Journalism in the Public Interest

Setting The Record Straight on GE’s Taxes

Did GE pay U.S. income taxes in 2010? The company known for minimizing its tax bill made a muddled situation worse responding to a New York Times report suggesting it might get a refund. GE now says it has a small tax liability for 2010.


President Barack Obama looks at a turbine during a tour of the General Electric Plant with GE Chairman and CEO Jeffrey Immelt, left, and plant manager Kevin Sharkey on Jan. 21, 2011, in Schenectady, N.Y. (Mandel Ngan/AFP/Getty Images)

This story was co-published with Fortune.

There's a heated debate over General Electric's taxes in places ranging from the front page of the New York Times to the blogosphere to, of all places, "The Daily Show." In the 10 days since the Times touched off this debate, what started out as something resembling a conversation has degenerated into posturing, name-calling, and shrieking. So, did GE really not pay any income taxes on a $5.1 billion U.S. profit last year? Is it really getting a tax refund?

We're going to try to answer these questions. We'll also show you some things that we've learned about GE that few people outside the company and the insular world of tax techies know. The Times, of course, made GE and its tax gamesmanship a national issue with its agenda-setting piece on March 25. (By the way, they beat us on the story; we'd been working on it for months.) Unfortunately, for all its good work, the Times story has created at least one major misperception -- that GE paid no U.S. income taxes last year and is actually getting a $3.2 billion refund from the Treasury.

The Times' own headline writers got that impression too. "GE Turns the Tax Man Away Empty-Handed," read the headline on early editions, including the Times' Washington edition, the version that politicians and the DC-based news media and commentariat see. "GE's Strategies Let It Avoid Taxes Altogether," was the original head on, the version the blogosphere reads.

Those headlines are based on the story's third paragraph, which discusses GE's 2010 financial results. "Its American tax bill? None. In fact, GE claimed a tax benefit of $3.2 billion." That seems to say that GE is getting a tax refund for 2010 -- but the words "tax benefit" are so ambiguous that it's not clear what they mean, and the article never explains them, or mentions them again.

By the time a revised (and accurate) headline got slapped on the later-edition print issues -- "At GE on Tax Day, Billions of Reasons to Smile" -- the idea that the Times was saying that GE paid no U.S. income taxes and was getting a big refund was firmly implanted.

GE made a muddled situation worse by putting complicated, technical and lawyerly rebuttals on its website, tweeting them, tripping over itself, and then proving unable to explain itself in public exchanges with the likes of Henry Blodget, proprietor of the widely followed BusinessInsider blog. Or in conversations with reporters.

Now, we'll give you brief answers to the main questions, but you'll have to bear with us afterward for the full explanation.

Did GE get a $3.2 billion tax refund? No.

Did GE pay U.S. income taxes in 2010? Yes, it paid estimated taxes for 2010, and also made payments for previous years. Think of it as your having paid withholding taxes on your salary in 2010, and sending the IRS a check on April 15, 2010, covering your balance owed for 2009.

Will GE ultimately pay U.S. income taxes for 2010? After much to-ing and fro-ing -- the company says it hasn't completed its 2010 tax return -- GE now says that it will pay tax.

Why should you care about this? Because we all have a stake in how this plays out. Thanks to the uproar over GE, we now risk ending up with legislation that targets GE but produces all sorts of unintended consequences. Public rage can make for bad law. For example, the Alternative Minimum Tax was adopted in 1969 amid an uproar generated by a Treasury report that said 155 wealthy families had paid no income tax. But the bill, badly designed and badly amended, has morphed into a mess that affects millions of middle- and upper-middle-class families, but not the really-high-income tax-minimizing families. They're not affected because the AMT fades out of the picture for families with income of $600,000 and up.

Now, let's take it from the top, slowly, and sort this all out.

GE's 2010 financial statements reported a $3.25 billion U.S. "current tax benefit," which is where the Times, which declined comment, got its $3.2 billion "tax benefit" number. But a company's "current tax" number has nothing to do with what it actually pays in taxes for a given year. "Current tax benefit" and "current tax expense" are so-called financial reporting numbers, used to calculate the profits a company reports to shareholders.

