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Philip Marris Agrees to Pay $500MM to Resolve LILO and SILO Leasing Transactions

Philip Marris Agrees to Pay $500MM to Resolve LILO and SILO Leasing Transactions

         RICHMOND, VA – May 22, 2012 – Altria Group, Inc. (Altria) (NYSE: MO) today announced that it has executed a Closing Agreement (Agreement) with the Internal Revenue Service (IRS) that, subject to court approval, resolves the federal income tax treatment for all prior tax years of certain leveraged lease transactions (referred to by the IRS as lease-in/lease-out (LILO) and sale-in/lease-out (SILO) transactions) entered into by Altria’s wholly-owned subsidiary, Philip Morris Capital Corporation (PMCC).

Altria expects to pay approximately $500 million in federal and state income taxes and related estimated interest as a result of the Agreement. Of this amount, Altria expects to pay approximately $450 million in federal income taxes and related estimated interest with respect to the 2000 through 2010 tax years by the end of the second quarter of 2012. The payment is net of federal income taxes that Altria paid on gains associated with sales of assets leased in the LILO and SILO transactions from January 1, 2008 through December 31, 2011. Of the $500 million, Altria also expects to pay approximately $50 million of state taxes and related estimated interest. The tax component of these payments represents an acceleration of federal and state income taxes that Altria would have otherwise paid over the lease terms of the LILO and SILO transactions. 
Pursuant to the Agreement, the IRS will not assess against Altria any additional taxes or any penalties in any open tax year through the 2010 tax year related to the LILO and SILO transactions; nor will the IRS impose penalties with respect to any prior tax years.
Altria also has agreed to dismiss, with prejudice, the pending litigation in federal court related to the tax treatment of the LILO and SILO transactions and to relinquish its right to seek refunds for federal taxes and interest previously paid.

Read more at: Tax Times blog

 
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