Weekend Economists Tickle the Ivories September 20-22, 2013

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17. BB&T Loses Court Bid to Recoup $688 Million in Taxes

http://www.bloomberg.com/news/2013-09-20/bb-t-loses-court-bid-to-recoup-688-million-in-taxes.html

BB&T Corp. (BBT) lost a bid to recover at least $688 million in taxes and penalties as a federal judge ruled a series of transactions with Barclays Plc (BARC), aimed at generating tax credits, lacked economic substance.

U.S. Court of Federal Claims Judge Thomas Wheeler in Washington yesterday slammed BB&T, Barclays and other participants in the transactions, including the KPMG consultancy and the Sidley Austin LLP law firm, for conduct he said was “nothing short of reprehensible.” BB&T “engaged in an economically meaningless tax shelter” Wheeler said.

Those firms followed a path “rife with its conflicts of interest, questionable pro forma legal and accounting opinions, and a taxpayer with a seemingly insatiable appetite for tax avoidance,” Wheeler wrote, upholding the Internal Revenue Service’s rejection of transactions from August 2002 through April 5, 2007.

BB&T said it expects to book a $250 million charge this quarter because of the ruling, at least the second charge the bank has taken in connection with the case. In February, BB&T announced a $281 million charge after Bank of New York Mellon Corp., lost a similar lawsuit involving deals with Barclays designed to generate tax savings.