They have nothing to do with what a company sends to (or receives from) the IRS. "Any correlation between the 'current tax expense' and the current tax payable is likely coincidental," says a leading tax authority, Ed Outslay, Deloitte/Michael Licata professor of accounting at Michigan State University's business school.

After repeated conversations with GE -- remember, we've been working on this story too -- we can finally give you reasonably definitive answers.

The company says that it's not getting any refund for 2010 -- validating Outslay's analysis. Its 2010 tax situation? "We expect to have a small U.S. income tax liability for 2010," GE chief spokesman Gary Sheffer told us. How big is small? GE declined to say. The number is unlikely to ever be disclosed unless GE goes public with it, or is forced to do so.

One reason the Times got ensnared -- and that it took us a while to figure things out -- is that the material is confusing. Professor Outslay drew up 10 GE tax metrics for us, and could have given us at least six more. None of them show what GE's U.S. income tax bill is for a given year.

We're certainly not trying to denigrate the Times. (Full disclosure: Co-author Jeff Gerth worked there for 30 years; co-author Allan Sloan once aspired to work there; ProPublica articles sometimes appear there.) We're certainly not siding with GE, which for decades has been an aggressive tax-minimizer, and could have averted this mess by explaining things simply and clearly to the Times and us and others. It either couldn't or wouldn't do so.

Okay. So instead of chewing over GE and the Times endlessly, let's look at the big picture.

For the first time in a long while, corporate taxes are actually a hot topic -- one that non-business types care about. Corporate tax reform was already in the air; now it's supercharged.

It's been 25 years since the last big tax reform legislation, which cut the corporate rate to 34 percent from 46 percent and eliminated a lot of deductions and tax breaks. But a quarter-century of pushing by businesses -- of which GE has been among the most aggressive -- has left us with both the lower tax rate (now 35 percent) and lots more deductions and shelters and other tax-reducing tactics than the 1986 legislation envisioned. GE's current idea of "reform" as expounded by John Samuels, the head of its tax department, is to cut the rate, but to allow some of GE's major tax-minimizing maneuvers to remain in place. It's hard to imagine anything like that happening now.

Samuels said at a tax forum in February that GE needs a tax system that will let it compete effectively with giant, foreign-based multinationals like Mitsubishi, Siemens, and Phillips. However, their effective tax rates for earnings purposes last year were 40 percent, 31 percent and 26 percent respectively, compared with 7 percent for GE. (GE says its tax rate's been artificially low the past few years, and will soon rise.)

We've already had more than enough heat about corporate taxes. What we need now is some light. And an appreciation that this problem, like GE's tax situation, is more complicated than the shriller voices among us would have you believe.

Uh. I fail to see how this sets any part of the record straight. For me, it adds to the confusion.

this sounds like GE’s pr—not an article.

Your effort have clarified little. Because of the lack of real information, it still looks like GE has gamed the system, and may still have paid no taxes.

The real story is not what the tax rate is, but what is paid. One fact is the percentage of the federal income from corporate taxes has been falling for years.

I don’t believe that taxes are a major drag on competition any more than wages are. If a corporation can afford the high salaries and bonuses they do, then they have money. If they can afford to make the donations to politicians and lobbyists they do, then they can afford to compete. Frankly, I like to see corporations constrained forcing more wealthy people to run companies whose failure effects their personal bottom line. The fact that we’ve created a situation where executives run their organization into the ground while collecting a huge paycheck that isn’t effected by reality is one of the biggest scams perpetrated on the citizens of the world.


So how much in tax did GE pay.

Huffington post spent how many months on this article and still couldn’t decipher what GE paid in taxes

Arianna better review these articles before she posts..

Why waste people’s time with articles that go nowhere

A civilized nation requires taxes; both individual AND corporate.

BS article - time to write straight simple facts instead of convolving the truth.

A CYA article if I ever read one, full of distractions, lacking any substance. Pure fluff. Who do they think they are fooling with this pap? . All it does is prove that the original story, that GE pays no taxes, is right.
I say let’s return to the tax rates of that great Republican, Dwight Eisenhower, when corporations and the super rich were proud of America, and paid to support it.

