New York (June 17, 2004) -- A KPMG tax shelter declared abusive by the Internal Revenue Service last year generated at least $1.7 billion in tax savings for more than two dozen companies, according to published reports.
Internal documents from KPMG LLP, which marketed the shelter, list several large, well-known companies as using it, including Delta Air Lines, Whirlpool Corp., Clear Channel Communications Inc., WorldCom Inc., Tenet Healthcare Corp. and the U.S. units of AstraZeneca PLC and Fresenius Medical Care AG, The Wall Street Journal reported.
According to the report, Qwest Communications International Inc., Washington Mutual Inc., Global Crossing Ltd., Lennar Corp. and the U.S. units of Cemex SA and Siemens AG signed agreements to buy the shelter, but the Journal said that those companies wouldn't say whether they implemented it.
The shelter, one of several under investigation by the government, was sold under the name "Contested Liability Acceleration Strategy," or CLAS. A July 2002 sworn statement filed by an IRS agent with a federal district court in Washington showed that 29 unnamed corporations bought CLAS from KPMG, reaping at least $1.7 billion in tax savings, making CLAS more costly to the Treasury than any of the four KPMG tax shelters that were the subject of last November's Senate subcommittee hearings, the Journal said. The IRS declared the shelter to be abusive in November 2003, according to the report.
"As a matter of policy, KPMG provides tax services to audit clients as permitted by the SEC's auditor independence rules and consistent with all applicable professional and regulatory rules as well as the client's own policies," the firm said in a statement. "KPMG does not discuss specific client engagements."
A federal grand jury in Manhattan is investigating KPMG's past tax shelter activities.
Some companies that used the shelter have already resolved IRS tax inquiries by abandoning the strategy, while others said that their discussions with the IRS are continuing, according to the report.
-- WebCPA staff
