Chapter 19: Paying Twice
MidAmerican Energy Holdings Company, part of Warren Buffett's extensive business holdings, has $665.9 million in deferred corporate income taxes, which can also be described as an interest-free loan. The entry below was pasted in from Page 96 of its 2006 10-k filing with the Securities and Exchange Commission.
Note that the average remaining life of this loan is 28 years.
Under federal tax law the dollars to be paid are fixed, so the longer the life of the loan the less the government collects as inflation erodes the value. At 3 percent inflation for 28 years beginning in 2006, the amount eventually paid to the government, assuming all of the deferred taxes are paid in 2034, would be about $284 million or roughly 43 cents on the dollar compared to paying the taxes in 2006.
The full document is available at this link. Dollar are in millions, so $665.9 equals $665,900,000.
