The big lie, or does GE really pay zero in income tax?

[Native_NM]

Doubt it very much....but perhaps...just remember that GE's Jeffery Imelt is Obama's buddy and GE didn't pay a dime in corporate taxes last year...hmmmm

This was posted in another thread.  This is a better forum for my response.

First, we have all heard that GE paid zero in income tax last year.  The media reports it all the time.  Is it really true?  Like all public companies, the financial data for GE is readily available, for free, to anyone.  I downloaded the 10-K for the real truth. Here is the data for GE for the last three years:

Per the Income Statement:

Tax Expense (millions)
2010         $979
2009          $82-   (a credit)
2008          $617

Hmm...almost a billion last year, a book tax credit in 2009, and $617 million in 2008.  On their earnings, an effective rate of 7% last year.  There must be more to the story.  Let's look deeper.  The Notes should have some data.  Here it is buried in the fine print...it seems GE recorded a current tax expense as follows:

Current tax expense (net)
2010         $2,024
2009          $2,739
2008          $3,427     

That can't be - that is $2.0 billion in taxes, $2.7 billion, and $3.4 billion in taxes...what gives?

There must be more...here it is...deeper in the Notes.  There is another company GECS, that holds the activity for their foreign operations.  The ones that take place oversees.

Current tax expense (net)
2010         $974-
2009          $3,887-
2008          $2,325-

Wow, look at those credits - all of which can be used against income at home.  Let's ignore the hocus pocus, and look at the checkbook.  How much did GE actually send to the US Treasury and other state tax offices?  Well that is disclosed also:

Cash paid for income tax (millions)

2010         $2,671
2009          $2,535
2008          $3,237

Last year, they paid $2.7 billion.  That is more than zero. In 2009, $2.5 billion.  More than zero.  In 2010, their net income was $11.6 billion and they wrote checks for $2.67 billion.  Guess old Mark Twain was right:  there are lies, damn lies, and statistics the Mainstream Media.

   

[MountainDon]

Thanks N_NM

[Native_NM]

I've spent the better part of 20 years in corporate finance and taxes.  GE does what everyone on this forum does -takes every tax deduction available to them.  If you have two kids and you take the Child Tax Credit, you would not think of yourself as a "tax cheat" if it lowered your taxable income to zero, which in fact is the case for 47% of the taxpaying households.  Due to the refundable nature of tax credits, EIC, solar credits, etc, half the country does not pay tax.  That means their "cash paid for income tax" amount is zero.  Zilcho.  Nada.  Book tax and income tax are night and day.  

Interestingly, it was Ronald R. and George W who did more for the average American family than any President in the modern era.  Reagan and the EIC and Bush and the CTC literally took millions of families off the tax rolls, and lowered their effective tax rate to zero.  Guess them evil Republicans have some 'splaining to do.

I don't know too many members here, but lets take our founder as an example.  John, I believe, lives in CA.  Assume that he determines that in developing nations there is a huge market for small, affordable homes.  He opens an office in Chile, hires staff there, and markets his plans.  A year later, the office is booming, and he is making tons of loot.  Meanwhile, back in the states, things are slow.  He is still making money, but the market is tough, and even worse, for every dollar he makes, he gives away a combined 40% to the IRS and the State of CA.  Chile, on the other hand, has very favorable tax laws.  He pays 66% less in tax, plus he gets to fly down on his new jet and visit cool places like Machu Picchu in Peru and the Amazon.  

One day he gets a letter from the state of CA. They tell him even though his other company is headquartered in another country, and it does no business in the state, they feel they are entitled to 10% of the pie.  Uncle Sam puts his hand out and says he wants a piece also.  John is a nice guy, but a quick calculation on a scrap "20x32 1.5" plan indicates they get millions of his money simply because he lives there.  "Pack uP", he tells the wife.  There is no reason to live here.  We got a snazzy jet now and we can visit on the weekends.  

My analogy is not too far off from what is happening today.  GE makes its money from foreign operations.  Ford and GM also.  The US is 300 million people out of 7.5 billion.  There is a bigger market "there" than there is "here".  The problems the country is facing today are the tip of the iceberg, but that is another thread.

