THE TRUTH ABOUT THE NYT-GE TAX SPAT: They're Both Full Of Crap!

jeffimmelt headdown tbi

Well, we’ve finally figured out who’s full of crap in the New York Times’s spat with GE over GE’s 2010 tax bill (or lack thereof).

Answer?

Both of them.

We’ll explain below. First, a recap…

THE SPAT

[Watch our video version of the GE-NYT feud here]
Last week, the New York Times reported that GE paid no US taxes last year — “none.”

GE responded immediately, blasting the NYT’s report as “misleading” and providing all sorts of details to back this up.  And then GE’s “public affairs” division ripped us on Twitter for having repeated the NYT’s assertion.

The latter led to us asking GE some follow-up questions over Twitter to try to get to the truth, which GE appeared to be doing everything possible to avoid sharing.  The deafening silences in that exchange provided a case-study in attempted-PR-damage-control-via-Twitter, which we wrote about here.

Late last night, GE responded to our questions in a more traditional format–via email and via a lengthy comment on our story.

After reading GE’s response, we thought we had finally discovered the truth: The New York Times was full of crap.

But then, this morning, we got a note from the New York Times standing behind every detail of its story and saying that it was GE that was full of crap.

To back up this assertion, the New York Times sent us an Agence France-Presse story in which the same GE spokesman who had written the comment on our site had said something that appeared to directly contradict what she had told us. The second statement from the GE spokesperson, moreover, appeared to partially corroborate the New York Times’s assertion about GE’s zero tax bill.

Well, eight hours later, we have now wasted another half day trying to get the truth out of GE. Although we’ve made some more progress, we’re not quite there yet. But GE has now decided to cut its losses and stop talking to us, so we’ve gotten as far as we’re going to get.

So we hereby invite any other journalists–maybe even the ones at the New York Times–to pick up where we’ve left off and nail down the truth.

But before we do that, we’ll also share the full story of what we know so far.

NYT: “[GE’s] American tax bill? None.”

That’s the quote from last week’s New York Times story about the heroic and successful lengths GE goes to to pay as little taxes as possible. The NYT observed that GE made $12 billion of net profit, including $5 billion in the US, and paid very little tax–including “none” in the US.

Well, as GE quickly pointed out, that statement was, at best, highly misleading, and, taken literally, wrong.  GE paid tons of “American” taxes last year, including state taxes, local taxes, and payroll taxes.

The New York Times eventually defended itself by saying that what it meant was US federal corporate income taxes, not other forms of American taxes.  But last night, on our site, GE spokesperson Anne Eisele said that even when the phrase “American taxes” is limited to US federal corporate income taxes, the statement is still a bunch of crap.

Specifically, Eisele said that GE paid US federal income tax in 2010.

Eisele also explained that these payments were pre-payments on a presumed 2010 tax liability–similar to the withholdings that you and I get taken out of every paycheck that we may get refunded to us when we file our taxes in April. Importantly, Eisele also said that, once GE’s final 2010 tax bill is determined, which Eisele says will happen this fall, GE expects to have a “positive tax liability” for 2010. Meaning that, contrary to the NYT’s assertion, GE will owe tax for the year.

Bill Keller

Now, if that’s correct, the New York Times’s statement that GE’s American tax bill was “none” is flat-out wrong no matter how you choose to limit or interpret it.Why?

  • First, because GE paid tons of “American taxes” in 2010 (state, local, payroll, etc.).
  • Second, because GE says it even paid federal income taxes in 2010.
  • Third, because GE’s American tax bill, which the NYT specifically cited, hasn’t even been computed yet.

And with that, we went to bed, hoping that we had finally gotten the truth.

But then we woke up this morning to get a statement from the New York Times in which the NYT stood by its story and asked that we retract our conclusion that its statement about GE’s taxes was “flat-out wrong.”  We shared what we had learned from GE with the New York Times. This prompted the New York Times to send us this AFP article, in which the same GE spokesperson, Anne Eisele, said something that appeared to directly contradict what she had just told us:

“GE did not pay US federal taxes last year because we did not owe any.”

