(CN) – Wells Fargo & Co. lost a $115 million tax-deduction claim against the government over “sale in-lease out” tax shelters. The U.S. Court of Federal Claims said the transactions “were only intended to reduce Wells Fargo’s federal taxes by millions of dollars.”
Wells Fargo claimed more than $115 million in depreciation, interest and costs for 2002, stemming from several “sale in-lease out,” or SILO, tax shelters.
In a SILO, a tax-exempt entity, such as a public transit agency, transfers tax benefits for a fee to a taxpayer like Wells Fargo. These arrangements allow the taxpayer to take advantage of significant tax breaks.
The government claimed the transactions were merely a transfer of benefits to avoid federal taxes.
After a 20-day trial in Washington, D.C., featuring the testimony of 33 witnesses, the claims court ruled for the government.
“The SILO transactions did not grant to Wells Fargo the burdens and benefits of property ownership,” Judge Thomas Wheeler wrote. “The transactions lack economic substance, and were intended only to reduce Wells Fargo’s federal taxes by millions of dollars.
“Although well disguised in a sea of paper and complexity, the SILO transactions essentially amount to Wells Fargo’s purchase of tax benefits for a fee from a tax-exempt entity that cannot use the deductions,” Wheeler added.
“If the Court were to approve of these SILO schemes, the big losers would be the Internal Revenue Service, deprived of millions in taxes rightfully due from a financial giant, and the taxpaying public, forced to bear the burden of the taxes avoided by Wells Fargo.”