Last year the New York Times noted that GE had found a way to avoid paying Federal corporate taxes altogether.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.
As discussed earlier, the Fiscal Cliff raised taxes on taxpayers, but gave away more than that in corporate tax breaks, including to GE.
The “fiscal cliff” legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan. But these subsidies weren’t the fruit of eleventh-hour lobbying conducted on the cliff’s edge — they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week.
Baucus’ Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama’s insistence, the Baucus bill was cut and pasted word for word into the cliff legislation.
General Electric may have been the biggest winner from the cliff deal. GE makes more wind turbines than any other U.S. company, and it lobbied hard for extension of the wind production tax credit. But more important for the multinational conglomerate was an arcane-sounding provision that became Section 222 of Baucus’ bill and then Section 322 of the cliff bill: “Extension of subpart F exception for active financing income.”
In short, this provision allows multinationals to move profits to offshore financial subsidiaries and thus avoid paying U.S. corporate income taxes. This is a windfall for GE: The exception played a central role in GE paying $0 in U.S. corporate income tax in 2011 when it made $5.1 billion in U.S. profits.
Peter Prowitt, formerly Baucus’ chief of staff, is now an in-house lobbyist and VP at GE. GE filings show Prowitt on the lobbying teams that won wind-tax credits, electric-vehicle tax credits, and “Extension of Subpart F Deferral for Financial Services.”
Two weeks before the Finance Committee hearing during which the bill was hashed out, GE’s political action committee topped off its contributions to Baucus’ Glacier PAC with a $2,000 check, according to the PAC’s federal filings. This brought GE’s contributions to Baucus’ PAC to the legal maximum of $10,000 for the election cycle.
Elizabeth Warren campaigned on making GE pay taxes. So far she has had nothing to say once she clawed her way into office.
So… when will GE be paying its fair share? Right after the Democrats lose the White House and the Senate. Or GE stops paying its annual bribes to them.