It's been more than a year since General Motors went bankrupt, reorganized as New GM and put together the current GM initial public offering. General Motors carefully distanced itself from "Old GM."
What's changed is that money-losing Old GM offers New GM some tax benefits, according to the GM IPO registration document. It looks as if Old GM could let New GM off the hook for billions of dollars in future taxes.
To GM's credit, I should add that GM's amnesia about The Bad Old Days under previous management does not extend to mitigating environmental problems left behind by Old GM. That's something I wrote about a while back. It's a safe bet that in doing so, GM is probably meeting some manner of legal requirement, but still.
It's also only fair to point out that if "New GM" is getting a tax break today, "Old GM" took a whopper of a hit on taxes before it went bankrupt. In the third quarter of 2007, GM had to write off $38.6 billion in net income related to tax credits it couldn't use.
GM had hoarded the tax credits for a sunny day, so to speak. The way it worked was that GM set aside tax credits from money-losing years, so that it could offset some profits for tax purposes in profitable years.
The trouble in 2007 was that after three consecutive years of net losses, accounting rules required GM to write off the value of the tax credits. At the time, GM executives said that the tax credits could be resurrected whenever GM regained profitability for three years in a row.
That hasn't happened yet, obviously. However, it seems clear that New GM will be able to dust off tax credits related to losses from Old GM, according to Robert Willens, a New York-based tax consultant. He said in an e-mail that break was given to recipients of aid from the Troubled Asset Relief Program. Registration documents for the GM IPO make it clear the concept is definitely on the minds of New GM.