GE: 7,000 tax returns, $0 U.S. tax bill

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0.

How'd it pull off that trick? By losing lots of money.

Tax bills for 5 corporate giants
The 2009 income tax bills for America's biggest companies ranged from $0 to $15 billion. Here's why.

GE had plenty of earnings last year -- just not in the United States. For tax purposes, the company's U.S. operations lost $408 million, while its international businesses netted a $10.8 billion profit.

That left GE (GE, Fortune 500) with no U.S. profit left for Uncle Sam to tax. Corporations typically face a 35% federal income tax on their earnings. Thanks to its deductions and adjustments, GE reported an actual U.S. federal income tax rate of negative 10.5%. It got to add a "tax benefit" of $1.1 billion back into its reported earnings.

"This is the first time in at least decades that GE has reported negative U.S. pretax income and it reflects the worst economy since the Great Depression," Anne Eisele, GE's director of financial communications, said via e-mail.

But what about the $10.8 billion profit overseas? GE is "indefinitely" deferring income tax payments on those profits, Eisele said.

It may seem like accounting magic, but it's completely legit.

GE isn't the only "Top 5" company on this year's Fortune 500 list that owed no income taxes. Bank of America (BAC, Fortune 500), which suffered major losses in 2009, included a tax benefit of $1.9 billion in its annual profit.

"That's one way of escaping taxes," said Scott Hodge, president of the Tax Foundation. "Companies get to deduct their losses, so if there's no earnings, then they pay no income tax."

But GE isn't exactly escaping all tax-related pain: The company paid almost $23 billion in taxes to governments around the world from 2000 to 2009, Eisele said.

Plus, paying the accountants to crank out 7,000 tax returns can't be cheap.

And then there's all the lawyers needed to defend those returns. GE filed tax paperwork in more than 250 jurisdictions around the world last year. "We are under examination or engaged in tax litigation in many of these jurisdictions," the company dryly notes in its annual report.

GE may not owe the IRS, but it still has to file -- and its filings are epic.

In 2006, as the IRS ramped up its corporate e-filing program, the tax agency actually issued a celebratory press release when it processed GE's tax return. On paper, the return -- the nation's largest -- would have totaled a massive 24,000 pages. But instead, the IRS was able to upload the 237 MB document in under an hour.

Reading it, though, is apparently taking a bit longer. The IRS is currently auditing GE's tax returns for 2003-2007. To top of page

Index Last Change % Change
Dow 17,734.54 104.27 0.59%
Nasdaq 5,099.98 10.77 0.21%
S&P 500 2,103.70 10.45 0.50%
Treasuries 2.29 0.04 1.78%
Data as of 12:53pm ET
Company Price Change % Change
Bank of America Corp... 18.10 0.23 1.26%
Ford Motor Co 15.06 0.38 2.59%
Pfizer Inc 35.67 0.32 0.91%
Micron Technology In... 20.07 0.32 1.62%
AT&T Inc 34.72 0.39 1.14%
Data as of 12:38pm ET
Sponsors

Sections

Buffalo Wild Wings CEO Sally Smith said a minimum wage of $15 an hour for fast food workers would probably mean her company and other restaurants would cut back on hiring inexperienced teens. More

Thanks in large part to the expansion of coverage under Obamacare, health care spending is expected to have increased by 5.5%, according to federal estimates released Tuesday. It's the first time the rate would exceed 5% since 2007. More

Instagram's ban on the Sandra Bland hashtag treads a fine line between protecting people from hate speech and blocking important social discourse. More

Canary, a startup in Boulder, Colo., just released an app for iPhones and iPads that detects and measures marijuana intoxication in users. More

Quitting without a plan can hurt your career, but here are some paths to quitting that worked for some. More