[MountainDon]

My personal belief on corporate income tax gets me into trouble with lots of folks. I believe corporations should pay lower tax rates with fewer "loopholes".  Maybe even zero %. It's only passed on to the consumers of their products anyhow.

[RIjake]

Hey that's an easy to understand explanation. Thanks

[Bob S.]

  The way I undeerstand it tax loopholes or tax deductions (whichever you want to call them) exist so a person or company will spend their money in a proscribed manner.
 The government lets you deduct something if they want more of that particular thing. In effect they are controlling us with their tax policies.
 This issue is being used by the left as part of their class warfare. And the main stream media is helping them in every way they can.

[UK4X4]

Ohh no you let the secret out - I'm not in Colombia for the ambiance !

well actually I still pay tax.

the company is on the US stock market but the international headquarters is in the caymen islands

We operate globally

The US company however is financially a completely seperate entity

Halliburton just seperated their company too- Hal international is based in Dubai.....no tax at all

funily the companies can do that

As a US citzen it does not matter where you are you still have to pay US tax even if your in the middle east
or the caymens

So the companies get away with it - but joe blogs does not

US expats have a slightly diferent international contract due to the diferences

Me being a brit I opted out of tax years ago- but I still pay a flat rate "tax"- basicly where ever I am i pay the same  but to the company fund

Financially i earn the same in each country - it does not make a diference to the local tax rate

Ie the guy in my old job in Qatar (tax free) is now paying some of my colombian tax

I think were the only global company to do this - but as I average a move every year or so its makes my life easy

I pay my percentage- the company deals with the rest.

You'll probably find that most global companies operate their US company seperately from their international groups.

You can bet cocacola surinam for example aint sending tax money back to uncle sam

[Ajax]

This was posted in another thread.  This is a better forum for my response.

First, we have all heard that GE paid zero in income tax last year.  The media reports it all the time.  Is it really true?  Like all public companies, the financial data for GE is readily available, for free, to anyone.  I downloaded the 10-K for the real truth. Here is the data for GE for the last three years:

Per the Income Statement:

Tax Expense (millions)
2010         $979
2009          $82-   (a credit)
2008          $617

Hmm...almost a billion last year, a book tax credit in 2009, and $617 million in 2008.  On their earnings, an effective rate of 7% last year.  There must be more to the story.  Let's look deeper.  The Notes should have some data.  Here it is buried in the fine print...it seems GE recorded a current tax expense as follows:

Current tax expense (net)
2010         $2,024
2009          $2,739
2008          $3,427     

That can't be - that is $2.0 billion in taxes, $2.7 billion, and $3.4 billion in taxes...what gives?

There must be more...here it is...deeper in the Notes.  There is another company GECS, that holds the activity for their foreign operations.  The ones that take place oversees.

Current tax expense (net)
2010         $974-
2009          $3,887-
2008          $2,325-

Wow, look at those credits - all of which can be used against income at home.  Let's ignore the hocus pocus, and look at the checkbook.  How much did GE actually send to the US Treasury and other state tax offices?  Well that is disclosed also:

Cash paid for income tax (millions)

2010         $2,671
2009          $2,535
2008          $3,237

Last year, they paid $2.7 billion.  That is more than zero. In 2009, $2.5 billion.  More than zero.  In 2010, their net income was $11.6 billion and they wrote checks for $2.67 billion.  Guess old Mark Twain was right:  there are lies, damn lies, and statistics the Mainstream Media.

Congratulations on one of the most massively misleading posts I've read in a long time

[Native_NM]

Congratulations on one of the most massively misleading posts I've read in a long time

http://sec.gov/cgi-bin/browse-edgar?company=&match=&CIK=ge&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany


A little hard to mislead facts.  It is a FACT that GE paid income taxes of $2.6 billion to various federal and state agencies last year.  It is a FACT they paid $2.5 billion the year before.  It is a FACT that GE tracks foreign operations in a separate subsidiary.  It is a FACT that despite numerous audits by the IRS, GE's tax position is consistent with US Law.   

What is misleading is a media comprised of kids with a political agenda whom are incapable of digesting a balance sheet, income statement, or cash flow statement.