Corporations have won the right to donate to political campaigns in unlimited amounts and secretly .. well .. how about corporations pay income taxes openly, honestly, forthrightly and with pride in being American .. like people ?

Paul Bogdanich

April 4, 2011, 10:02 a.m.

What a fluff piece written to confuse everyone and make GE look better.  I guess you can do that when you have the money saved from not paying your taxes.  O.K. so GE has complicated taxes.  So why not look at what they paid for 2008, 2007,2006, 2005, 2004, 2003 and so on or years where their “complicated” tax periods settle and the taxes are final.  Why not do that to cut through the bullpoop?  If you do that you find that they pay on average about 3.2% of US net income in US taxes.  3.2 freaking percent.  Less under Reagan and Bush-II and probably even less than that under the current corporate stooge.

The big point is using GE’s historical effective tax rate of 7% they are paying about 210 billion in taxes on 3.5 billion in US profits, which is too low and is being paid for by now by both parties targeting our kids and parents.  GE is a multinational which puts it’s own interests first.  Mainstream Americans need to put our interests first. No American should have to worry about healthcare, retirement or educating their child.  They have built a system that steals the wealth we produce and then penalizes us for being victims of the theft.  Enough is enougn.

GE is part of the military-industrial-Congressional system that has lost over 2 trillion from Pentagon budgets.  That is public money that is unaccounted for. It’s own of the biggest crimes in history.  We want our money back NOW.

This piece was not written by Huff Post but by ProPublica…look at the top of the article. Huff Post only had the link to the article.

AND, it is BS.

Estimated taxes are taxes you think you may owe that you pay in advance and most oftentimes get refunded, this doesn’t mean GE paid taxes.  I am a tax professional and this article is filled with nonsense in order to confuse the issue further.  I agree with an earlier poster, this sounds like GE pr.  Getting a 3.5 billion dollar credit may not be an actual refund that GE received but it may have lowered their tax bill significantly.  This article is for the ignorant who don’t know how our tax laws work.…the answer is still zero…..great….

The real story for me is that the corporations are really asshats paying someone millions in compensation and bonuses and stock options for the trade of better and better profits then they leave and go to another company with millions and millions to say that they made money for the shareholders.  These companies are the same as the banks and the housing market built on a bubble.  They will fall.

Ditto the other posters that said this article was worthless and did not add anything new.  Bobby Blue I agree that we should return to tax rates of Eisenhower days and maybe these corporations would instead invest in America and innovation and their workers in order to avoid more profits and taxes.  That was the impetus for the higher tax rate and to also create a situation where more dynasty/aristocrat families were NOT created.  We did not want to have a country whereby a few Kings and Queens ran our nation.  Look where we are now?  Top 400 people who are billionaires and have there way with our politicians and White House.

How about some real numbers?  You can start with how much GE paid in taxes.  If you don’t know, then don’t bore me with this piffle.  We all know that corporations don’t give a shit about anyone but themselves.  Our country has been raped by corporate greed If you’re a journalist, write about that.  Otherwise, don’t waste my time.

Well, I guess the vaunted GE PR machine is ramping up - with BS mostly.

This article looks like someone just bought the GE BS and did the usual ‘the other side says’ w/o really taking the time (and seeking real expertise) to fact check. 

I expected better from HP…

New title for this article: depends on what the definition of “is” is.

i love this article.  it went no wheres in quite few words.  i really liked learning the the alternate minimum tax isn’t applied above incomes of 600K$s.  if that’s true what was that all about?  does the constitution start out ” We the people,”  or “We the stupid people”?  the corporations ran the scam of reducing the percentage paid in taxes from 46% to 34% while giving up certain scams then went on to reintroduce those and other scams to further reduce their taxes.  now they want to reduce the 34% to a lower amount and the buy more reductions from THEIR congressmen/women and senators and presidents.  until we are paying them just to run their businesses and screw us more then ever. the insults never stop in this country.  i would like to write some laws that include a noose and a firing squad.  these people already believe they are not of the same species the rest of are.  if so its time for our species to get rid of their species, permanently.

GE can’t pay taxes, but they seem to have plenty of money to buy writers.

