The New York Times 02/28/12 Andrew Ross Sorkin
“Bending Tax Code For AIG”
Last week, the American International Group reported a whopping $19.8 billion profit for its fourth quarter. It was a quite a feat for a company that was on its death bed just a little over three years ago, so sick that it needed a huge taxpayer bailout.
But if you dug into the numbers, it quickly became clear that $17.7 billion of that profit was pure fantasy — a tax benefit, er, gift, from the United States government. The company made only $1.6 billion during the quarter from actual operations. Yet A.I.G. not only received a tax benefit, it is unlikely to pay a cent of taxes this year, nor by some estimates, for at least a decade.
The tax benefit is notable for more than simply its size. It is the result of a rule that the Treasury unilaterally bent for A.I.G. and several other hobbled companies in 2008 that has largely been overlooked.
Here’s the back story: A.I.G.’s tax benefit comes in large part from its immense “net operating losses” during its depths of despair in 2008 before its rescue. The government had to dump $182 billion into the company after it was crippled by bad bets it had made insuring mortgage-backed securities.
The government — taxpayers — still own 77 percent of the company, down from 92 percent three years ago.
Still, the Treasury issued “notices” exempting A.I.G. from losing its right to make use of its net operating losses. In total, the insurer estimated that those losses were worth $26.2 billion as of 2009, and it claimed almost $9 billion in other “unrealized loss on investments.”
Common Sense Review
When a company makes $17.7 billion but their true earnings are $1.6 billion and the rest are from tax cuts. This is beyond irritating when the American taxpayers had to bail them out a few years ago and now we continue on bailing them out in the form of tax cut.
What happened to business being self-sufficient? The pride of creating a successful business? The American dream is being sold in the tax code. We should look forward to doing our taxes to get extra money..
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