BB&T Records Charge for Disputed Tax Liability, Could Cut Reserves to $496M or Raise by $328M

BB&T Corporation (NYSE: BBT) today announced that it will record a charge of $281 million in the firstquarter 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 acase between the Bank of New York Mellon Corporation and the IRS involving atransaction with a structure similar to a financing transaction entered intoby BB&T in 2002. BB&T is currently in litigation with the IRS to recover aprevious assessment of $892 million.BB&T has confidence in its position in the dispute because, among otherreasons, BB&T will raise arguments and issues in its case that were notconsidered by the Tax Court. However, management recorded the charge as aresult of its consideration of this adverse opinion.The tax reserves relate to an IRS statutory notice of deficiency for the taxyears 2002 – 2007 asserting a liability for taxes, penalties and interest of$892 million related to the disallowance of foreign tax credits and otherdeductions claimed in connection with the financing transaction. BB&T paid theassessment in 2010 and filed a lawsuit seeking a refund in the U.S. Court ofFederal Claims. The court has scheduled the trial to begin on March 4. BB&Trecorded a receivable for the amount of the payment, less reserves. Followingthis 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 litigationprogresses.