Altria Loses Bid Over $24.5 Million in Tax Deductions
Altria Group Inc., the largest U.S. tobacco company, said it lost a legal bid to retain $24.5 million in tax deductions.
Altria, based in Richmond, Virginia, sued the U.S. government in 2006 to stop it from seeking back taxes over the deductions taken in 1996 and 1997. A federal jury in Manhattan began hearing the case in June and returned a verdict today, Altria said.
“We believe that Altria and its subsidiary, Philip Morris Capital Corp., fully complied with the law,” Murray Garnick, Altria Client Services senior vice president, said in a statement. “We will seek further review of the jury’s verdict in the trial court and, if necessary, in the appellate court.”
In the four transactions at issue, Altria’s unit took depreciation deductions on property that the U.S. claimed was owned by other entities. The entities, which include New York City’s Metropolitan Transit Authority, weren’t entitled to take the deductions themselves because they were nonprofit, government-run, or lacked profits against which they could offset the deductions.
The U.S. says Altria tried to claim ownership of the properties merely by paying fees to the entities in so-called “lease-in, lease-out” or “sale-in, sale-out” transactions.
“There’s nothing wrong with saving taxes,” Assistant U.S. Attorney Robert Yalen told jurors in opening statements. “What this case is about is Philip Morris claiming tax benefits it’s not entitled to.”
Defense attorney Dan Webb told jurors in opening statements that PMCC entered into the transactions in accordance with federal tax rules.
“After these transactions were structured and entered into, the government improperly took these deductions away from us,” Webb said. “We’re entitled to our tax deductions.”
The case is Altria v. U.S., 06-cv-9430, U.S. District Court, Southern District of New York (Manhattan).
Source: Bloomberg