[Ajax]

http://sec.gov/cgi-bin/browse-edgar?company=&match=&CIK=ge&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany


A little hard to mislead facts.  It is a FACT that GE paid income taxes of $2.6 billion to various federal and state agencies last year.  It is a FACT they paid $2.5 billion the year before.  It is a FACT that GE tracks foreign operations in a separate subsidiary.  It is a FACT that despite numerous audits by the IRS, GE's tax position is consistent with US Law.   

What is misleading is a media comprised of kids with a political agenda whom are incapable of digesting a balance sheet, income statement, or cash flow statement.

If you'll be patient, I give a more complete response this evening.  I have trouble with quoted responses from my work computer.

[muldoon]

In perspective... 

---
http://www.upi.com/Business_News/2009/06/29/GE-is-quiet-bailout-recipient/UPI-11291246282301

GE Capital, the company's finance firm, qualified for assistance through the Temporary Liquidity Guarantee Program, due to its ownership of a modest savings and loan in Utah, The Washington Post reported Monday.

The government has guaranteed $340 billion in debt through the program with a quarter of that issued by GE Capital.

[Squirl]

NOTE 14. INCOME TAXES

Provision for Income Taxes



             
(In millions)    2010      2009      2008   
   
GE
                   
Current tax expense
    $     2,401       $     3,199       $     3,844   
Deferred tax expense (benefit) from temporary differences
      (377)         (460)         (417)   
                           
      2,024         2,739         3,427   
                           
GECS
                   
Current tax expense (benefit)
      (2,397)         (1,554)         (1,460)   
Deferred tax expense (benefit) from temporary differences
      1,423         (2,333)         (865)   
                           
      (974)         (3,887)         (2,325)   
                           
Consolidated
                   
Current tax expense
      4         1,645         2,384   
Deferred tax expense (benefit) from temporary differences
      1,046         (2,793)         (1,282)   
                           
Total
    $     1,050       $     (1,148)       $     1,102   
                           



GE and GECS file a consolidated U.S. federal income tax return. This enables GE to use GECS tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECS effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return.

Consolidated U.S. earnings (loss) from continuing operations before income taxes were $5,078 million in 2010

[Squirl]

Yes Native_NM you should read the 10-K section titled INCOME TAXES.

FACT

The 2.8 billion was paid to foreign governments and thanks to structuring of the U.S. tax code they were able to claim an additional $3.2 billion dollar tax credit.

"Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of a benefit of $3,253 million, $833 million and $651 million in 2010, 2009 and 2008, respectively, related to the benefit from GECS deductions and credits in excess of GE's current U.S. tax expense."

[Squirl]

I have in the past edited 10-K forms as part of my living.  Normally my dealings with the IRS are with special agents and substance over form doctrine.  It had been a while since I had to translate lines from a statement of cash flows with descriptive paragraphs from a 10-K.

I would say more accurately Obama and all presidents before him and almost all of congress of both parties are Imelt's buddies and they have structured the tax code to benefit those people, (corporations are people too.)

[Squirl]

What I find interesting is they made $5 billion dollars of net income before taxes in the U.S. and paid no taxes.  So they would have made $9 billion of revenue offshore and paid $2.6 billion in taxes on that or 28%.  How bad is the U.S. tax rate then?  Maybe the more outrageous thing is they actually have to pay it to do business in other countries like China and India.

[Ajax]

This was posted in another thread.  This is a better forum for my response.

First, we have all heard that GE paid zero in income tax last year.  The media reports it all the time.  Is it really true?  Like all public companies, the financial data for GE is readily available, for free, to anyone.  I downloaded the 10-K for the real truth. Here is the data for GE for the last three years:

Per the Income Statement:

Tax Expense (millions)
2010         $979
2009          $82-   (a credit)
2008          $617

This is not GE's tax liability, it's their gain or loss on discontinued operations.  The actual 2010 tax expense is 1050

Hmm...almost a billion last year, a book tax credit in 2009, and $617 million in 2008.  On their earnings, an effective rate of 7% last year.  There must be more to the story.  Let's look deeper.  The Notes should have some data.  Here it is buried in the fine print...it seems GE recorded a current tax expense as follows:

Current tax expense (net)
2010         $2,024
2009          $2,739
2008          $3,427     

That can't be - that is $2.0 billion in taxes, $2.7 billion, and $3.4 billion in taxes...what gives?

