19 Jun 2009 @ 11:17 PM 
 

Sovereign sues IRS over tax penalties

 

Sovereign Bancorp Inc. is suing the IRS to recover $235.2 million in taxes and penalties it says it was “erroneously and illegally’’ required to pay on a loan arrangement with Barclays Bank of England, according to a lawsuit filed Wednesday in US District Court in Boston.

The tax dispute arose from $1.2 billion in financing Sovereign received in 2003 and 2004 from Barclays that was meant to produce tax benefits for both banks.

Sovereign borrowed the funds from the British institution at a lower interest rate than it could get at home, the bank said in the lawsuit. Sovereign paid British taxes that it incurred and claimed foreign tax credits on US tax filings from 2003 to 2005, to avoid what it called double taxation.

But the IRS disagreed and required Sovereign to pay the taxes. The case is being watched by tax lawyers; Barclays made similar deals with other US banks.

Sovereign, a unit of Spain’s Banco Santander with a large presence in Boston, declined to comment on the lawsuit. An IRS spokeswoman was not immediately available to comment.

Source

Tags Categories: IRS, Tax Penalties Posted By: taxnick
Last Edit: 19 Jun 2009 @ 11 17 PM

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