Berkshire Hathaway gained $29B from GOP-led tax legislation

By Allen Cone  |  Feb. 24, 2018 at 12:28 PM
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Feb. 24 (UPI) -- Berkshire Hathaway, the global holding company run by Warren Buffett, gained $29 billion in 2017 because of taxes in the U.S. tax law, the billionaire said.

The legislation, signed last December by President Donald Trump, lowered the the rate on unrealized gains on equity investments from 35 percent to 21 percent.

This helped push Berkshire's net earnings to $44.94 billion in 2017 from $24.07 billion the prior year while offsetting declines in certain businesses, according to a 16-page letter released Saturday to stockholders by Buffett.

In the letter, the 87-year-old Buffett said the gain was "real" and a "large portion of our gain did not come from anything we accomplished at Berkshire."

He said the other $36 billion of the company's $65 billion gain came from its operations.

Berkshire owns $170 billion of marketable stocks.

"The new rule says that the net change in unrealized investment gains and losses in stocks we hold must be included in all net income figures we report to you," Buffett wrote. "That requirement will produce some truly wild and capricious swings in our GAAP bottom-line." The acronym refers to the generally accepted accounting principle.

Berkshire's operating earnings dropped 18 percent to $14.5 billion in 2017, likely due to losses in its insurance operations from hurricanes and other natural disasters that plagued the U.S. last year.

Berkshire's book value per share rose 23 percent in 2017, the company said, compared with a 22 percent total return in the S&P 500, including dividends.

Berkshire had a record $116 billion in cash at year-end, mostly in Treasury bills,

"Berkshire's goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions," Buffett wrote. "Our smiles will broaden when we have redeployed Berkshire's excess funds into more productive assets."

Berkshire already owns outright or has a major stakes in variety of companies, including railroads and utilities, media firms, industrial manufacturers and retailers. Subsidiaries include Benjamin Moore & Co., Dairy Queen, GEICO, See's Candies, Star Furniture.

Two deals fell through last year for Unilever and Texas power-transmission company Oncor.

Last October it took a 38.6 percent stake in truck-stop company Pilot Travel Centers, which will increase to 80 percent in 2023.

"Our bonds had become a dumb-a really dumb-investment compared to American equities," he said.

He praised the work of his staff in Omaha, his hometown.

"This team efficiently deals with a multitude of SEC and other regulatory requirements, files a 32,700-page Federal income tax return, oversees the filing of 3,935 state tax returns, responds to countless shareholder and media inquiries, gets out the annual report, prepares for the country's largest meeting, coordinates the Board's activities, fact-checks this letter -- and the list goes on and on."

Anyone who owns at least one share of B level stock worth around $200 can attend on May 5. The class A stock was worth $304,020 at the closing Friday on the New York Stock Exchange. Last year's three days of meeting, called the Woodstock of Capitalism, drew around 40,000 despite it being live-streamed.

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