Last week, the New York Times looked through General Electric’s disclosure statements and reported that the multinational conglomerate would pay no US taxes on a global profit of over $14 billion, including domestic profit of over $5 billion.  In fact, the Times reported that GE would get $3.2 billion from taxpayers, thanks to tax credits for which it lobbies Congress on an ongoing basis.  The report provoked outrage across the political spectrum, got plenty of blogospheric coverage (including here), and resulted in demands for Barack Obama to kick GE chief Jeffrey Immelt off of a presidential advisory committee on the economy.

There was only one problem with the Times’ coverage — it wasn’t true.  ProPublica and Fortune report that GE will in fact pay taxes, and that the Times needs to do a better job of understanding financial statements:

Unfortunately, for all its good work, the Times story has created at least one major misperception — that GE paid no U.S. income taxes last year and is actually getting a $3.2 billion refund from the Treasury.

The Times’ own headline writers got that impression too. “GE Turns the Tax Man Away Empty-Handed,” read the headline on early editions, including the Times’ Washington edition, the version that politicians and the DC-based news media and commentariat see. “GE’s Strategies Let It Avoid Taxes Altogether,” was the original head on nytimes.com, the version the blogosphere reads.

Those headlines are based on the story’s third paragraph, which discusses GE’s 2010 financial results. “Its American tax bill? None. In fact, GE claimed a tax benefit of $3.2 billion.” That seems to say that GE is getting a tax refund for 2010 — but the words “tax benefit” are so ambiguous that it’s not clear what they mean, and the article never explains them, or mentions them again.

Later in the day, the Times changed its headline to “At GE on Tax Day, Billions of Reasons to Smile,” but the meme had already been set.  In fact, GE did not get a $3.2 billion refund.  They also paid estimated taxes during the course of the year, as all companies do, and they’re pretty sure they’re not getting a refund, either.  They will probably end up with a “small tax liability” for 2010, which means they have to write a check to the IRS on the 15th, like many Americans will do.

So how did the Times get the story so wrong?  Well, thanks to a ludicrous American tax code, it’s extremely complicated to analyze any company’s tax liabilities even from the inside, let alone from the outside.  The Times apparently got confused by a report showing a $3.2 billion “tax benefit” in 2010, which they mistook for an after-profit credit.  The term actually refers to estimated pre-profit deductions and credits, which lower the eventual taxable income number on which GE gets billed by the IRS.  It’s roughly analogous to mistaking personal itemized deductions on a tax return for a refund figure.

That doesn’t mean that the issue of actually getting $3.2 billion in deductions and credits in a single year isn’t an important topic, and the lack of clarity on GE’s tax situation — even at GE, which Fortune and ProPublica describe in some detail — once again show the need for a flat, simple, and reasonable tax code that allows businesses to compete evenly without Congress picking winners and losers through hidden subsidies and penalties enforced at the IRS.  But the Times’ reporting gave a completely false impression of GE’s actual status, and should be corrected.

Be sure to read the lengthy analysis of GE’s actual tax strategies at Fortune and ProPublica as well, which speak directly to the real issues of corporate tax reform.