General Motors Seeks $121M Tax Refund From San Francisco, Files Lawsuit

General Motors Co GM has lodged a lawsuit against the city of San Francisco, seeking a refund of $121 million for overpaid taxes and penalties.

What Happened: GM alleges it was charged higher tax by factoring in its autonomous vehicle subsidiary, Cruise, into the tax assessments, Reuters reported, citing the lawsuit filed at the California Superior Court in San Francisco on Friday.

The Detroit-based automaker is seeking to retrieve about $108 million in overpaid taxes over seven years, in addition to interest and penalties totaling $13 million.

GM maintains that San Francisco-based Cruise operates separately, contributes insignificantly to sales, and hence, should not be considered when determining GM’s tax obligations in the city where it has a limited presence.

“Cruise has an experienced executive leadership team that is separate from GM's leadership team. Cruise also maintains its own corporate functions that include human resources, communications, legal, public policy, finance (including treasury and accounting), and marketing,” GM said in the lawsuit while adding that Cruise executive leadership and corporate functions include about 480 professionals who are employed directly by Cruise and operate separately from GM.

Further, Cruise performed only research and development activities for most of the 7 years in question, the company said, with ‘very little revenue.’

Why It Matters: Cruise has been embroiled in safety concerns after one of its AVs got involved in an accident in early October. It has paused both autonomous and manual AV operations in the United States.

Initially, Cruise paused its autonomous vehicle operations in San Francisco in October following a directive from the California Department of Motor Vehicles (DMV). California DMV suspended Cruise's autonomous vehicle deployment and driverless testing permits citing "unreasonable risk" to public safety. The authority further alleged that the company misrepresented information on the safety of its autonomous technology.

The suspension of Cruise’s operations in Austin, Phoenix, and Houston followed a few days later. Early in November, the company announced that it is also pausing supervised and manual AV operations in the U.S., in a bid to rebuild public trust and undergo a full safety review. Earlier in December, it was also reported that Cruise is laying off nearly a quarter of its entire workforce.

In the last quarter, Cruise reported an EBIT-adjusted loss of $732 million, a 47% increase from the loss of $497 million reported a year earlier.

Photo Courtesy: Shutterstock.com

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