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Business Crimes Hotline

By ALM Staff | Law Journal Newsletters |
March 28, 2013

LOUISIANA

Dow Chemical Company Loses $1 Billion Tax Shelter Case

On Feb. 25, Chief Judge Brian A. Jackson of the United States District Court for the Middle District of Louisiana in Baton Rouge ruled against Dow Chemical Company (Dow) in a case addressing the validity of two tax-shelter transactions created for the company. The transactions, which included approximately $1 billion in deductions, involved the creation of a partnership via Dow's European headquarters in Switzerland, and were designed for the company by Goldman Sachs and King & Spalding, the international law firm. In ruling for the Government, Judge Jackson stated that the “tax law deals in economic realties, not legal abstractions.” In addition to affirming the denial of the deduction, Judge Jackson also levied a penalty against Dow and he further remarked that “Dow viewed its tax department as a profit center.”

According to published reports, a spokesperson for Dow noted that it had already paid all taxes at issue in the litigation, along with corresponding interest. Dow also noted at the time of the decision that it was considering all options, including a possible appeal. Chemtech Royalty Associates v. United States, No. 05-cv- 00944 (M.D. LA Feb. 26, 2013).

LOUISIANA

Dow Chemical Company Loses $1 Billion Tax Shelter Case

On Feb. 25, Chief Judge Brian A. Jackson of the United States District Court for the Middle District of Louisiana in Baton Rouge ruled against Dow Chemical Company (Dow) in a case addressing the validity of two tax-shelter transactions created for the company. The transactions, which included approximately $1 billion in deductions, involved the creation of a partnership via Dow's European headquarters in Switzerland, and were designed for the company by Goldman Sachs and King & Spalding, the international law firm. In ruling for the Government, Judge Jackson stated that the “tax law deals in economic realties, not legal abstractions.” In addition to affirming the denial of the deduction, Judge Jackson also levied a penalty against Dow and he further remarked that “Dow viewed its tax department as a profit center.”

According to published reports, a spokesperson for Dow noted that it had already paid all taxes at issue in the litigation, along with corresponding interest. Dow also noted at the time of the decision that it was considering all options, including a possible appeal. Chemtech Royalty Associates v. United States, No. 05-cv- 00944 (M.D. LA Feb. 26, 2013).

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