New York Times' David Kocieniewski Wins March Sidney for Exposé on G.E.'s Aggressive Tax Avoidance Strategies
NEW YORK: The Sidney Hillman Foundation announced today that New York Times reporter David Kocieniewski has won the March Sidney Award for his exposé of the General Electric Company. The Times reported that G.E. earned $14.2 billion in worldwide profits in 2010, and paid nothing in United States taxes.
Kocieniewski wrote that G.E.’s extraordinary success in avoiding American taxes “is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”
Sidney Award judge Charles Kaiser called Kocieniewski’s article “a classic piece of investigative reporting. Kocieniewski demonstrates that G.E.’s experience is emblematic of the way more and more giant American corporations have figured out how to reduce their annual tax bills to something close to zero.”
The piece comes at a crucial moment in the debate over corporate tax policy.
Among the story’s findings:
- 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.
- 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.
- 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.
- In 2008, Charles Rangel, then the chairman of the House Ways and Means Committee, reversed his opposition to a crucial tax break for G.E.
- The following month, Mr. Rangel and G.E.’s chief executive, Jeffrey R. Immelt. stood together at St. Nicholas Park in Harlem as G.E. announced that its foundation had awarded $30 million to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district. This was the largest gift ever to New York City schools. Both G.E. and Mr. Rangel have denied that there was any connection between the Congressman’s reversal of position and the exceptionally generous grant to the New York City school system.
David Kocieniewski has a B.A. from SUNY Binghamton and a Master’s from Columbia University’s Graduate School of Journalism. He is an investigative reporter who covers tax policy for the business section of The New York Times.
Since joining the Times in 1995, he has authored many investigations, including a series of stories about Congressman Rangel’s ethical violations which led to Rangel’s resignation as chairman of the Ways and Means committee, and his censure by Congress.
Kocieniewski was also part of the team that won a Pulitzer prize for coverage of Gov. Eliot Spitzer’s downfall. Kocieniewski is co-author of Two Seconds Under the World (Crown 1994), which that revealed how the F.B.I. botched repeated opportunities to prevent the 1993 World Trade Center bombing. He also wrote The Brass Wall (Henry Holt, 2003), a non-fiction thriller about an undercover N.Y.P.D. detective whose identity was leaked to the Mafia by a fellow officer.
A native of Buffalo, N.Y., he lives in Yardley, Pa., with his two daughters.
Backstory
Why did you decide to look into G.E.?
My editors and I decided late last year that I should look into the general issue of corporate taxes. We became interested in it after seeing a bunch of statistics : IRS numbers indicating that corporations’ share of federal revenues had dropped to single digits (down from 30 percent a few decades ago) ; and SEC figures indicating that US corporations have had to set aside a staggering amount of money for uncertain tax positions (accounting manuevers that their lawyers say are unlikely to withstand an audit if discovered by the IRS).
With so much concern over the budget deficit and spending - and corporate profits at record highs - it seemed as though people might want to take a closer look at what corporations actually pay.
When a source gave me a tip about Ways and Means Chairman Charles Rangel’s district getting millions in donations from from G.E. at the same time his committee was being lobbied by the company for a tax break, I began looking into it. And when G.E.’s CEO Jeff Immelt was named to the White House Commission on Jobs and Competetiveness, it was clear that G.E. would provide the kind of vivid example that makes a complex story like the corporate tax code accessible to the general public.
What surprised you as you did your research?
That G.E. has spent more than $200 million on lobbying during the past decade; and that a single tax code change made in 2004 to benefit G.E. specifically (deferral of income on offshore leasing income) reduced the company’s US federal income tax bill by more than $1.2 billion in the following three years.
What has the response been since you published it?
The response has been overwhelming. More than 1,000 emails; widespread follow-up by other media outlets around the world (Didn’t think it was possible for Jon Stewart and Bill O’Reilly to be on the same side of ANY issue); Twitter and Facebook campaigns to pressure G.E. into paying more taxes and asking the company CEO to step down from the Presidential commision.
Is there something you wish you had room to include in the piece but could not?
I would have liked to show more detail about how G.E. accrued various tax credits and given a breakdown of the $3.2 billion in tax benefits the company claimed. But G.E. has been reluctant to give details. I’m still asking for more information in hopes of writing a follow-up.
What kind of effect do you think this piece could have on corporate taxes in the future?
It’s helped put a spotlight on how lobbying and tax preferences have shaped the tax code in ways that favor some companies rather than others. The story also stimulated a discussion about how much corproations should contribute to federal revenues at a time when the debate over budget deficits - and how to address them - is profoundly reshaping how our government works. What democracy ultimately decides to do is anyone’s guess.
I’ll be writing lots more about the corporate tax system in the months to come…..
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