Potential Tax Bill Could Derail General Motors (GM) Turnaround

General Motors Corp. (NYSE: GM) is reaching out to the U.S. Treasury Department and Congress looking to avoid a multibillion-dollar tax burden that could be attached to a new restructuring plan that GM is working to create in the next couple of weeks, according to The Wall Street Journal.

General Motors is racing to submit a viability plan to the White House by February 17th, but GM could face an income-tax bill of as much as $7 billion. This tax bill would be associated with a plan to give much of the company's outstanding stock to debtholders, the United Auto Workers union and the federal government.

The WSJ said the issue is related to rules the government has used in the past to limit the ability of companies to use distressed-asset transactions as a way to avoid paying taxes.

The potential tax burden could derail General Motor's effort to steer clear of a bankruptcy filing. Congressional leaders did say they are open to cooperating with GM on the issue.

GM needs all the cash it can get in order to keep current on its payments to vendors and employees, and likely is preparing to ask for additional funds in coming months, the WSJ said.

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