U.S. Supreme Court declines to hear Wells Fargo-IRS tax squabble
WASHINGTON, June 9
WASHINGTON, June 9 (Reuters) - The U.S. Supreme Court declined on Monday to hear an appeal from Wells Fargo & Co in a case involving a complex financial deal implemented by the banking group that the government said was set up solely to avoid millions of dollars in taxes.
The high court's order will let stand an appeals court ruling last year that said the Wells Fargo deal, which generated more than $400 million in tax loses, lacked any business purpose or "economic substance" beyond tax avoidance.
A Wells Fargo spokeswoman said in a statement that the decision would have "no financial impact" on the company because the case involved an $82 million tax refund, not a liability.
Wells Fargo had argued that the government was enforcing tax law too broadly and that the San Francisco-based bank properly structured the transaction as legitimate tax planning.
The Supreme Court may face the economic substance question again soon as the U.S. Internal Revenue Service has several similar disputes in litigation with other big banks.
Santander Holdings, BNY Mellon Corp, and BB&T Corp have economic substance cases pending with the IRS in federal appeals courts involving multi-million dollar tax-saving deals known as STARS, or "structured trust advantaged repackaged securities."
The economic substance doctrine is a legal strategy that focuses less on the technicalities of particular financial structures and more on their broader purposes and outcomes.
The IRS is relying more frequently on economic substance arguments to win corporate and individual tax shelter cases, said Stuart Bassin, a tax lawyer formerly at the U.S. Justice Department.
If an appeals court rules in favor of the banks in a STARS economic substance case, he said, "that would be a very strong candidate for Supreme Court review."
The case is WFC Holdings Corporation v. United States, No. 13-1037. (Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Bernadette Baum)
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