Well, that statement appeared to undermine everything Eisele had just told us about GE having paid federal income taxes AND corroborate the NYT’s assertion that GE’s federal tax bill was “none.”

So, naturally, we sent the article to Eisele, asking for an explanation.

After a couple of flustered emails that we would characterise as “Oh. Look at that. Oops. Guess I’ll have to get back to you,” Eisele went silent for a while. Then, eventually, she returned with an answer that she said proved that BOTH things she had said were correct (see emails below).

Well, we spent a decade on Wall Street analysing financial statements and taxes and so forth, but we still couldn’t understand what Eisele was trying to say in her final clarification — other than to make clear her belief that she hadn’t misled us earlier when she had told us GE had paid federal taxes in 2010.

So we asked Eisele to clarify her answer.

Eisele, finally getting short with us, said she had already answered our question and that, if we wanted more information, she would be happy to put us in touch with GE’s tax department.

And we thought about wasting even more hours going back and forth with GE’s tax department and instead just emailed Eisele back and observed that we were asking very simple questions and this just wasn’t that complicated. And, in that same email, we also mentioned to Eisele that there was unfortunately another topic we needed to ask her about, which was GE’s assertion that GE’s sponsorship of a community project in Harlem that GE CEO Jeff Immelt and allegedly corrupt New York Congressman Charlie Rangel had proudly announced together had had nothing to do with Rangel’s suddenly dropping his opposition to an important GE tax break after meeting with the head of GE’s tax team.

(Because we found that last assertion hard to believe)

Well, that was enough for Eisele.

Eisele said that if we didn’t care enough about the truth to call her and talk to her tax people, she was “done.” (She ignored the Rangel question).

Well, we did care about the truth (and the Rangel question), so we called.

That was several hours ago. Eisele hasn’t returned our call.

CONCLUSION

The New York Times is full of crap. Although we haven’t yet determined for certain that GE’s US federal income tax bill will be more than zero (neither has GE), the NYT’s statement that GE’s “American” tax bill in 2010 was “none” is, at best, highly misleading. GE paid loads of American taxes in 2010, even before you get to the federal income tax question. A reasonable New York Times reader would have no idea that the phrase “American tax bill” was supposed to mean only “federal income taxes” and this reader would therefore be surprised to learn that GE actually paid lots of local, state, and payroll taxes. We assume the New York Times aspires to be more accurate than “highly misleading,” so we think the paper should issue a correction.

GE is full of crap. As we progressed in our interminable dealings with GE, it became clear that GE’s assertion that it “paid federal income taxes” in 2010 was, at best, spin (if not a complete fabrication). It is absurd to think that normal humans could understand how to reconcile the statements, “GE did not pay any federal taxes because it didn’t owe any” and “GE paid federal taxes [and will owe some].” These statements appear to completely contradict each other. And it’s also insulting that GE thinks (or hopes) that people are so dense that GE can get away with saying “we paid taxes” when what they mean is “we made payments that will eventually be returned to us once we file our tax returns.” This is the worst kind of corporate spin, and GE, of all companies, should be above it.

The New York Times readers deserve clear, accurate statements from the paper, especially if editor Bill Keller is going to trumpet the company’s commitment to “verification rather than assertion.”

Similarly, the public deserves simple, clear answers about GE’s business from GE’s PR team, not spin. GE is one of the most important and powerful companies in the world. It if wants to live up to its reputation for fairness, quality, and leadership, it should make certain that its vast communications and legal resources are used to further those goals–not to waste people’s time and obscure truths that some Americans may find unpleasant.

What follows is a series of emails between me and GE and me and the New York Times over the past 24 hours, as I tried to figure out who was right and who was wrong...

