Crackdown on Back Taxes Spurs 200 Banks to Consider Settlements
The department sent a letter proposing settlement talks to the state's 320 banks, some of which have moved loans, bonds and other assets to subsidiaries in Nevada, where there is no corporate income tax, the Milwaukee Journal Sentinel reported. The department is clamping down on the practice to stop millions of dollars in potential taxable income from flowing out of the state, where the corporate income tax is 7.9 percent.
More than 200 banks responded to the department's offer to begin settlement talks. Originally, the state wanted to collect up to six years of back taxes, but bankers said they had received state permission to operate Nevada subsidiaries and should not be charged.
The department backed off its six-year demand, agreeing to collect fewer years of back taxes if the bank agreed to settle. According to the settlement guidelines set up by the department, loans would no longer be sent to Nevada subsidiaries but some long-term investments, U.S. Treasuries for example, could go out of state.
The department will not name the 23 banks that have already reached settlements or reveal the dollar amounts.
Some banks may go to court, said James D. Friedman, a Quarles & Brady attorney hired by the Wisconsin Bankers Association. "There are a number of people out there who have significant and legitimate issues that were not really satisfactorily addressed in this so-called model settlement," Friedman said. "For some people, the dollars involved and the significant strength of the legal position in favor of the banks makes it very likely that someone will litigate."
Much work remains to be done before settlements are reached.
"When the banks sent in the letter, it's more or less to say they are interested in discussions with us," said Eva Robelia, spokeswoman for the Department of Revenue. "So we will then start the discussion process. But with having over 200 banks respond to us, it's obviously going to take us a while," she said.