Original Link: http://mediamatters.org/research/201104050029
Fox News has repeatedly attacked General Electric (GE) for paying "no taxes" in 2010, using GE's actions to attack President Obama. However, records show that News Corp., Fox News' parent company, also paid no federal taxes for at least several years in the past two decades.
NYT Reports GE Paid No Federal Taxes In 2010
NYT: "[GE's] American Tax Bill? None. In Fact, G.E. Claimed A Tax Benefit Of $3.2 Billion." A March 24 article in The New York Times claimed that despite a $14.2 billion profit, GE paid no taxes in 2010. From the article:
General Electric, the nation's largest corporation, had a very good year in 2010.
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. [The New York Times, 3/24/11]
Fox Attacks GE For Using "An Army Of Lawyers" To Find "Loopholes" And Avoid Paying Taxes
O'Reilly: Obama "Want[s] To Tax The Rich" But Not GE Because Former CEO Is "Budd[ies]" With Obama. During the March 25 edition of The O'Reilly Factor, O'Reilly brought on Fox Business host Lou Dobbs to discuss the GE tax story. Dobbs said that "finding tax loopholes" allowed GE to avoid paying taxes and said corporate lobbyists have created "a tax system that permits GE to book its profits and leave them offshore." At one point, O'Reilly said, "I want GE to pay their fair share and every other company that's doing this." From the broadcast:
O'REILLY: All right, I'm going to pay millions of dollars to federal government this year. Millions, OK? And GE pays nothing. Tell me, tell me.
DOBBS: You've got to spend more not only on finding tax loopholes, Bill. You've got to do what GE does, you've got to spend a small fortune creating those loopholes. It's what I call non-taxation through extraordinary aggressive representation that has to be bought. And by the way, corporate America Bill, buys with $4 billion a year representation that you and me and our fellow citizens can't buy in Washington.
And the result is a tax system that permits GE to book its profits and leave them offshore and not, what's called repatriate, bring them back to the United States no matter where the profits are made. And that's what's happening here. They bought the loophole. They are using the loophole. And they're going to continue to do just that -
O'REILLY: All right, so they make $5 billion -- they make $5 billion with "b" -
O'REILLY: -- $5 billion here in the United States profit.
O'REILLY: And they -- and they -- they are shipping it out someplace else. They ship the money someplace else so they don't have to pay taxes?
DOBBS: That's right. They're -- they're -
O'REILLY: But I supposed [sic] to go to jail if I did that. I would be put in jail if got an offshore haven and -- and -- and threw my money in there and didn't do the withholding and all of that business. They would throw me in jail for that.
DOBBS: Well, that's why it's important for you to buy some loopholes so that you don't go to jail. And by the way this is being done across -- all across the country by major corporations. There is an estimated trillion dollars sitting out there -- repatriated profits.
O'REILLY: All right, when you say, I don't know what unrepatriated means, all right.
DOBBS: That's money that they've made -- that they're not bringing back into the United States. They're leaving in the bank accounts overseas.
O'REILLY: All right, they keep it in bank accounts overseas.
O'REILLY: Ok, let's turn political now.
O'REILLY: How can Barack Obama say to me I want to tax the rich and that means you all right?
O'REILLY: To the max but I'm going to allow my buddy, Jeffrey Immelt and General Electric who actively supported my election campaign by the way --
O'REILLY: -- as aggressively as any media company because at that time GE owned NBC has ever done in the history of this country, ever. GE was the most aggressive in supporting a presidential candidate ever.
So and then Obama -- appoints Immelt to (INAUDIBLE) -- and turns around and says I'm going to tax you but I'm not going to tax him. I'm -- I'm not going after these big corporate guys -
O'REILLY: -- who bought the loopholes. So isn't that just hollow crap?
O'REILLY: Ok but -- but shouldn't President Obama if he's an honest man try to close these loopholes? Now, I -- I -- the Republicans are probably -
O'REILLY: -- would be against it because they are pro business guys, I guess.