I thought the story we published yesterday was the end of it (see link at end), but then I got this nice note from GE's Anne Eisele at about 6pm

FROM: Anne Eisele, GE
TO: Henry Blodget

GE -- understand you're trying to reach me?

Henry, gimme a call. Happy to talk to you about the GE Tax thing as I'm the spokesperson for it. As I imagine you know having read the story.

Anne Eisele

Director, Financial Communications

GE

Finally, this seemed like a chance to get some straight answers. So I responded...

FROM: Henry Blodget
TO: Anne Eisele

Hi Anne!

Thanks for the note. I wasn't actually trying to reach you (unless you're the voice behind @GEpublicaffairs), but now that I have you...

The first question would be to ask you to provide a full answer to the question we were hashing out on Twitter today. GE says in its statement that it paid 'significant US federal income taxes' in 2010, which appears to be a direct refutation of even a limited reading of the NYT's story, which said GE paid 'none.'

If so, can you tell me how much US Federal income tax GE paid in 2010 and confirm that this was net of any future refunds.

And can you confirm that the New York Times was just flat-out wrong? (And if so, why haven't they issued a correction?)

Thanks.

Henry

Anne responded quickly... (It's now 10PM; I had been slow to get back to her)

And then another email from Anne--a full, detailed response that didn't answer the questions

Anne's email had answered a lot of questions I hadn't asked, so I asked the only question that mattered again:

FROM: Henry Blodget
TO: Anne Eisele

Anne,

Thanks. I think I understand all this.

So you are confirming that GE paid 'significant US federal corporate income taxes in 2010'?

That's the point that seems completely inconsistent with the NYT's assertion that GE's US tax bill in 2010 was 'none.'

With respect to those two statements, both sides can't be right. One of those statements is wrong. I'm just trying to figure out which one.

Thanks.

Henry

Anne responded immediately, with the perfectly legitimate implication that it was time for bed (I couldn't have agreed more). She also noted that she had responded on our site, which I hadn't realised.

FROM: Anne Eisele
TO: Henry Blodget

Henry, I answered your questions A) on your blog and B) in the email below. I've been more than responsive and my answers are clear. What am I missing?

I'm logging off shortly -- as I'd like to see my family for just a moment.

I told Anne to see her family, then went to read her response on our site...

FROM: Henry Blodget
TO: Anne Eisele

See your family! This can wait.

Thanks.

Anne returned the farewell...

FROM: Anne Eisele
TO: Henry Blodget

Thank you. And you.

FROM: Henry Blodget
TO: Anne Eisele

Just saw your response on the post, which was crystal clear. Apologies--would not have bothered you with the follow-up email.

I featured the response directly under the post.

Henry

I thought it had all been settled: GE was right, the NYT was wrong. But then, at 7am, I got an email from Danielle Rhoades Ha at the New York Times...

FROM: Danielle Rhoades Ha, NYT
TO: Henry Blodget

Hi, Henry -

Please update your post (http://www.businessinsider.com.au/ge-taxes-2010) on GE's taxes with the following response from the New York Times:

'The New York Times story on GE was based on the company's own SEC filings and has no inaccuracies which is why GE has not asked for a correction. The bottom line is that GE made $5.1 billion in U.S. profits and owed no U.S. federal income taxes even though the U.S. corporate tax rate is 35 per cent.'

Danielle

Danielle Rhoades Ha
The New York Times Company

Armed with new information from GE, I pushed back:

FROM: Henry Blodget
TO: Danielle Rhoades Ha, NYT

Danielle,

Thanks.

GE is saying that it paid 'significant' federal taxes in 2010 and that when its full 2010 tax bill is calculated, it will owe tax.

That is not consistent with the tax bill being 'none' (not least because the bill hasn't even been computed yet).

So either GE is lying or your statement was wrong.

Which is it?

Thanks.