There must be more...here it is...deeper in the Notes.  There is another company GECS, that holds the activity for their foreign operations.  The ones that take place oversees.

GECS does not hold Foreign activity.  It's GE Capital Services, their financial arm.  From page 32 of the annual report, management's discussion of operations

Our consolidated financial statements combine the industrial manufacturing, services and media businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).

Current tax expense (net)
2010         $974-
2009          $3,887-
2008          $2,325-


Again, let's go to the annual report, where we find the data below.  You can once again see the tax expense of 1050, which we found earlier in the income statement.  You mentioned the 7% effective tax rate.  GE lists the details of that on page 103 of the annual report, but you can also get the number from the income statement  by dividing 1050 by 14208, which is the earnings from continuing operations.  That equals 7.4%.  But look at the consolidated current tax expense.  That's what they paid this year.  The other 1.046 Billion is deferred.

GE       Current Tax Expense       2401 Deferred Tax Expense      -377                                   2024        GECS       Current Tax Expense      -2397 Deferred Tax Expense      1423                                     -974        Consolidated       Current Tax Expense            4 Deferred Tax Expense      1046                                    1050

Wow, look at those credits - all of which can be used against income at home.  Let's ignore the hocus pocus, and look at the checkbook.  How much did GE actually send to the US Treasury and other state tax offices?  Well that is disclosed also:

Cash paid for income tax (millions)

2010         $2,671
2009          $2,535
2008          $3,237

Last year, they paid $2.7 billion.  That is more than zero. In 2009, $2.5 billion.  More than zero.  In 2010, their net income was $11.6 billion and they wrote checks for $2.67 billion.  Guess old Mark Twain was right:  there are lies, damn lies, and statistics the Mainstream Media.

   
Lets get something straight.  According to the supplemental data on the cash flow statement, GE paid $2.7 billion.  I don't doubt it.  Again, the annual statement:

Annually, we file over 6,400 income tax returns in over 250 global taxing jurisdictions.

So did GE pay US income taxes this year?  Not according to the annual report

Consolidated U.S. earnings (loss) from continuing operations before income taxes were $5,078 million in 2010, $(212) million in 2009 and $2,956 million in 2008. The corresponding amounts for non-U.S.-based operations were $9,130 million in 2010, $10,207 million in 2009 and $16,814 million in 2008. Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of a benefit of $3,253 million, $833 million and $651 million in 2010, 2009 and 2008, respectively, related to the benefit from GECS deductions and credits in excess of GE's current U.S. tax expense. Consolidated current tax expense amounts applicable to non-U.S. jurisdictions were $3,258 million, $2,385 million and $3,027 million in 2010, 2009 and 2008, respectively

Let's do a bit more math

3258 Billion Current tax expense from foreign operations
(3253) Billion Current tax expense from US operations
------
    4 Consolidated current income tax expense.  We've seen that before.  Conclusion, GE paid no US federal income taxes in 2010.  As Native posted, it's all in the annual report

Sorry it's hard to read, I tried to increase the font size but had no luck

[Native_NM]

The statement attributed over and over is that GE pays no tax or has no tax liability.  They pay taxes.  Do not confuse the Balance Sheet presentation required under FAS109 with the income statement and the cash flow statement. 

[Gary O]

 

"Sorry it's hard to read, I tried to increase the font size but had no luck"

Well, if one really wants to read it, that little sprocket looking thing will increase the font size, or alt+x.

OK, somebody help me out.
What can I do about it?
I'm not being facetious, what can I (average guy) do about it?
I watched the video from another recent thread about the economy (with the sound off) just to study how the speaker acted. Thought he'd blow a major artery.
I'm not goin' there, but I can sure help as a part of a body of many.

WHAT CAN I DO ABOUT IT?

Gary O'

[Ajax]

The statement attributed over and over is that GE pays no tax or has no tax liability.  They pay taxes.  Do not confuse the Balance Sheet presentation required under FAS109 with the income statement and the cash flow statement. 

General Electric Paid No Federal Taxes in 2010

For those unaccustomed to the loopholes and shelters of the corporate tax code, GE's success at avoiding taxes is nothing short of extraordinary. The company, led by Immelt, earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore. In fact, GE got a $3.2 billion tax benefit.

