AT&T will take $1B non-cash charge for health care

[Omaha Steve]

Source: AP

By BARBARA ORTUTAY

NEW YORK (AP) - AT&T Inc. will take a $1 billion non-cash accounting charge in the first quarter because of the health care overhaul and may cut benefits it offers to current and retired workers.

The charge is the largest disclosed so far. Earlier this week, AK Steel Corp., Caterpillar Inc., Deere & Co. and Valero Energy announced similar accounting charges, saying the health care law that President Barack Obama signed Tuesday will raise their expenses. On Friday, 3M Co. said it will also take a charge of $85 million to $90 million.

All five are smaller than AT&T, and their combined charges are less than half of the $1 billion that AT&T is planning. The $1 billion is a third of AT&T's most recent quarterly profit. In the fourth quarter of 2009, the company earned $3 billion on revenue of $30.9 billion.

AT&T said Friday that the charge reflects changes to how Medicare subsidies are taxed. Companies say the health care overhaul will require them to start paying taxes next year on a subsidy they receive for retiree drug coverage.


Read more: http://apnews.excite.com/article/20100326/D9EMHME00.html

[Xipe Totec]

1. In other words, they are no longer receiving a one billion dollar government subsidy

Did I get that right? They used to get a billion dollars a year from the federal government?

And they're crying now?

[DJ13]

2. +1

[htuttle]

3. I think they still get the billion dollars, but it's not tax free anymore

That's what I got from the last line of the excerpt:
"Companies say the health care overhaul will require them to start paying taxes next year on a subsidy they receive for retiree drug coverage."

on edit:
Actually, I bet the subsidy is way more than a billion dollars if they have to pay taxes that they say will cost them a billion.

[Roland99]

4. Gotta click the link. More details at the actual article >>>>>

Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees have been able to receive subsidies covering 28 percent of eligible costs. But they could deduct the entire amount they spent on these drug benefits - including the subsidies - from their taxable income.

The new law allows companies to only deduct the 72 percent they spent.

[htuttle]

5. Got it. Instead of a $3.6 billion tax deduction, they only get a $2.6 billion one

I guess I'd be crying too, if I was a greedy multinational corporation.

[fasttense]

6. So AT&T got a subsidy and wrote it off on their taxes????

No wonder theses Corporations are getting such huge profits. They are getting money funneled to them by the federal government and then writing off the free money on their taxes as deductions. Man, I wish I could get government welfare like that.

Yeah they claim they use it for their retired employee's drug benefits. But they promised those retired employees benefits and the corporations owe it. It's a bill the federal government is paying for them. No wonder corporations don't want health care reform.

[high density]

13. I wonder when I'll stop being shocked about this Bush-era garbage that keeps getting uncovered

Subsidies plus a tax deduction in the process. I'm glad to hear this sweetheart deal is coming to an end.

[MindandSoul]

7. You're right. . .no one, especially corporations, are taxed at 100%!

[protocol rv]

10. Doing the math

US corporations pay 36 % income tax. The impact is estimated as follows:

Say the company spends $1 in medicines under the program. Under the old law, They paid $0.72, they got $0.28. They wrote off $0.36. So for every $1 they spent, they had $0.28+0.36=$0.64 covered by the government, and $0.36 covered by their own cash. Since this was due to a mandated program passed by the Republicans under Bush, it's evident the government felt it was a fair deal for all.

Under the new scheme, they will be taxed on the $.28 at 36 %, which means they'll have to pay an extra $.10 US dollars. They paid $0.36 before, now they pay $0.46. This represents a reduction in their net after income tax income of 10 % for every dollar spent providing this mandated coverage. Remember, this coverage was mandated by the government, not something they offered to provide on their own.

Not being American, I find the system in the USA to be quite bizarre, overly complex, and fool of loopholes and inequalities. Why should a person who happens to be over 65 merit any of this coverage at all, if a person who is 62 doesn't? The Bush administration, which wasn't known for its thinking skills, passed this Medicare program as a way to buy old retired people - make them vote Republican. But it is a very unfair law, as are so many laws in the USA.

Furthermore, I would like to point out large profits by US companies are mostly due to the work of their employees. There's nothing wrong with the capitalist system as such - it's the best we human beings have devised as a wealth generator. But it doesn't work very well when the government fails to regulate properly, and politicians are irresponsible, sell out to special interests, and are stupid. And I see a lot of stupid people in your Congress.

[RUMMYisFROSTED]

20. Corporations pay nowhere near 36% income tax in the US.

The majority of US corporations pay zero income taxes.


Senators Dorgan And Levin Release Study Showing Majority Of Corporations Pay No Federal Income Tax
http://www.allamericanpatriots.com/congress/senators-dorgan-and-levin-release-study-showing-majority-corporations-pay-no-fed

[kestrel91316]

8. IOW, corporate welfare to AT&T has been cut back, saving the taxpayers

MILLIONS.

Sounds like a WIN to me.

[LiberalFighter]

9. Why don't they cut the salaries and expenses of the officers?

Oh wait! They are entitled to it?

[crazylikafox]

11. Unfortunately, they'll cut their employee benefits instead, and blame it on Obama

Then the PUBS will say they were right, Obama messed with your Employer Health Care.

F**k

[midnight]

12. Unfortunately, you are probably going to be right...

[napi21]

14. True, and the program was so complex the truth can't even be

explained to most people, even if they WOULD listen.

I wonder just how many other thidbits like this we're going t hear about????

[Nikki Stone1]

15. The race the bronze is starting.

"If you like your insurance you can keep it" was always contingent on the companies' desire to keep supplying it.

[golfguru]

16. That means $350 Billion less in tax paid by AT&T

based on 35% tax bracket.

[NotThisTime]

19. 360 Billion? I think 360 million

[golfguru]

21. you are right 360 Million LOL

Million, Billion, Trillion....it is all incomprehensible to my mind LOL

[leftygolfer]

17. next quarter announcement...

AT&T will layoff 1000 jobs. it's so predictable. the worker bees pay the price every time. enjoy your g5 mr. executive. don't worry about us, we'll find a way to make do.

[TomCADem]

18. This B.S. Even As They Took The Charge, Their Stock Prices Have Gone Up!

If HCR caused such a dent in their earnings, you would expect investors to discount the price of their stock to take into account the impact of HCR. Instead, the opposite has occurred during the week that HCR was passed.

[tritsofme]

22. Lots of retirees who get prescription drug coverage through their job will be dumped into Part D.

I don't know enough about the programs to conclude if this is a good or bad thing.