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DOJ PREVAILS IN TAX SHELTER CASE INVOLVING DOW CHEMICAL

(The following is a reformatted version of a press release
issued by The U.S. Justice Department and received via
electronic mail. The release was confirmed by the sender.) 
FEBRUARY 27, 2013 
JUSTICE DEPARTMENT PREVAILS IN TAX SHELTER CASE
INVOLVING $1 BILLION IN TAX DEDUCTIONS 
The Dow Chemical Company Had Engaged in Tax Transactions
Designed by Goldman Sachs and Lawyers at King & Spalding 
WASHINGTON - A federal court in Baton Rouge, La., on Monday
rejected two tax shelter transactions entered into by The Dow
Chemical Company that purported to create approximately $1
billion in phony tax deductions.  In addition to rejecting the
tax benefits from the shelter transactions, Chief Judge Brian A.
Jackson also imposed penalties. 
As stated in the opinion, the schemes were created by Goldman
Sachs and the law firm of King & Spalding, and involved creating
a partnership that Dow operated out of its European headquarters
in Switzerland.  Chief Judge Jackson wrote in his 74-page
opinion that the government was correct to reject the artificial
tax benefits created by these schemes that were designed to
exploit perceived weaknesses in the tax code and not designed
for legitimate business reasons.  Judge Jackson noted that “tax
law deals in economic realities, not legal abstractions.” Judge
Jackson also wrote that penalties were appropriate because any
reasonable and prudent person should have known that the
artificial tax benefits created by the scheme were “too good to
be true.”  Judge Jackson noted in his opinion that “Dow viewed
its tax department as a profit center,” and had at its disposal
“numerous lawyers and tax professionals.” 
Assistant Attorney General Kathryn Keneally of the Justice
Department’s Tax Division hailed the Louisiana court’s opinion.
“It is offensive to all taxpayers who pay their fair share when
our largest corporations believe that they can claim hundreds of
millions of dollars in tax deductions that are manufactured by
abusive tax schemes,” said Keneally.  Keneally thanked the
agents and attorneys at the Internal Revenue Service who
assisted the Justice Department, as well as Tax Division trial
attorneys, Thomas Sawyer, Robert Welsh, Thomas Koelbl and Philip
Schreiber. 
(202) 514-2007
WWW.JUSTICE.GOV
TTY (866) 544-5309 
(bjh) NY 
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