US Eighth Circuit upholds Wells Fargo liable for penalties for engaging in abusive tax shelter scheme

0
43

WASHINGTON, USA – The Eighth Circuit Court of Appeals issued a precedential opinion on Friday, April 24, 2020, affirming a district court decision that a transaction designed to generate massive foreign tax credits (referred to as the STARS tax shelter) lacked economic substance and business purpose and was subject to the accuracy-related penalty for negligence, announced principal deputy assistant attorney general Richard E. Zuckerman and deputy assistant attorney general Joshua Wu of the Justice Department’s Tax Division.

In Wells Fargo v. United States, No. 17-3578, the Eighth Circuit Court of Appeals affirmed the decision of the US District Court for the District of Minnesota and the position of the United States. Wells Fargo, like several other US banks, had entered into the STARS shelter, a transaction promoted to them by Barclays PLC and KPMG as a method of generating foreign tax credits on US income.

The Eighth Circuit rejected the transaction as an economic sham subject to penalties, consistent with the decisions of three other courts of appeals. In rejecting Wells Fargo’s appeal, the court agreed with the government that “STARS was an elaborate and unlawful tax avoidance scheme, designed to exploit the differences between the tax laws of the US and the UK and generate US tax credits for a foreign tax that Wells Fargo did not in substance, pay.”

Principal deputy assistant attorney General Zuckerman thanked Tax Division attorney Judith Hagley and former Tax Division attorneys Gilbert Rothenberg and Richard Farber, who handled the case on appeal for the government, as well as chief Senior Litigation Counsel Dennis Donohue, Senior Litigation Counsel Kari Larson, trial attorneys William Farrior, Harris Phillips, Matthew Johnshoy, and former Tax Division attorney Viki Economides Farrior, who litigated the case in the district court.

LEAVE A REPLY

Please enter your comment!
Please enter your name here