IRS: More than 30 companies settle on tax shelters
By Jonathan Stempel
NEW YORK, Oct 21 (Reuters) - The Internal Revenue Service said more than 30 companies agreed to settle disputes over their use of leasing tax shelters that the agency considers abusive and some courts have declared improper.
The settlement addresses leasing transactions that allowed at least 45 companies to lease or buy large assets such as non-U.S. rail systems or sewer systems, and then immediately to lease them back to the original owners.
According to the IRS, however, the "lease-in, lease-out" and "sale-in, lease-out" transactions, or "LILO" and "SILO," let companies improperly bolster their balance sheets, and had no purpose other than to create tax benefits.
The agency on Tuesday said the settling companies had more than 80 percent of the leases in dispute, covering 80 percent of the dollar amounts. Settling companies would keep 20 percent of the tax deductions, but nonetheless give up billions of dollars of tax deferrals, it said.
"This broad response from some of the nation's largest corporations reflect the success of the IRS campaign against aggressive tax shelters," IRS Commissioner Douglas Shulman said in a statement. "For those who failed to take us up on this offer, we will vigorously pursue their cases."
Two banking companies, Bank of New York Mellon Corp (BK.N) and KeyCorp (KEY.N), have in the last week said they are among the companies that agreed to settle.
The IRS did not identify which other companies also did so, but has said the companies being reviewed include Fortune 500 companies and many of the nation's top banks. It announced its settlement offer on Aug. 6.
The settlements follow federal court victories by the IRS over the transactions, including against KeyCorp and regional banks BB&T Corp (BBT.N) and Fifth Third Bancorp (FITB.O).
KeyCorp in the second quarter took a $1.01 billion charge over the transactions, while Wachovia Corp WB.N took a $975 million charge. (Editing by Gary Hill)
