LITTLE ROCK — Whirlpool Corp. will claim $300 million this year in U.S. tax credits for making energy-efficient appliances, collecting almost four times the government’s estimate for what all companies would receive from the tax incentive.
The credit will generate about one-third of Whirlpool’s earnings this year, according to the company’s projections. Company filings show that as of Dec. 31, 2010, Whirlpool had $555 million in stockpiled business credits and $2 billion in tax losses. Both can typically be used to offset up to 20 years of future income and taxes.
“I was shocked,” said Robert Willens, president of the New York tax-consulting firm Robert Willens LLC. “I’ve never looked at Whirlpool before, but I was really surprised to see that it was possible to accumulate that amount of general business credit.”
The energy-efficient appliance credit is one of dozens of targeted breaks scattered throughout the tax code that lawmakers use to encourage companies to engage in activities that meet policy goals. In December 2010, Congress extended the tax break through 2011and continued an uncapped portion of the credit, allowing Whirlpool to qualify for a subsidy that exceeds the congressional estimate of $78 million for the entire industry.
Whirlpool, which reported $18.4 billion in global sales and $619 million of net income for 2010, had negative effective income tax rates in 2010, 2009 and 2008. Last year, the company reported an income tax benefit of $64 million and an effective tax rate of negative 10.9 percent, according to company filings.
Whirlpool, based in Benton Harbor, Mich., wouldn’t comment for this story. The company’s appliance brands include Whirlpool, KitchenAid, Maytag, Jenn-Air and Amana. The company operates a manufacturing plant in Fort Smith
Whirlpool shares fell $1.82,or 2.18 percent, to $81.62 in New York Stock Exchange composite trading Tuesday amid a broader decline in U.S. markets. Before Tuesday, the shares had declined 1.3 percent over the past year.
Roy Templin, the company’s chief financial officer, told analysts in a Feb. 2 earnings call that Whirlpool won’t receive cash from the credits in 2011. Instead, he said, the credits will reduce Whirlpool’s future taxes for multiple years.
“I want to be very clear - 2012 and beyond,” he said.
The company relies more heavily on the credit than do other appliance makers such as Electrolux AB and General Electric Co., said Laura Champine, an analyst at Cowen & Co. in New York.
“These guys are really unique,” she said. “They’re getting the vast majority of the credits.”
Congress created the appliance manufacturing taxcredit in 2005. It was extended for a year in December in a broader tax law. The congressional Joint Committee on Taxation estimated that a one-year extension would lead to $78 million in forgone government revenue over the next decade.
GE, the biggest provider of appliances for newly built U.S. homes, has invested more than $1 billion in its appliance unit and plans to add 1,300 positions as it renovates and opens factories and design centers in Indiana, Kentucky, Alabama and Tennessee, to build energy-efficient appliances.
Those moves helped GE, based in Fairfield, Conn., qualify for more than $200 million in tax credits last year, Chief Financial Officer Keith Sherin said in a January call to discuss earnings.
“We’re spending a lot more on new products. We’re investing across the entire product line,” he said. Suchtax credits “will continue in 2011.” GE Home & Business, the Louisville, Ky.-based unit that includes appliances, provided $8.65 billion of the parent company’s $150.2 billion in revenue last year. GE shares fell 24 cents, or 1.1 percent, to $21.20.
The tax credit provides fixed-dollar amounts to companies that increase production of high-efficiency appliances that meet specified standards. For example, a company that makes a dishwasher that uses no more than 307 kilowatt-hours a year and 5 gallons a cycle would receive a $25 tax credit.
The law caps the credits for 2011 at $25 million per company. That cap exempts the most efficient clothes washers and refrigerators, which are eligible for credits of $225 and $200, respectively.
Those uncapped credits will allow Whirlpool to receive 12 times the per-company cap in 2011, Willens and Champine said. Whirlpoolclaimed $225 million of the credits in 2010, Templin told analysts.
Whirlpool will be eligible to continue receiving the credits only if Congress extends the credit and the uncapped portion. The company spent $940,000 on lobbying Congress and the administration on all issues in 2010, according to public records. That total includes $240,000 that it paid Capitol Tax Partners, which focuses on tax policy.
The top recipient of contributions from Whirlpool’s PAC was U.S. Sen. Blanche Lincoln, a Democrat from Arkansas and a Finance Committee member who lost her re-election bid in November.
In his budget proposal released Feb. 14, President Barack Obama called for extending the credit through 2012. His proposal would continue the uncapped portion of the credit and not create a new $25 million annual cap. The Treasury Departmentestimates that the extension would lead the government to forgo $25 million in revenue over 10 years.
The cap was a factor in the $78 million estimate, said Thomas Barthold, chief of staff for the Joint Committee on Taxation.
Revenue estimators have access to tax returns and use that information to measure the lost revenue, said Ed Kleinbard, former chief of staff of the Joint Committee on Taxation. Estimates are sometimes wrong and aren’t revised retroactively, he said.
Kleinbard, a law professor at the University of Southern California, said policymakers have difficulty structuring tax incentives for equipment or products that target the benefits only for incremental activity.
“Instead, a very large fraction of the government subsidy goes to reward behavior that would have taken place without the subsidy,” he said.
Business, Pages 21 on 02/23/2011