BB&T Corp loses case to U.S. as judge says deal a tax shelter
WASHINGTON (Reuters) - BB&T Corp lost on Friday a multimillion-dollar tax dispute with the U.S. Internal Revenue Service in federal court over a transaction the judge called "an economically meaningless tax shelter."
In a ruling that could affect other U.S. banks with similar disputes, BB&T unit Salem Financial was fighting for a tax refund of $772 million related to a deal that it said was meant to advance its core business.
A U.S. Court of Federal Claims judge disagreed.
"(T)he weight of the evidence shows that tax avoidance was singularly and precisely the goal pursued in execution of the STARS transaction," Judge Thomas Wheeler said in a 67-page decision.
BB&T, in a statement late Friday, said it was reviewing the court decision and evaluating its legal options. The firm expects to book an after-tax, related charge of about $250 million in the current quarter, but remain profitable for the quarter.
"We are surprised and very disappointed with the court's ruling and continue to firmly believe that this was a legitimate financing transaction," BB&T's Chairman and Chief Executive Officer Kelly King said.
STARS is short for "structured trust advantaged repackaged securities." The IRS has accused several banks of generating artificial foreign tax credits through STARS from roughly 1999 to 2006 with the assistance of UK bank Barclays Plc.
Barclays was not a party in any of the STARS cases.
Foreign tax credits are awarded to U.S. companies by the IRS to ensure that they are not taxed twice on the same profits by the U.S. government and by a foreign government.
Wheeler said the final dollar amount in the BB&T dispute will still need to be confirmed between the bank and the IRS.
BB&T, in a filing with the U.S. Securities and Exchange last month said that as a result of the litigation, its future uncertain tax positions could range from a $496 million benefit to a $328 million expense.
In February, Bank of New York Mellon lost a STARS case in U.S. Tax Court. The bank has said it is appealing the decision.
Wells Fargo and Santander Holdings are challenging the IRS in separate STARS disputes.
(Additional reporting by Zeba Siddiqui; Editing by Kevin Drawbaugh, Leslie Adler and Tim Dobbyn)
- North Korea says Kim's powerful uncle dismissed for 'criminal acts'
- Thai PM calls snap election, protesters press on
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Billy Joel, Shirley MacLaine feted at Kennedy Center Honors
- Singapore hit by rare outbreak of rioting, 27 arrested |