Henry

And that's when the NYT sent me this bombshell... A statement by Anne Eisele in another story that appeared to completely contradict what she had just told me

FROM: Danielle Rhoades Ha
TO: Henry Blodget

GE's statement that it paid $2.7 billion in cash taxes in 2010 does not state where those taxes were paid, so it may be referring to its payments to foreign governments. The company's claim that it paid 'significant U.S. taxes' is too cryptic to be meaningful (which could include settling audits for previous years).

Here's an AFP story from yesterday in which the GE spokeswoman is quoted saying: 'GE did not pay U.S. federal taxes last year because we did not owe any.'

http://www.google.com/hostednews/afp/article/ALeqM5iKsuJGAIixQeosmxOctEB-0bhW3g?docId=CNG.34a222e35c6a2e98d03744cee3b43b05.1b1

Well, THAT was interesting. I told the New York Times I would check with GE and update the post...

FROM: Henry Blodget
TO: Danielle Rhoades Ha, NYT

Danielle,

Thanks. Yes, the 2.7B of cash taxes is a smoke-screen. The issue now is whether GE paid--and will owe-- US federal income tax. As of last night, they were saying 'yes' to both.

I hadn't seen that AFP statement from the spokesperson. Let me follow-up with GE and come back to you.

Henry

So, I went back to GE

FROM: Henry Blodget
TO: Anne Eisele

Uh oh -- did you really say this?
In defending its 'no US taxes' wording, the NYT sent me this article in which you are quoted as saying the following:

'GE did not pay US federal taxes last year because we did not owe any.'

That is not what you wrote on our site yesterday or in your email to me, and it is not what GE says in its statement about how GE 'paid significant US income taxes.'

Here's what you wrote on our site:

In the meantime, you asked if GE paid U.S. federal income tax in 2010?
A: Yes. We've already paid some and we expect a positive U.S. federal tax liability for 2010 when we complete our U.S. income tax filing later this year.
Which is right? 'GE paid no US federal taxes because GE didn't owe any' or GE paid some taxes and you expect a positive tax liability when the final bill is tallied?

And why are you saying contradictory things?

Thanks.

(I don't mean to be this persistent, and I certainly don't want to spend much more of your or my time on this. But I do want to get it right).

All best,

Henry

To her credit, Anne responded immediately...

FROM: Anne Eisele
TO: Henry Blodget

That's a really good point, Henry. And I'm embarrassed to see what appears to be a contradiction in approved talking points I've been using over several weeks. Ugh.

Gimme 10 to get to bottom of this…. (more than you need to know, but we gave written answers to Times over several weeks and I've been working with the Tax team here in real-time responding to subsequent coverage this weekend with new approved talking points but you raise a valid point….)

So loving my job today.

I'll be back….

An hour later, no word from GE, but the NYT asked for a retraction...

Hi, Henry -

Following up to see when you are going to update your story with our comment below. Your updated post reads that the New York Time is 'flat-out wrong' which is completely false and should be corrected.

'The New York Times story on GE was based on the company's own SEC filings and has no inaccuracies which is why GE has not asked for a correction. The bottom line is that GE made $5.1 billion in U.S. profits and owed no U.S. federal income taxes even though the U.S. corporate tax rate is 35 per cent.'

Danielle

I updated our post with the absolute latest, and told the NYT I was trying to pin down GE on the truth

Another hour later, Anne still hadn't responded, so I nudged...

FROM: Henry Blodget
TO: Anne Eisele

Any insight? Need to write follow up.

Thanks.

Henry

Anne said she was in an unrelated meeting, but she'd get back to me as soon as she could. Then, around 11am, she did.

FROM: Anne Eisele
TO: Henry Blodget

I've been doing my other job, I'm afraid.

In any case -- here is how I'd answer your question, Henry.

We do expect a positive U.S. federal tax liability for our 2010 returns, as we have said. This was in response to a specific question about whether the liability would actually be zero or something positive. As was reported, we expect that the liability will be covered through overpayments.

