Post by L Browning on Dec 11, 2008 23:19:57 GMT 4
December 11, 2008
Reprieve for Tax Shelter Is in Proposed Bailout for Detroit
By LYNNLEY BROWNING
A little-noticed provision in the proposed bailout plan for Detroit’s automakers blesses an aggressive tax shelter sold by large banks and insurers to municipal transit agencies across the country.
The provision asks the government to help the agencies by guaranteeing the economics of the complex shelter, despite years of efforts by the Treasury Department and the Internal Revenue Service to shut it down and collect billions of dollars of unpaid taxes, interest and penalties owed by the banks and insurers.
The shelter, known as Silo, for sale-in, lease-out, was one of the costliest corporate tax dodges in recent years and allowed participants, including the American International Group, to avoid paying tens of billions of dollars in taxes by buying and then leasing back depreciation rights and assets at the agencies.
Many of the deals are faltering because of the credit crisis and have put the agencies at risk of having to make large payments to banks and insurers. Last month, the agencies asked the government to back their role in the deals. The I.R.S., which banned the shelter in 2004, offered a so-called amnesty in August to more than 45 corporations that engaged in more than 1,000 Silo deals involving municipal property.
Senator Charles E. Grassley, Republican of Iowa and the ranking member of the Senate Finance Committee, said on Wednesday that the provision was “a dark-of-night move that unravels an important tax reform and benefits tax shelter participants, including transit agencies, corporations and foreign banks, on the U.S. taxpayers’ dime.”
Reprieve for Tax Shelter Is in Proposed Bailout for Detroit
By LYNNLEY BROWNING
A little-noticed provision in the proposed bailout plan for Detroit’s automakers blesses an aggressive tax shelter sold by large banks and insurers to municipal transit agencies across the country.
The provision asks the government to help the agencies by guaranteeing the economics of the complex shelter, despite years of efforts by the Treasury Department and the Internal Revenue Service to shut it down and collect billions of dollars of unpaid taxes, interest and penalties owed by the banks and insurers.
The shelter, known as Silo, for sale-in, lease-out, was one of the costliest corporate tax dodges in recent years and allowed participants, including the American International Group, to avoid paying tens of billions of dollars in taxes by buying and then leasing back depreciation rights and assets at the agencies.
Many of the deals are faltering because of the credit crisis and have put the agencies at risk of having to make large payments to banks and insurers. Last month, the agencies asked the government to back their role in the deals. The I.R.S., which banned the shelter in 2004, offered a so-called amnesty in August to more than 45 corporations that engaged in more than 1,000 Silo deals involving municipal property.
Senator Charles E. Grassley, Republican of Iowa and the ranking member of the Senate Finance Committee, said on Wednesday that the provision was “a dark-of-night move that unravels an important tax reform and benefits tax shelter participants, including transit agencies, corporations and foreign banks, on the U.S. taxpayers’ dime.”