GM Doesn't Have to Pay Taxes

Little-noticed ruling costs government $45.4 billion
By Kevin Spak,  Newser Staff
Posted Nov 3, 2010 7:27 AM CDT
In this file photo taken Jan. 12, 2009, a General Motors sign is shown at the North American International Auto Show in Detroit.   (AP Photo/Paul Sancya, File)

(Newser) – General Motors won’t be government-owned for much longer, but it’s getting a parting gift from Uncle Sam: a $45.4 billion tax exemption that could leave it tax-free for years. GM will be able to shield its future profits using past losses using so-called “tax-loss carry-forwards,” the Wall Street Journal reports. Companies that have recently changed ownership aren’t supposed to be able to take full advantage of those, but a little-noticed ruling last year exempted TARP companies from that restriction.

The government decided that giving companies the tax shield would make them more attractive to investors, raising the sale price of their assets enough to make up for the lost tax revenue, sources tell the Journal. Besides, that tax revenue wouldn’t exist if the companies failed.

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