Of course we should give the corporations who own our government every benefit of the doubt, else their massive investments to shape laws in their favor, both tax and regulation, will have been wasted.

Crawford Harris

April 4, 2011, 10:23 a.m.

If they are not pushing the envelope, why do they need 900 in-house tax lawyers plus accountants and lobbyists to write new loopholes for Congress to pass?

Business provided 30% of government revenue in the 1950s, when our economic engine was at its most productive. Now it is 6.6% and they are sending jobs overseas and otherwise displaying their inability to create jobs. Tax cuts do not produce jobs. They encourage corporations and the wealthy to find way to maximize what they get and keep through tax and financial scheming.

This didn’t go very far in “setting the record straight”. Perhaps a more thorough and in-depth article is required. Unless this was just written to get more ‘clicks’ on your sight.

GE is and has been a bullshit company.  They are imagination at work alright.  I can’t believe O’bama put the CEO in charge of bringing jobs back to the states when they (GE) are the most guilty of dismantling companies they purchase and send to GE India.

Des Moines Dude

April 4, 2011, 10:26 a.m.

Well, the Times can’t get it right, GE can’t explain it and Pro Publica can’t explain either, even when it says it can.

If there was ever a compelling case for a flat tax, this is it.

I do not think that “tax rate” is a good indicator of corporate tax burden.
Here is a fictional “tax return” to illustrate:

Profit (Income - Expenses)                          5 Billion
Tax (Tax rate = 110%)                5.5 Billion
    Deduction (Public good deeds)    2.  Billion
    Deduction (Political Contributions)  1.  Billion
    Deduction (Lobbying Expenses)    1.  Billion
    Deduction (Misc corporate perks)  1.5 Billion
Total Corporate Allowed Deductions                 (5.5 Billion)

Reported Corporate Profit                           (  .5 Billion)

I would lobby for a national tax structure designed to produce revenue rather than a tax policy implementing political social philosophy.

This might be one of the poorest written articles ever published!  This article managed to say absolutly nothing in twenty odd paragraphs.

Allen Sloan and Jeff Gerthe are BSers.

agenda setting?
irate public makes bad law?
where was the author when walker and kasich began their attempt to gut the unins and the onlu articles to be found were excoriating publuc employees for supposedly gouging “taxpayers”.
fah, what a load of crap.
this country is screwed up

The People’s Money Bill -

Any company, corporation, firm, association, university, charity or other business entity using Federal money in the form of subsidies, tax breaks, loans, grants or other relief shall ensure that NONE of their employee’s including subsidiary employees shall earn, in total compensation, more than the President of the United States minus 10%. This includes executives, board members and officers of the company.

Problem solved.

The real story is Imelt’s “explanation” regarding GE Capital. Does he really think that writing down assets and writing off bad debts warrants an attaboy?  So, GE cleans up its balance sheet with taxpayer support and then acts like it has turned the company around by registering an after tax profit for 2011.  Only thing is, nothing operationally or strategically really changed.  That of course won’t stop GE execs from spinning the restored “health” of the company. Nobody is being fooled here, except maybe an overly empathetic board of directors and a few Fortune reporters and researchers.  As evidence by the stock price, Wall Street yawned and is still waiting for something tangible.

Written by a GE PR flunky or spin artist?

You have just told us nothing.  Everything is still in the dark.  Corporations and the weathly either move money off shore or form headquarters in places that just help avoid taxes.  If we could just collect the taxes due on the underground economy (cash business) we probably solve most of our tax problems.

Can’t see the forrest for the trees?  I’m afraid you got so stuck in how complicated it was, you missed the bottom line to the corporate story in today’s world.  When it comes to profit, there seems to be no national pride.  The times beating you to the punch, caused the grapes to sour for you.

I do not believe Jeff Gerth has done himself any favors by participating in this article.  It smacks of usless Public Relations and nothing more.  Do they think we are all morons?  Lots of average people pay estimated tax for a variety of reasons and few of us get by with the tax rate of G.E.  I would expect nothing better from Fortune, however.

You know, for them and other corporations, its not even about the profits anymore. It’s about the power.

Kenneth Thomas

April 4, 2011, 10:47 a.m.

