Dow Chemical Co.’s claim to $1 billion in tax deductions was based on transactions with sham partnerships promoted by Goldman Sachs Group Inc. and King & Spalding LLP, a U.S. judge ruled, throwing out the company’s bid to recover the money.
The Internal Revenue Service correctly rejected the tax benefits created by the partnerships from 1993 to 2003 because Dow’s transactions with them were designed to exploit perceived weaknesses in the tax code and not for legitimate business purposes, U.S. District Judge Brian Jackson, said in Tuesday’s ruling.
“The facts of the present case indicate that Dow viewed its tax department as a profit center,” Jackson said in his opinion, issued in Baton Rouge, Louisiana.
In addition to rejecting the tax benefits, Jackson imposed a 20 percent penalty.
“Dow is disappointed by the trial court’s decision in this case, and we believe the opinion is not supported by the facts and applicable law,” Nancy Lamb, a spokeswoman for Dow, said in an e-mail statement. “Dow is exploring all of its options, including appeal.”
She said Dow had paid the taxes sought by the IRS and had sued to recover money the company believed shouldn’t have had to pay.
Michael DuVally, a spokesman for Goldman Sachs, had no immediate comment on the ruling.
“As a matter of policy we do not discuss client matters,” Matt Hyams, a spokesman for Atlanta-based King & Spalding, said by phone.
The case is Chemtech Royalty Associates LP v. U.S., 05-cv- 00944, U.S. District Court, Middle District of Louisiana (Baton Rouge).
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