Attorneys for Dow Chemical and the federal government have until mid-March to argue what kinds of penalties the specialty chemical company should pay for its $1 billion phony tax shelter that in part involved its Louisiana operations in Plaquemine.
In September, a three-judge panel of the 5th U.S. Circuit Court of Appeals let stand a 2013 Baton Rouge federal court ruling that Dow entered into two Chemtech partnerships that ran from 1993 to 2003 mainly to avoid taxes, as the company had no legitimate business purpose for them. But the court also asked U.S. District Judge Brian Jackson, who presided over the case, to reconsider a possible 40% penalty for any alleged “gross valuation misstatement” of taxes. Jackson had imposed only a 20% penalty for negligence and substantial understatement of taxes.
The judge has now given both parties until March 16 to submit briefs on the issue. The “sham partnerships” known as Chemtech I and Chemtech II were promoted by Goldman Sachs Group Inc. and the law firm King & Spalding. Chemtech I sought deductions for royalty costs tied to the use of 73 Dow patents; Chemtech II sought deductions tied to the depreciation of a $715 million chemical plant in Baton Rouge that had a tax basis of just $18.5 million.
All told, the company had claimed more than $1 billion in tax deductions involving the partnerships that have since been paid and accrued. Read more about the case in a July 2013 story in Business Report.
—Penny Font
