BB&T Corporation BBT today announced that it will record a charge of $281 million in the first
quarter to increase its reserves related to an ongoing disputed tax liability.
The decision follows a Feb. 11 opinion by the U.S. Tax Court with respect to a
case between the Bank of New York Mellon Corporation and the IRS involving a
transaction with a structure similar to a financing transaction entered into
by BB&T in 2002. BB&T is currently in litigation with the IRS to recover a
previous assessment of $892 million.
BB&T has confidence in its position in the dispute because, among other
reasons, BB&T will raise arguments and issues in its case that were not
considered by the Tax Court. However, management recorded the charge as a
result of its consideration of this adverse opinion.
The tax reserves relate to an IRS statutory notice of deficiency for the tax
years 2002 – 2007 asserting a liability for taxes, penalties and interest of
$892 million related to the disallowance of foreign tax credits and other
deductions claimed in connection with the financing transaction. BB&T paid the
assessment in 2010 and filed a lawsuit seeking a refund in the U.S. Court of
Federal Claims. The court has scheduled the trial to begin on March 4. BB&T
recorded a receivable for the amount of the payment, less reserves. Following
this charge, it is possible that BB&T will decrease tax reserves by as much as
$496 million or increase reserves by as much as $328 million as the litigation
progresses.
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