U.S. Treasury forgives $14 billion in tax revenue in a deal with GM

GM Renaissance Center

As a part of a sweet deal with the United States Treasury, General Motors will be able to save $14 billion in tax revenue. GM, which is expected to post its first profitable year since 2004 when it reports its 4th quarter results on Thursday, won’t have to worry about getting a big tax bill since it lost billions in the past. The break will reduce GM’s U.S. tax bill by $14 billion in the coming years, while cutting global taxes by close to $19 billion.

When companies face past losses, they typically get a break on future taxes. However, in most cases they lose that tax break during bankruptcy since the losses are offset by income the company receives when it gets rid of debt. So you would think that GM, which shed $30 billion in debt during bankruptcy last year, would not get a tax break. Well, somehow that won’t happen to GM and the company is essentially getting a $14 billion ‘gift’ from the U.S. government.

It’s unclear why GM is allowed to carry over its losses but experts say that GM received preferential treatment.

– By: Omar Rana

Source: CNNMoney