Eighth Circuit: Wells Fargo liable for penalties for engaging in abusive tax shelter schemeChristian Fernsby ▼ | April 28, 2020
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.
Circuit Wells Fargo
Topics: Wells Fargo
Wells Fargo, like several other U.S. 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 U.S. 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 U.S. and the U.K. and generate U.S. tax credits for a foreign tax that Wells Fargo did not, in substance, pay.” ■