I’ve had conversations with IRS agents about corporate income taxes and they were of the opinion that corporate taxes are little more than a shell game to make the voters think everyone pays taxes. With carrybacks, carryforwards, special rules, the taxes become one big sleight of hand. Employing many lawyers, accountants, tax agents.
Perhaps they speak truth.
and the corporations either lobby for them or expect them.
I remember a few years ago Gallo wines were getting a tax break to “help them sell their product abroad.” I thought that was a basic idea in business- sell your products, and not needing incentive.
It goes on and on at every level of government- state vs. state, localities against each other, and the Feds giving breaks everywhere. Full employment for tax attorneys and accountants. This would be a place for bi-partisan action- getting rid of corpoate welfare.
I knew some people that went around starting businesses based on existing tax benefits for those businesses alone.
Today’s “incentive to go green” is tomorrow’s tax break.
The issue, if I recall correctly, is that other wine-producing nations subsidize bejesus out of their wine industry.