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Friday, March 25, 2011

GE CORPORATE WELFARE BUMS: Profit Jumps 77 Percent UPDATE: G.E. Pays NO TAXES U.S. Profits $ 5.1 Billion, claimed a tax benefit of $3.2 billion CORPORATE WELFARE

GE's Profit Jumps 77%

online.wsj.com
General Electric Co. reported a 77% increase in first-quarter earnings, lifted by marked improvement at its GE Capital financing arm and gains at most of its industrial units.
The company also boosted its quarterly dividend by a penny to 15 cents. The move marks GE's third dividend increase in the past year, although the payout remains well short of GE's 31-cent dividend before the financial crisis and economic downturn.
Many companies have been boosting dividends, looking to give cash back to shareholders as the need to hoard it wanes amid an improved economy.
GE shares were up 2.7% to $20.95 in recent premarket activity. The stock has risen 12% year-to-date through Wednesday, with GE's strong first-quarter results following a fourth-quarter report in January that showed substantial evidence of a turnaround.
"GE has emerged from the recession a stronger, more competitive company," Chief Executive Jeff Immelt said in a prepared statement Thursday. "The GE business model will continue to deliver earnings growth for shareowners in 2011 and beyond."
He reiterated confidence that the Fairfield, Conn., company will achieve goals laid out in its 2011 financial framework, which among other things calls for about 5% revenue growth in GE's industrial businesses. GE has been relying on its industrial units to fuel its long-term prospects as it moves to shrink GE Capital, which once accounted for half the conglomerate's profit but became an albatross amid the financial crisis.
GE ended the first quarter with a $177 billion backlog of orders for big-ticket equipment and services, a company record and an increase from $175 billion at the end of the fourth quarter.
New equipment and services orders totaled $19 billion, up from $17.1 billion in the year-ago period but down from $24.8 billion in the fourth quarter.
GE reported a first-quarter profit of $3.43 billion, or 31 cents a share, up from $1.95 billion, or 17 cents a share, a year earlier. The company's operating earnings, which exclude discontinued operations and other items such as nonoperating pension costs, rose to 33 cents from 20 cents. Revenue rose 6.2% to $38.45 billion.
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A PRESIDENT’S BUSINESS LIAISON
In January, President Obama named Jeffrey R. Immelt, General Electric’s chief executive, to head the President’s Council on Jobs and Competitiveness. “He understands what it takes for America to compete in the global economy,” Mr. Obama said. 
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G.E.’s Strategies Let It Avoid Taxes Altogether

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The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
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. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.
In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.
Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.
Yet many companies say the current level is so high it hobbles them in competing with foreign rivals. Even as the government faces a mounting budget deficit, the talk in Washington is about lower rates. President Obama has said he is considering an overhaul of the corporate tax system, with an eye to lowering the top rate, ending some tax subsidies and loopholes and generating the same amount of revenue. He has designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes.
“He understands what it takes for America to compete in the global economy,” Mr. Obama said of Mr. Immelt, on his appointment in January, after touring a G.E. factory in upstate New York that makes turbines and generators for sale around the world.
A review of company filings and Congressional records shows that one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.
Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.
Company officials say that these measures are necessary for G.E. to compete against global rivals and that they are acting as responsible citizens. “G.E. is committed to acting with integrity in relation to our tax obligations,” said Anne Eisele, a spokeswoman. “We are committed to complying with tax rules and paying all legally obliged taxes. At the same time, we have a responsibility to our shareholders to legally minimize our costs.”
The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.
But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.

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