WASHINGTON (AP) -- General Motors Corp. would receive a tax break in the $790 billion stimulus bill after the automaker argued its government-led restructuring would unintentionally lead to at least $7 billion in tax liabilities.
General Motors, which received a $13.4 billion lifeline from the Bush administration last year, would have been required to pay additional income taxes from its government loans, potentially undermining its turnaround plan.
GM received $9.4 billion in federal loans and is expected to receive another $4 billion, while Chrysler LLC has received $4 billion in loans and hopes to get another $3 billion. The companies must submit plans next week showing how they will restructure their companies and become profitable.
President Barack Obama, in an interview Wednesday with about a dozen selected reporters from news organizations, said he was committed to helping the U.S. auto industry and more help could be available if the plans are realistic.
If not, Obama said, "Then we're going to have to ask them to go back to the drawing board."
"Get me a plan that works," Obama said, according to the Detroit Free Press and The Detroit News.
In the GM tax issue, lawmakers said several conditions in the Detroit company's loan agreement with the government could trigger an "ownership change" under the tax law. That tax law was designed to prevent companies from merging to avoid a hefty tax bill.
The loan agreement gives the government shares in the company in exchange for the financing and requires GM to convert outstanding debt into equity and make payments in the form of stock to a health care fund for retired workers.
All three of the provisions could trigger the ownership change clause. GM officials said a major part of the federal loans would have been used to pay income taxes instead of funding the company's restructuring.
Sen. Debbie Stabenow, D-Mich., said the stimulus bill clarifies that the ownership change portion of the tax law does not apply to companies being restructured under the Troubled Asset Relief Program, or TARP.
Without the clarifying language, GM could have faced between $7 billion to $10 billion in tax liabilities.
GM spokesman Greg Martin declined comment, awaiting final approval of the stimulus bill by Congress.