This kind of thing is just infuriating (and completely a product of the damned gargantuan and indecipherable tax code):
Some of the nation’s biggest banks have sheltered hundreds of millions of dollars from state taxes by creating investment funds that didn’t sell shares publicly but paid tax-exempt dividends to the banks, Thursday’s Wall Street Journal reported.
A review of Securities and Exchange Commission (news – web sites) records shows that at least 10 major banks shifted more than $17 billion into such funds. Bank of America Corp. (BAC) alone transferred at least $8 billion into its fund, sheltering more than $750 million in income from 1999 through last May. The banks contend the funds were legitimate vehicles for raising investment capital, but many appear to have served little purpose beyond sheltering income. In effect, the funds converted interest income from the banks’ loan portfolios into tax-exempt dividends.
And, like all the corporate malfeasance that is being pinned erroneously on the Bush administration, you will never guess when it started:
All but one of the known funds — 11 in all — were set up with advice from KPMG LLP, an accounting firm whose tax shelter practices are under scrutiny by the Internal Revenue Service. They were created in 1999 and 2000, but have been gradually shut down over the last two years, after the SEC and California revenue officials quietly began looking into the practice. It is not known if more such funds remain active. California officials, calling the maneuver ” outrageous” and “egregious,” are auditing several banks’ tax returns in an effort to recoup lost revenues and looking as far back as 1993. The officials declined to identify the banks, citing tax-confidentiality laws.
Here is the list of criminals:
SEC records show that the following 10 institutions created investment fund subsidiaries under the federal law that governs mutual funds: Washington Mutual Inc., the nation’s eighth largest bank; Bank of America, the third largest; Summit Bancorp, now part of Fleet Bank ; Zions First National Bank, now Zions Bancorp , which had two funds; Cathay Bancorp ; East-West Bancorp; City National Bank Corp.; NBT Bancorp ; Imperial Bank, now part of Comerica Inc.; and Chinatrust.
Throw the book at them.