Feb. 26 (Bloomberg) -- BB&T Corp., suing to recoup $892 million in tax payments, said it will take a $281 million charge this quarter after another bank lost a similar court fight.
The charge will boost BB&T’s reserves in case it doesn’t prevail in its own lawsuit, according to a statement today from the Winston-Salem, North Carolina-based lender. The move follows a legal setback for Bank of New York Mellon Corp., which said this month it will take an $850 million charge after a U.S. tax court blocked it from claiming foreign-tax credits.
“Management recorded the charge as a result of its consideration of this adverse opinion,” BB&T said. Still, the firm “has confidence in its position in the dispute because, among other reasons, BB&T will raise arguments and issues in its case that were not considered by the tax court.”
BB&T is seeking to recover payments made after the Internal Revenue Service objected to the bank’s use of foreign tax credits and other deductions from 2002 to 2007. The lender initially complied with the 2010 IRS demand for $892 million in taxes, penalties and interest. The bank then sought to recover money in court and booked some of the anticipated proceeds as a receivable, according to a November filing, meaning the bank expects to recoup the money.
As the litigation continues, it’s possible BB&T will cut tax reserves by as much as $496 million or increase them by as much as $328 million, according to today’s statement.
The IRS’s demand for $892 million represents about 44 percent of BB&T’s reported annual profit of $2.03 billion in 2012. The stock gained 3 percent in the past 12 months, trailing the 24 percent gain the 24-company KBW Bank Index.
To contact the reporter on this story: Laura Marcinek in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: David Scheer at email@example.com.