O'REILLY: -- but I'm not against it. I want GE to pay their fair share and every other company that's doing this. [Fox News, The O'Reilly Factor, 3/25/11, accessed via Nexis]
Beck: "GE Has Built The System" So That "They Paid No Income Tax At All Last Year ... Good To Be Obama's Friend, Huh?" On the March 29 edition of his Fox News show, Glenn Beck stated:
This is the problem. If the government starts understanding that they don't have cash, ha-ha-ha-ha, maybe we could not worry so much about our debt. Maybe we could also cut back on favoritism for Obama's most loyal contributors, you know, because that's not working out real well either.
Did you know GE has built the system to the extent that they paid no income tax at all last year? That's right. They made a profit of $14.2 billion. Didn't pay a penny. They got TARP money and everything. That's weird. Good to be Obama's friend, huh? [Fox News, Glenn Beck, 3/29/11, accessed via Nexis]
O'Reilly: GE Is "Not Paying Any Taxes Because They Are Parking Money Offshore." On the April 4 edition of Fox News' The O'Reilly Factor, O'Reilly discussed the GE tax story with guest and Fox News contributor Bernie Goldberg. O'Reilly said that GE avoided taxes by "parking money offshore," while Goldberg falsely suggested that NBC didn't cover the story because "[i]t was embarrassing to one of NBC's parent companies." In fact, as Media Matters documented, NBC covered the story on March 31. From the broadcast:
O'REILLY: Now last week, we also reported about the GE tax story, great story, where they are not paying any taxes because they're parking money offshore, and their CEO Jeffrey Immelt is heading up a presidential commission on trying to get jobs in the United States. So, I mean obviously, this can't go on much longer. But there really hasn't been an outcry by the media about this. Been some reportage, not a lot.
GOLDBERG: Yeah. This is something you know, Bill, but let me explain to the civilians out there how this works. When producers and anchors come in in the morning, and even before they come in in the morning, first thing they do is they read page one of The New York Times. That's how they decide what they are going to put on the news that night. Because The New York Times sets the agenda. If The New York Times went on strike, they would have no idea to put on the nightly news. Are we supposed to believe in this case that [NBC Nightly News Editor] Brian Williams and his producers read page one of The New York Times and then decided that this wasn't a news story? No. That's not now it happened.
O'REILLY: Because they did run it --
GOLDBERG: This was embarrassing.
O'REILLY: -- The New York Times did run this on page 1.
GOLDBERG: Yeah. They did.
GOLDBERG: This was simply a matter -- it's very simple. It was embarrassing to one of NBC's parent companies. That's why they didn't run it. But NBC -- by the way, they lose credibility when they do that because then the viewer understands that they care more with about themselves than they care about the viewer.
O'REILLY: Yeah but -- I don't want to stick up for NBC. You know how I feel about them. But the financial press in general didn't really rush to this story. They didn't. Because the financial press in general upholds the loopholes that allows GE to legally, to park money offshore. [Fox News, The O'Reilly Factor, 4/4/11; Media Matters, 4/4/11]
Varney: GE "Employ[ed] An Army Of Lawyers" To Avoid Paying Taxes On "$14 Billion Worth Of Profits." The April 5 edition of Fox News' Fox & Friends featured a segment based on the IRS auditing the tax returns of wealthy Americans. On-screen text claimed that the IRS is "hunting the rich" and "soaking the rich." During the segment, the co-hosts and Fox Business host and guest Stuart Varney discussed GE's taxes. Varney said the company "employ[ed] an army of lawyers" to avoid paying taxes on "$14 billion worth of profit" and suggested that GE would be exempt from government scrutiny because CEO Jeff Immelt "sits as head of the president's council on jobs." From the show:
STEVE DOOCY (co-host): Ultimately, though, Stuart, wouldn't you say if somebody owes taxes they got to pay them?
VARNEY: Of course. I mean, there's nothing wrong with that. But will these wealth squads go after a company like GE, for example, which earned $14 billion worth of profit and paid absolutely no federal tax on it whatsoever? And the CEO of GE, Jeff Immelt, sits as the head of the president's council on jobs, and it's no coincidence.
