Request to reconsider $1bn tax deduction dismissed and penalties upheld
The US Supreme Court has rejected Dow Chemical’s efforts to resuscitate a claim to more than $1 billion in tax deductions relating to partnerships set up in the late 1990s and early 2000s. Lower courts had already determined that these partnerships, known as Chemtech I and Chemtech II, were primarily intended to evade tax, without legitimate business purposes.
The Supreme Court concurred with the appeals court that Dow is not entitled to these tax benefits, and upheld a 20% penalty for negligence and substantial understatement of taxes.
Dow said it is ‘disappointed’ that the Supreme Court has declined to hear its appeal. The company maintains that the taxes at issue were wrongly assessed by the US Internal Revenue Service (IRS). However, Dow states that there is no financial impact from the decision because it has already paid the applicable taxes, penalties and interest. The company says it will now work with the IRS to finalise the adjustments to its tax returns and ultimately will receive a refund.