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U.S. Tax Court Judge David Gustafson ruled at a court hearing
that a partnership led by Boston-based Fidelity was bonafide in
its pursuit of generating tax credits from the production of
treated coal.
The case has been closely watched by Wall Street firms and other
corporations because the production of chemically treated, or
refined, coal generates more than $1 billion a year in tax
credits.[nL2N259128]
At the hearing Gustafson said he disagreed with IRS arguments
that Fidelity and its partners faced insignificant downside risk
on their investment in refined coal facilities. The judge said
the partnership endured prolonged facility shutdowns due to
permitting problems and environmental contamination, for
example.
Fidelity had invested in the production of refined coal at three
South Carolina power plants to qualify for tax credits that
could total up to $330 million over 10 years. The coal is
treated with chemicals to cut mercury and smog pollution.
Fidelity's partners included insurance broker Arthur J.
Gallagher & Co and Schneider Electric SE.
The IRS had disallowed millions of dollars in tax credits and
claimed losses reported by a Fidelity-led partnership in 2011
and 2012. The IRS said the partnership was only created to
"facilitate the prohibited transaction of monetizing refined
coal tax credits."
(Reporting by Tim McLaughlin in Boston; Editing by Leslie Adler)
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