Leveraged leases - BBT has 1.2bln in deferred taxes?
Key got crushed yesterday on this among other things. WSJ article says BBT paid 1.2 bln in deferred taxes. Apparently a negative tax court ruling came out determining these are invalid. Can anyone fill us in on these? Is this a bomb? Note Key cut its healthy dividend.
"This decision does not represent a new charge to the bank," spokesman Bob Denham said yesterday. BB&T said it paid $1.2 billion in taxes and interest to the IRS in January 2007 related to all of its lease transactions. The majority of the $1.2 billion had been deferred by BB&T in the 1997 to 2005 tax years, Denham said. "All taxes have been paid," he said. Denham said that the bank is evaluating its options, which could include appealing to the U.S. Supreme Court. "We still believe we were in full compliance with the Internal Revenue Code and all tax regulations existing in 1997," he said.
You cited the better, more informative article. In today's journal the article on Key included a reference that left BBT's exposure unclear to anyone that had not been aware of its management's prior decisions to deal with the ruling.
BBT dealt with the issue several months ago and has already taken the charge against earnings. They were the only party in the original suit: it was Uncle Sam v. BBT. Other banks have been looking through their books and are recognizing losses if they have similar lease arrangements. Seems to me Key was a little slow on this, and I think there were additional reasons why their stock got killed yesterday...