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IRS Offers Companies A Deal To Quit Tax Sheltering

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IRS Offers Companies A Deal To Quit Tax Sheltering

Business

IRS Offers Companies A Deal To Quit Tax Sheltering

IRS Offers Companies A Deal To Quit Tax Sheltering

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The IRS has been targeting companies that engage in transactions that have no purpose other than to reduce or eliminate tax liabilities. The IRS on Wednesday said it is offering to settle tax shelter abuse cases against about 45 companies, but they have to stop using the shelters by 2010.

RENEE MONTAGNE, host:

The Internal Revenue Service said yesterday it's giving companies who use a certain kind of tax shelter the chance to come clean or pay stiff penalties. These tax shelters have names that sound like something out of a children's book, though U.S. officials say the LILO and SILO transactions have cost the treasury billions of dollars. NPR's Jim Zarroli reports.

JIM ZARROLI: The names are short for lease-in/lease-out and sale-in/lease-out. And here's how the two shelters worked. A company would arrange to buy an asset that pays no taxes, like a water treatment plant in Germany. Then it would lease the plant right back to the original owner. In the process, the tax payer got to take a big deduction on the future depreciation of the plant.

Doug Shulman is the commissioner of the IRS.

Commissioner DOUG SHULMAN (Internal Revenue Service): They really are no more than a set of complicated leasing transactions that are form over substance, that don't have a purpose other than to avoid paying taxes.

ZARROLI: The IRS has recently won three court cases against banks that had used the shelters, but it has some 45 other companies in its sights. They've used these shelters a total of 1,000 times, costing the treasury billions of dollars. The IRS won't give their names, but officials say the companies include some of the biggest in the country.

Yesterday, the IRS said it had sent letters to these companies offering to settle with them, which would reduce the number of cases that go to trial. The companies will get to keep 20 percent of their tax savings if they agree to get out of the shelters by no later than 2010.

Jim Zarroli, NPR News, New York.

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