"GE did not pay US federal taxes last year because we did not owe any," spokeswoman Anne Eisele told AFP, rejecting suggestions the United States' fourth largest company was gaming the system.

[Ajax]

OK, somebody help me out.
What can I do about it?
I'm not being facetious, what can I (average guy) do about it?
I watched the video from another recent thread about the economy (with the sound off) just to study how the speaker acted. Thought he'd blow a major artery.
I'm not goin' there, but I can sure help as a part of a body of many.

WHAT CAN I DO ABOUT IT?

Gary O'

Nothing.  It's not that big a deal.  GE, like all of us, uses every legal avenue to reduce their overall tax bill.  It's just that being a huge mulit-national, they have more tricks.  In past years, the financial arm of the company made big money, and GE paid taxes.  Corporate earnings can be lumpy, so carry forwards and carry backs make sense.  In reality, neither Native or I have any real idea what GE paid in US taxes, because tax and book accounting are different.  You can be pretty sure that if GE did pay US taxes on last years income, it was minimal.  You know that much just from looking at the annual.

[Native_NM]

According to GE, their effective tax rate over the last 20 years is about 8%.  Over the last few years, it has been less.  It still amounts to billions. 

Now if you want to argue if they should pay more, that's a different topic...

[Gary O]

Nothing.  It's not that big a deal.  GE, like all of us, uses every legal avenue to reduce their overall tax bill.  It's just that being a huge mulit-national, they have more tricks.  In past years, the financial arm of the company made big money, and GE paid taxes.  Corporate earnings can be lumpy, so carry forwards and carry backs make sense.  In reality, neither Native or I have any real idea what GE paid in US taxes, because tax and book accounting are different.  You can be pretty sure that if GE did pay US taxes on last years income, it was minimal.  You know that much just from looking at the annual.

Thanx Ajax
Pretty much what I figured

[rick91351]

Thanx Ajax
Pretty much what I figured

Gary sort of reminds me of many years ago when in collage.  Many of us were locked in discussions of the war in Vietnam mixed with civil rights.  This was mixed with herb and consuming bottle after bottle of Bud, Coors,  Annie Green Springs Green Apple Wine and Boones Farm fortified something.  Several of us that gathered together almost nightly for this ritual discovered our discussions were pretty fruitless at best.  Little was gained and nothing was changed.  Sort like the saying about opinions and rectal orifices - everyone has one.  This seemed to disarm our discussions on world views to the point where they actually digressed to places where our opinions actually mattered and we might change things; where we might actually make a difference.  Those discussions down graded themselves and faded to 270 virus 30-06.  Further degraded themselves to best one and two day floats on Idaho, Washington and Oregon.  Along with catching 20 inch rainbows on a Adams Fly with a #20 hook.  IE the 20 20 Club.  Then Oh My God heated discussions on floating fly lines opposed to sinking.  Solved absolutely nothing but at least it was subjects we knew something of and had actual hands on experience.   

Peace Bros' 

[Gary O]

Well Rick, you had me right up to the fly fishin'.
Got 6 fly rods (gifts and one antique bamboo) that I've never wet a line.
I'm just a troglodyte bait fisherman.
Guess I never gave fish the credit of ability to discern the difference between a may fly and a shrimp.
Love to stroll into Kaufman's Streambourne and ask where the refrigerator is, however.

But, yes, back in the day they were sometimes called 'rap sessions'.
Went well with beer, kegs, bottles, steins, and some with weed....and pizza.
If in a bar, things tended to digress more rapidly, depending on thirst to member quotient.
The makeup of the discussion panels consisted of the egg head, the political science guy, the jock, the entrepreneur, the self appointed 'God's gift to wimin', and a passel of thirsty drones.
Most every night we solved a lot of issues, mostly consisting of things like, 'I bet I can hit the urinal from the door' contest, or 'if someone holds the keg up, I bet I can finish it off without stopping' endurance test, or the 'your woman is so ugly' relay.
Back then, put downs were well orchestrated, back and forth. Starting good humouredly, then culminating in a fun little scuffle, the egghead becoming a projectile, the politician sidling behind the bar with God's gift, and the rest of us falling down and getting up.

Thanks for the memories, Rick.