OHIO JUDGE REJECTS TAX CLAIMS ON $423 MILLION ALLEGED PURCHASE OF GERMAN FACILITY MADE BY CLEVELAND AND PITTSBURGH-BASED BANKS

Alleged Cross-Border Leasing Transactions Involving Key Bank and PNC Bank
Were Improper Tax Shelters

WASHINGTON – A federal judge in Cleveland rejected tax claims presented by a partnership owned by Key Bank and PNC Bank that they were entitled to more than $100 million in deductions related to an international leasing transaction, the Justice Department and Internal Revenue Service (IRS) announced today. In addition to disallowing the deductions as improper, the court held the partnership was liable for penalties for substantial understatement of tax.


The banks claimed the deductions in connection with a purported Sale-In/Lease-Out (SILO) transaction in which they claimed to have acquired ownership of a trash disposal and energy generation plant in Germany. The banks claimed they acquired the plant from a German municipal utility and leased the plant back to the utility for at least 25 years on the same day. The utility continued to use and operate the plant without interruption, while the banks claimed depreciation deductions on the plant and interest deductions on loans used to finance the SILO transaction. See, http://www.usdoj.gov/opa/pr/2008/May/08-tax-481.html