General Motors 2010 Annual Report Download - page 245

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Successor
December 31, 2010 December 31, 2009
Accrued interest receivable ........................................................ $ — $ 10
Accrued interest payable .......................................................... $250 $275
Accrued penalties ............................................................... $119 $137
Other Matters
Most of the tax attributes generated by Old GM and its domestic and foreign subsidiaries (net operating loss carryforwards and
various income tax credits) survived the Chapter 11 Proceedings, and we are using or expect to use the tax attributes to reduce future
tax liabilities. The ability to utilize certain of the U.S. tax attributes in future tax periods could be limited by Section 382(a) of the
Internal Revenue Code. On November 1, 2010, we amended our certificate of incorporation to minimize the likelihood of an
ownership change occurring for Section 382 purposes. In Germany, we have net operating loss carryforwards for corporate income
tax and trade tax purposes through November 30, 2009 that, as a result of reorganizations that took place in 2008 and 2009, were not
recorded as deferred tax assets. Although we received a ruling from the German tax authorities confirming the availability of these
losses for carry over on January 26, 2011, a European Union Commission review concluded the German law on which the ruling was
based is void and therefore reaffirmed these loss carryforwards are not available. We are evaluating options that would allow these
loss carryforwards to reduce future taxable income. In Australia, we have net operating loss carryforwards which are subject to
meeting a “Same Business Test” requirement that we assess on a quarterly basis.
In the U.S., we have continuing responsibility for Old GM’s open tax years. Old GM’s federal income tax returns for 2004 through
2006 were audited by the Internal Revenue Service (IRS), and the review was concluded in February 2010. The IRS is currently
auditing Old GM’s federal 2007 and 2008 tax years. The IRS is also reviewing the January 1 through July 9, 2009 Old GM tax year as
part of the IRS Compliance Assurance Process (CAP), the objective of which is to reach early issue resolution and increase audit
efficiency. Our July 10, 2009 through December 31, 2009 and 2010 tax years are also under IRS CAP review. In addition to the U.S.,
income tax returns are filed in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We
have open tax years from 2001 to 2009 with various significant tax jurisdictions. These open years contain matters that could be
subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of
revenue and expenses or the sustainability of income tax credits for a given audit cycle. Given the global nature of our operations,
there is a risk that transfer pricing disputes may arise.
In May 2009 the U.S. and Canadian governments resolved a transfer pricing matter for Old GM which covered the tax years 2001
through 2007. In the three months ended June 30, 2009 this resolution resulted in a tax benefit of $692 million and interest of $229
million. Final administrative processing of the Canadian case closing occurred in late 2009, and final administrative processing of the
U.S. case closing occurred in February 2010.
In June 2010 a Mexican income tax audit covering the 2002 and 2003 years was concluded and an assessment of 2.0 billion pesos
(equivalent to $165 million) including tax, interest and penalties was issued. We do not agree with the assessment and intend to
appeal. We believe we have adequate reserves established and collection of the assessment will be suspended during the appeal period
and any subsequent proceedings through U.S. and Mexican competent authorities.
In November 2010 an agreement was reached with the Canadian government to resolve various income tax matters in the years
2003 through 2009. In the three months ended December 31, 2010, this resolution resulted in a tax benefit of $140 million including
interest.
Based on an unfavorable Brazilian Supreme court decision rendered to a separate Brazilian taxpayer on a similar income tax matter,
it is likely we will settle a contested income tax matter for $242 million in the next twelve months. This amount was fully reserved in
a prior period.
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