GM Could Get $45 Billion Tax Break

[lostinblue 1,989]

http://www.thedetroitbureau.com/2010/11/gm-could-get-45-billion-tax-break/

General Motors could be in for the sort of tax break that would make even the most pro-business lawmaker blush, a savings of as much as $45 billion that comes as part of its government-financed restructuring.

GM is expected to report its third quarterly profit in a row, this month, a welcome bit of news for a company that ran up tens of billions of dollars in losses in the years leading up to its 2009 bankruptcy – and which is now planning to go public again, with an IPO expected to be held around November 18th.

Those losses, which would normally be wiped out by the Chapter 11 filing, will instead be applicable as so-called tax-loss carry-forwards, the Wall Street Journal reports. That comes as the result of a little-known ruling on the government’s TARP program, which has been used to rescue troubled financial institutions, as well as automakers GM and Chrysler.

The tax savings for the giant maker would come to $45.4 billion. That’s on top of the billions of dollars GM saved when much of its debt, as well as significant bondholder and shareholder equity, was wiped out when the maker emerged from bankruptcy protection in July 2009.

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Tax-loss carry-forwards permit a business to shield profits from federal taxes for up to 20 years by offsetting earnings against prior-year losses, as well as expenses for such things as pension programs.

The ruling, issued last year, is intended to help make GM more attractive to investors. That strategy will be tested, in the coming weeks, when the maker launches its return to public trading. While GM officials have so far declined to discuss details of the planned IPO, it has been reported that the maker will seek to sell about $10 billion in common stock, at somewhere between $26 and $29 a share, along with $3 billion in preferred shares. (Click Here for more.)

The federal government can only hope for a maximum payoff considering it holds a 61% stake in the “new” GM. It is expected to reduce that to below 50% with the IPO.

But the Detroit News is reporting that the Treasury could lose as much as $5.4 billion when it puts somewhere between 263 million and more than 300 million shares of government-held GM stock on the block. The newspaper estimates that at the planned share price, the government would generate up to $8.8 billion in revenue for that stake, which would represent about a third of the government’s $50 billion investment.

In all, Washington last month estimated that the bailout of General Motors, Chrysler, and Ally Financial – formerly known as GMAC – will ultimately generate $17 billion in losses.

Going forward, GM officials are reportedly aiming to boost the company’s stock price, perhaps to twice the initial strike price, which would sharply reduce losses when the Treasury further reduces its stake.

[Gary and Alla 3,694]

Look how good tax breaks are for business! GM employs a lot of union workers, 45 billion pays a lot of union workers and buys a lot of Democrat votes.

Imagine how great it would be if we just eliminated ALL business tax

[Obama 2012 1,714]

Look how good tax breaks are for business! GM employs a lot of union workers, 45 billion pays a lot of union workers and buys a lot of Democrat votes.

Imagine how great it would be if we just eliminated ALL business tax

Imagine how great it would be if we would have let the schmucks at GM go bankrupt!

[spookyturtle 9,465]

Imagine how great it would be if we would have let the schmucks at GM go bankrupt!

That would have been a big help to the country.

[Heracles 417]

That would have been a big help to the country.

Is that a joke?

One of the country's best known brand names would disappear, along with its technology. Best thing they did was assist them.

Imagine how great it would be if we would have let the schmucks at GM go bankrupt!

Which manufacturer do you prefer? I'm keen to hear.

[Obama 2012 1,714]

Which manufacturer do you prefer? I'm keen to hear.

One that acts responsibly as a corporation.

A business should never be bailed out by the government. Never.

[spookyturtle 9,465]

Is that a joke?

One of the country's best known brand names would disappear, along with its technology. Best thing they did was assist them.

Which manufacturer do you prefer? I'm keen to hear.

I was being sarcastic. While I don't approve of government bailouts, I think it was the right decision concerning GM. I was and am all for saving the US auto industry as long as it's realistically feasible. I think that it should have be set up so that the government gets back all of its investment plus interest as GM returns to profitability. And I believe that it is entirely possible.

[Gary and Alla 3,694]

One that acts responsibly as a corporation.

A business should never be bailed out by the government. Never.

If we eliminated tax on business it would make sure they never needed help from the government. Businesses just pass on tax in the cost of things which makes them less competitive. It does not say "Made in China". You only THINK it says "made in China" It ACTUALLY says "Made where we did not have to pay taxes"

[Mr. Big Dog 10,747]

It does not say "Made in China". You only THINK it says "made in China" It ACTUALLY says "Made where we did not have to pay taxes"

Really? "Socialist" Germany (taxes, unions and all) exports more than the US - despite being much smaller an overall economy - and exports more than it imports. How come seeing that Germany is clearly at a disadvantage with all that big government and all them taxes and unions over there?

Export ranking:

1. China: 1.20 tn

2. Germany: 1.16 tn

3. USA: 1.05 tn