Delphi: Eatin’ American Tax Dollars, S**ttin’ British Tax Pounds

When Delphi emerged from a long, drawn-out bankruptcy in 2009, the Federal Government's Pension Benefit Guaranty Corp assumed a six billion dollar liability in underfunded pension plans. As a consequence, many Delphi salaried employees have lost the majority of their pensions. But when Delphi Automotive incorporated after the bankruptcy, that incorporation took place in the United Kingdom.

Now the IRS is actively pursuing claims against Delphi for tax liabilities — but "new Delphi" would rather pay taxes to our former colonial masters.

According to the WSJ,

In 2011, as the new Delphi prepared to go public, it disclosed that the IRS was "currently reviewing" whether the anti-inversion rules applied to it. The company said that if the IRS didn't carve out an exception in its impending rules, there would be a "significant risk" that Delphi's inversion eventually would be set aside and the firm would be treated as a domestic corporation for U.S. tax purposes. When the regulations came out in February of 2014, no exception was carved out, lawyers say.

It is difficult to envision how anybody's version of a "free market" involves a company shedding six billion dollars of liability to the United States Government before running off to the UK to incorporate for the purpose of saving tax money — even though Delphi's primary operations continue to be in Michigan. Given the continuing and considerable legal activity by former Delphi salaried employees who strenuously object to taking seventy-percent haircuts on their pensions, perhaps the best thing to do would be to permit Delphi to continue to pay the UK taxes on its earnings, but to hand over that six-billion dollar liability to "new Delphi".

Alternately, the IRS might determine, and the courts might agree, that the "inversion" is not permitted by law, forcing Delphi to remit several years' worth of back taxes to the United States. No matter how it happens, however, something's rotten in Denmark — or London, depending how you look at it.

The post Delphi: Eatin' American Tax Dollars, S**ttin' British Tax Pounds appeared first on The Truth About Cars.

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