About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 Joseph Henchman, Transit Agencies in Bind due to SILO Deals and AIG Collapse 1 (2008)

handle is hein.taxfoundation/ffbfdxz0001 and id is 1 raw text is: FISCAL FACT October 2008 No. 153 Transit Agencies in Bind Due to SILO Deals and AIG Collapse By Joseph Henchman Federal Officials Encouraged Leasebacks, Then Made Them Worthless for Creditors Introduction Major newspapers are reporting on a financing crisis that is hitting many transit systems in the United States late this month. The situation is a result of (1) a series of leaseback transactions these agencies conducted which included heavy termination penalties, (2) federal policy first to encourage and then to discourage them, and (3) the collapse of insurer AIG. As a result, approximately 30 agencies nationwide may face serious financial shortfalls absent action by the U.S. Treasury Department.' On October 29, 2008, the Washington Metropolitan Area Transit Authority (WMATA) sought an injunction in U.S. District Court against KBG Group, a Belgian bank that is demanding $43 million in termination fees by October 31.2 Metro warned that unless the injunction was granted, the agency might be forced into default. Transit Agencies Used Leaseback Transactions to Supplement Funding When a private company builds an asset, they are permitted under federal income tax law to deduct from their taxes the depreciation (wearing out) of the asset over time, reducing their overall tax bill. Cities and transit agencies also build and own assets, but because they are governmental instrumentalities, they are exempt from federal income taxes. Given that they don't pay taxes, these reductions in taxes owed are worthless to them. U 1AX FOUNDATION

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most