The Foreign Account Tax Compliance Act, or FATCA, is frequently referenced in the news as the cause of global bank transparency. In reality, though, bank secrecy was really broken by the John Doe summons. In 2008, the John Doe summons blew the lid off the hushed world of Swiss banking. A judge allowed the IRS to issue a John Doe summons to UBS for information about U.S. taxpayers using Swiss accounts. Continue Reading…
Archives For Bank of New York Mellon
WASHINGTON, Feb. 11. — The world’s largest custody bank, Bank of New York Mellon Corp. (Marketwatch) lost its bid to keep $900 million in tax benefits after a U.S. Tax Court ruled in the Internal Revenue Services’ favor.
After receiving a $1.5 billion loan in 2001 from Barclays Bank PLC and KPMG LLP, BNY Mellon used intricate foreign tax strategies to lower its tax liability. The IRS denied BNY Mellon’s tax benefits, finding them liable for $199 million; the bank responded by filing a lawsuit against the agency, which a U.S. Tax Court struck down on Monday. BNY Mellon had warned shareholders before the court’s decision it may have to set aside a reserve of more than $800 million as a litigation-related reserve; the court’s ruling only affected two years ($199 million), but the total amount of tax benefits or profit on the transaction is more than $850 million over a span of about 6 years. According to the U.S. Tax Court, the transactions lacked “economic substance.” BNY Mellon has said it will appeal the decision.