Bailout Beneficiary Wells Fargo Loses Transit Tax-Shelter Lawsuit

The tax tricks known as SILOs
— in which major banks snapped up rail cars and other pieces of public
infrastructure from cash-strapped localities, only to lease them back
and claim a tax write-off — has prompted an outcry from the Hill as Wall Street’s biggest players invoked obscure claims to wring money from local transit agencies.

TR1_100509.jpg(Photo: NJBIZ)

formally banned SILOs (short for "sale in, lease outs") in 2004, but
some banks are so intent protecting their deals that a court battle is
needed to settle the cases.

And in one such dispute, Wells Fargo has lost a $115 million SILO lawsuit against the same federal government that gave the bank a $25 billion bailout last year. From the opinion released by federal claims court Judge Thomas Wheeler:

Although well disguised in a sea of paper and complexity,
the SILO transactions essentially amount to Wells Fargo’s
purchase of tax benefits for a fee from a tax-exempt entity that
cannot use the deductions.

Wells Fargo had taken on the government over a passel of 26 SILOs,
including several signed with transit agencies in New Jersey,
Washington D.C., California, and Harris County, Texas. A Belgian
telecom company was also party to one of the tax shelters at issue in
the suit.

some of the deals, beleaguered insurance company AIG had agreed to
underwrite the SILOs. The precipitous fall of AIG’s credit rating last
year as it headed for an $80 billion bailout triggered some of the major banks’ claims to SILO payments from transit agencies.

lawmakers continue to weigh legislation that would slap a 100 percent
excise tax on banks’ SILO proceeds, however, it’s important to note
that local transit agencies weren’t necessarily innocent victims in
some of the deals. When Congress moved to outlaw SILOs four years ago,
transit officials were seen lobbying alongside banks to preserve the shelters.

former lawyer for Caltrans, California’s state DOT, even bragged last
fall that he had put one over on Wells Fargo by structuring the deal to
shield his employers from liability. "I sold [the bank] the Brooklyn
Bridge," he told BusinessWeek.

A Wells Fargo spokeswoman told Bloomberg today that the bank is weighing whether to pursue an appeal.


VTA Sales Tax With Massive Highway Expansion Program on November Ballot

The Santa Clara Valley Transportation Authority (VTA)’s half-cent “Envision Silicon Valley” transportation sales tax is now headed to the November 8 general election ballot in the county, after receiving the unanimous approval of the transit agency’s Board of Directors on June 2. The new sales tax would fund a massive highway expansion program, spending $1.85 billion […]

Supes Avalos, Wiener Clash on Equitable Spending Strategies for Muni

Supervisors John Avalos and Scott Wiener are sparring over how new revenue for transit should be spent to benefit the Muni riders who need it most. With tax measures proposed for the 2014 ballot that could significantly increase transportation funds, Avalos introduced a charter amendment yesterday that would “require the city to prioritize investments to address existing […]

Surprise Vote by Pro-Transit Supes Against Vehicle License Fee Measure

Photo: Bringo. The Board of Supervisors, acting as directors of the San Francisco County Transportation Authority (SFCTA), voted 8-3 yesterday to put a $10 vehicle registration fee increase on the November ballot, a measure that would raise $5 million yearly for congestion mitigation, street and road resurfacing, pedestrian safety and improved transit. The fee increase […]