Financial holding firm BB&T Corp lost a USD 772 million tax shelter case with the US Internal Revenue Service (IRS). Its Salem Financial unit filed for the tax refund with the IRS since the transaction was done by the company to expand its core business.
However, Judge Thomas Wheeler of the US Court of Federal Claims said the firm's claim for the tax shelter was meaningless. Wheeler said in his 67-page decision, "The weight of the evidence shows that tax avoidance was singularly and precisely the goal pursued in execution of the STARS transaction."
STARS stands for "structured trust advantaged repackaged utilities." The IRS said the STARS scheme allowed banks to get foreign tax credits they did not deserve. The IRS normally provides a foreign tax refund to firms doing business in the US. This was a safety feature put in place by the IRS. Foreign tax credits would prevent firms from double taxation on the same profits, Reuters reported.
BB&T Chairman and Chief Executive Officer Kelly King told Reuters that the company was surprised by the ruling. "We are surprised and very disappointed with the court's ruling and continue to firmly believe that this was a legitimate financing transaction," he said.
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