This article is very short on details. I endorse the earlier comment that you should have included data on GE’s actual taxes in recent years.

For example, you do not say what the source of the $3.25 billion tax benefit is. Is it tax deferral on offshore earnings? Or something entirely different? Except for GE’s word, we don’t know that the $3.25 billion actually is smaller than its estimated taxes.

I’m also not sure why you are accepting the line about multiple tax metrics, and I am skeptical. Companies report annually on what they pay in taxes, and usually break it down by U.S. federal, U.S. state, and foreign income taxes. What are those numbers for GE?

This article raises more questions than answers, and I don’t understand the pro-GE spin.

The title of the article needs to reflect its contents:  “Obfuscate, Confuse, & Spin the Record On GE’s Taxes”

This article couldn’t have been written better if the GE lawyers had mailed it in (which I suspect may have happened).

Corporations, companies, etc. do not pay taxes. Individuals/end users that buy their products pay the taxes; taxes on corporate profits are passed on to the end user.

Raise the corporate rate; the price of their products will increase propotionatly. You, the consumer, will pay that increase.

Wardell Castles

April 4, 2011, 10:53 a.m.

Playing the game is not illegal.  It may be immoral.  However, it’s not illegal.  If GE did nothing illegally, which I don’t think anyone is claiming, then our issue is not with GE but with the IRS and Federal Government that provides these loopholes and tax havens.

Tom in San Jose

April 4, 2011, 10:53 a.m.

Okay, now that you’ve given us the snake oil sales pitch….

Your “explanation” of GE’s tax liability, payments, credits sound like the Wizard of Oz and we just shouldn’t look behind the curtain.  Confusing, and totally failing to make anything “clear”.  In other words, an attempted snow job by a fairly well respected financial magazine.  So, in the end it makes me wonder, “Just how many pages of advertising in Fortune did this ‘non-denial, denial’ cost GE?”

Hey, why don’t we get someone from FORTUNE magazine in here to write an article defending GE?

Oh, I see they beat me to it.

Allan Sloan and Jeff Gerth have earned the title of Hack. Congratulations gentlemen. If you do another article of this quality you may just earn the lordly title of Corporate Shill.

Seriously though, this is some awful apologist style nonsense. If we want to have a wider dialog about the ability of businesses to compete internationally with competing national tax structures, well then let’s do that. This nonsense defense of a company not living up to its civic responsibility borders on the criminal, and is turning your credentials into worthless paper very quickly.

Reclaim your credibility before it is too late. You may get a paycheck from these behemoths but you will have to live with their mark upon you until the end of your days. Save yourself.

Your article besides, telling us the Times scooped you but you were really there also, does not get to the main point.

No, the amount paid to the IRS in any one year may not be the amount of tax owed for that period.

A tax benefit, as opposed to a tax refund is the amount carried on the balance sheet as a asset that may be used in the future. It is not cash.

An individual or corp. is only required to pay the amount of tax the current tax code requires.

However, spending a lot of money trying to influence politicians to change the tax code in your favor is unfair, when a corp. like GE can outspend individuals by orders of magnitude.

It is the basic unfairness that grips the American Public, not the actual amount of dollars owed and paid to the IRS by GE.

wow - terribly written article - really didn’t clarify anything…

Pro Publica is doing real public service journalism overall. However, this particular article doesn’t provide much in the way of insight or useful information. It’s easy to see why so many commenters believe it’s no more than refried PR…which GE is very good at.  I suggest a follow-up piece that does a better job of clarifying the taxes paid/not/ owing by GE and how their “tax credits” or breaks really worked. What did they get them for? How standard are those credits/deductions? For example, does the current tax law allow GE to write off its paper losses from one division agains the profits of another totally unrelated division e.g. GE Capital vs. Power Plants or Aircraft Engines? Such examples would help illuminate what clearly is an ongoing issue with the corporations outgunning taxpayers as usual with lobbyists, PR flacks and lawyers.

Two more points. The title is unfortunate and inaccurate. And the fact that this article was co-published with Fortune sadly diminishes ProPublica’s credibility while enhancing that business-shilling magazine’s.

Get Updates

Our Hottest Stories