Court rules US Dow took part in artificial tax benefit scheme

27 February 2013 23:54  [Source: ICIS news]

HOUSTON (ICIS)--Two tax shelter transactions entered into by Dow Chemical to create about $1bn (€770m) in tax deductions have been rejected by a US federal court, the US Department of Justice (DOJ) announced on Wednesday.

Chief Judge Brian Jackson of the US District Court for the Middle District of Louisiana also imposed penalties, details of which were not available late Wednesday.

In the court’s opinion, Jackson wrote that the tax schemes were created by investment firm Goldman Sachs and law firm King & Spalding and involved creating a partnership that Dow operated out of its European headquarters in Switzerland.

Jackson wrote that the government was correct to have previously rejected the artificial tax benefits created by the schemes that were designed to exploit perceived weaknesses in the tax code. US-based Dow had sued to keep the tax deductions.

“Dow viewed its tax department as a profit centre” and had at its disposal “numerous lawyers and tax professionals”, Jackson wrote.

In a press statement, Dow said that the company sued the federal government for the return of taxes paid from 1993-2003.

"Dow paid all taxes at issue plus interest, but requested the US District Court to agree that the taxes were wrongly assessed by the IRS," the company said.

Dow said it was disappointed with the Baton Rouge-court’s decision.

"We believe the opinion is not supported by the facts and applicable law,” the company said. “Dow is exploring all of its options, including appeal."

Assistant Attorney General Kathryn Keneally of the DOJ’s Tax Division hailed the court’s decision.

“It is offensive to all taxpayers who pay their fair share when our largest corporations believe that they can claim hundreds of millions of dollars in tax deductions that are manufactured by abusive tax schemes,” Keneally said.

By: Jeremy Pafford
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