DOOCY: That's just a coincidence. Just a coincidence. (laughing)
VARNEY: Whatever you say.
GRETCHEN CARLSON (co-host): I'm going to give you your answer this morning. They're not going after them.
DOOCY: Congress will.
VARNEY: Probably not. Probably not.
CARLSON: I mean, come on.
VARNEY: You could say that GE didn't have to pay any taxes on $14 billion worth of profits because they used legitimate loopholes, legitimate deductions. They employ an army of lawyers to fix it --
DOOCY: Lobbyists as well.
VARNEY: -- and that's exactly what they do. It's a legitimate thing. But should Jeff Immelt sit as the chair of the president's council on jobs and competitiveness? Cozying up -- crony capitalism with the government? Should he be doing that?
CARLSON: It's a little bit of a conflict of interest.
VARNEY: Resign, Mr. Immelt!
CARLSON: You heard it here first. [Fox News, Fox & Friends, 4/5/11]
Yet News Corp., Fox's Parent Company, Is Known To Use Loopholes To Evade Taxes
NYT In 2007: By Taking Advantage Of Tax Code Provision, "News Corporation Paid No Federal Taxes In Two Of The Last Four Years." In a June 25, 2007, article, The New York Times noted:
Mr. Murdoch has an army of outside lobbyists, who have reported being paid more than $11 million since 1998 to address issues as diverse as trade relations, programming decency and Internet regulation.
One firm focuses almost exclusively on parts of the tax code that affect the News Corporation. By taking advantage of a provision in the law that allows expanding companies like Mr. Murdoch's to defer taxes to future years, the News Corporation paid no federal taxes in two of the last four years, and in the other two it paid only a fraction of what it otherwise would have owed. During that time, Securities and Exchange Commission records show, the News Corporation's domestic pretax profits topped $9.4 billion. [The New York Times, 6/25/07]
Economist: Between 1987 And 1999, News Corp. Had Paid "No Net British Corporation Tax." From a March 18, 1999, article in The Economist:
RUPERT MURDOCH is an exceptional businessman in many ways--in the risks he has taken to build News Corporation, in the global reach of his empire, in the way he has changed the rules of the game for other media companies. But one of his most remarkable achievements is his tax bill. In keeping with his anti-statist philosophy, Mr Murdoch hands very little of his profits to governments.
In the four years to June 30th last year, News Corporation and its subsidiaries paid only A$325m ($238m) in corporate taxes worldwide. In the same period, its consolidated pre-tax profits were A$5.4 billion. So News Corporation has paid an effective tax rate of only around 6%. By comparison, Disney, one of the world's other media empires, paid 31%. Basic corporate-tax rates in Australia, America and Britain, the three main countries in which News Corporation operates, are 36%, 35% and 30% respectively.
Investigating News Corporation's tax affairs is made especially hard by accounting standards in Australia, where the company is incorporated. They are among the most lax of the developed economies. In America, too, many of the unlisted subsidiaries of Mr Murdoch's listed companies are incorporated in Delaware, where there is no obligation on them to file publicly available accounts.
In Britain, however, the laws require Mr Murdoch to publish at least a few facts. That has enabled The Economist to go through 11 years'-worth of financial results of the 101 British companies listed in the latest set of News Corporation accounts as subsidiaries of Mr Murdoch's main British holding company, Newscorp Investments, to find out how much tax they paid.
The answer is that since June 1987, although the group has made £1.4 billion in profits, it has paid no net British corporation tax at all. In some years the companies paid some tax (see table), but in other years they claimed rebates. [The Economist, 3/18/99, emphasis added]
New Report Indicates GE May Have Paid Some Taxes In 2010
Fortune Editor: "After Much To-ing And Fro-ing...GE Now Says That It Will Pay Tax In 2010." In an April 4 post on CNNMoney.com, Allan Sloan, senior editor-at-large of Fortune, and Jeff Gerth, a senior reporter for ProPublica, wrote:
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?
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. ...
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. [CNNMoney.com, 4/4/11]