However, speaking more generally about the initial NYT reporting, we said we didn't pay because we didn't owe. This was correct because of the overpayments that would offset any expected liability. In addition, this was in response to the general points of the article and responding that we did expect some positive liability was a technical point that wasn't responsive to the general theme of the article or the general nature of the questions that were being addressed.

Since you seem to insist on trying to make a story out of some sort of supposed conflict, I'll reiterate what I said last night in response to your many notes:

I am not advocating your pointing anything out to anyone. We have communicated our position publicly, to the Times, and to other media. We've stated it's a complex issue and that tends to be ill-served by oversimplification even as we've worked hard to be clear. Readers can see our disclosures on taxes -- we have provided links and cites. And we've been as responsive as possible to media/blog inquiries.

Help me understand your apparent interest in pushing this story forward, Henry?

FROM: Henry Blodget
TO: Anne Eisele

Anne,

Thanks. My only interest here is getting the facts right and determining whether the New York times article that says your US tax bill was 'none' is wrong.

With that in mind, I am still trying to reconcile these two statements:

'GE did not pay US federal taxes last year because we did not owe any.'

and

In the meantime, you asked if GE paid U.S. federal income tax in 2010?
A: Yes. We've already paid some and we expect a positive U.S. federal tax liability for 2010 when we complete our U.S. income tax filing later this year.

So,

Did you pay US federal taxes last year? (As you say in statement 2)

or

Did you not pay US federal taxes last year because you didn't owe any? (As the NYT says and as you say in statement 1).

(In your latest email, you refer to your 2010 liability being covered by 'overpayments.' Were these 'overpayments' made before 2010 or in 2010? And are you very confident that your tax liability--aka, 'bill'--for 2010 will be positive?)

Thanks.

Henry

That's when communications began to break down...

FROM: Anne Eisele
TO: Henry Blodget

Henry, I've answered the question. If you care to continue discussing, call me and I'll try to put you on DIRECTLY with someone in Tax.

I've tried to be helpful and responsive. Explain to me why you don't believe I have been.

Here's my response, which I expected to be the last word on the federal income tax matter. In this email, I brought up the next topic I need to discuss with GE: The meeting between allegedly corrupt New York Congressman Charlie Rangel and GE's tax boss, which, according to the NYT, was immediately followed by GE sponsoring a huge project in Rangel's district and Rangel dropping his opposition to a tax break that GE wanted

FROM: Henry Blodget
TO: Anne Eisele

Anne,

Thanks. I don't want to spend any more time on it. I just want straight answers to simple questions, and I still don't feel like I'm getting them. It's just not THAT complicated.

Either GE paid US federal taxes in 2010 or it didn't.

Either GE owed US federal taxes in 2010 or it didn't.

But let's leave it there.

I do, unfortunately, have one more topic I'd like to get your take on, which is the Rangel meeting. It's just hard to believe that something wasn't said or promised in that meeting relative to the Harlem project that helped persuade him to change his vote. If there's some backstory I'm missing there, please let me know.

Thanks.

Henry

Anne ignored the Rangel question and then suggested that I wasn't interested in the truth

FROM: Anne Eisele
TO: Henry Blodget

Henry, are you refusing then to call us for an explanation on this complex issue?

So either you are interested in getting it right or you're not?

THAT pissed me off.

FROM: Henry Blodget
TO: Anne Eisele

If I'm going to get a simple, straight answer when I call you, I'm happy to call.

(In my experience, that's almost never the case.)

Let me know...

Henry

And THAT pissed Anne off...

FROM: Anne Eisele
TO: Henry Blodget

Do what you want henry. I've answered your question. I've offered to put you on the phone with someone. I'm done.

I didn't want the story to be that GE wanted to tell me the truth but couldn't because I refused to call them. So I called. I haven't heard jack since.

So, there you have it! Further adventures in trying to get at the truth. Now read the backstory...

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