CORRECTED-Bank of New York loses bid for $900 mln tax benefit
(Corrects headline from $900 billion to $900 million)
WASHINGTON Feb 11 (Reuters) - A U.S. court ruled on Monday against Bank of New York Mellon Corp's bid to keep $900 million in tax benefits it called a legal funding strategy, but which tax authorities deemed abusive.
The Internal Revenue Service had earlier denied Bank of New York's use of foreign tax credits, expense deductions and trust income for 2001 and 2002 to lower its tax bill. The company filed a lawsuit against the agency.
The U.S. Tax Court agreed with the IRS, ruling that the transactions lacked "economic substance," meaning they were done solely for tax purposes.
A Bank of New York spokesman had no immediate comment.
The case was the first to go to trial since the IRS accused some banks of generating artificial foreign tax credits through loans with London-based Barclays Plc.
The tax benefit stems from a $1.5 billion loan to BNY Mellon from Barclays, which also helped several other U.S. banks generate billions of dollars in foreign tax credits.
Barclays has not been accused of any wrongdoing.
The banks in question used foreign tax credits, which are given to U.S. companies to prevent them from being double-taxed by two countries for the same income. The banks call it a legal funding strategy; the government calls them sham tax shelters.
The transaction "was an elaborate series of pre-arranged steps designed as a subterfuge for generating, monetizing and transferring the value of foreign tax credits," wrote Tax Court Judge Diane Kroupa in a 55-page decision. (Reporting by Kim Dixon and Patrick Temple-West; Editing by Kevin Drawbaugh, Bernard Orr)