F&M says: Tax thee, not me

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An accountant writes to tell me about an interesting case discussed at a recent tax law seminar. The case is F&M Bancorporation & Subsidiaries v. Oklahoma Tax Commission, No. TC-99331. Here's how the case was summarized in the seminar materials.

An Oklahoma bank holding company established an investment subsidiary which was organized and had its principal office in another state. The subsidiary presumably had substantial equity capitalization. It acquired mortgage notes receivable that had been generated in Oklahoma by a bank subsidiary of the holding company. The investment subsidiary did not report any income to Oklahoma and the holding company did not report any of the investment subsidiary's income or dividends to Oklahoma.

My correspondent adds:

Further information I gathered would indicate that the subsidiary was established in Delaware.

What the above is saying is F&M generated loans in OK then transferred those assets to a Delaware subsidiary. Then F&M did not pay OK income taxes on the income derived from the loans originated in OK.

The state of OK was a double loser here. The people with the loans more than likely deducted the interest expense on their OK income tax returns and F&M did not report the interest income from the loans on their OK tax return.

Being a fiscal conservative I think that is great, because OK would have just wasted the additional revenues on things like oh say, Great Plains Airlines. But, it kind of makes F&M not look like the greatest corporate citizens...

So far F&M has won the case. The OTC has asked the OK Supreme Court to review the case. They have not accepted nor rejected the case as of yet.

Who is the chairman of F&M Bancorporation? According to the F&M Bank's 2001 annual report, it's Robert E. Lorton, who is also chairman of the F&M Bank and Trust Company, and Chairman and Publisher of World Publishing Company, publisher of the Tulsa Whirled.

I don't take offense that a business would seek ways to minimize its tax liability, but it is amusing that this bank would be trying to avoid Oklahoma state tax, while the editorial board of the Tulsa Whirled, headed by the same man, never met a tax it didn't like, and frequently complains about the constitutional protections that make it hard to raise taxes on Oklahoma businesses and residents.

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» REMEMBERING WHEN WITH F & M BANK from HFFZ.org News

Editorial by John S. Denney, Attorney for HFFZ Remember when F & M Bank's President was extolling the virtues of adding another F & M bank and office building at 71st and Harvard during the zoning protest hearing before the... Read More

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This page contains a single entry by Michael Bates published on December 9, 2004 12:42 AM.

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