1st Circ. Reverses Santander's $234M Foreign Tax Refund Win

Law360, New York (December 16, 2016, 9:54 PM EST) -- The First Circuit overturned an earlier $234 million victory for Santander Holdings USA Inc. after ruling on Friday that an internal securities transaction the bank had engaged in lacked economic substance and does not qualify for foreign tax credits.

A three-judge panel unanimously held that the structured trust advantaged repackaged securities, or STARS, transactions set up by Sovereign Bancorp Inc., Santander's predecessor, had only tax-avoidance features with no bona fide business purpose or real economic risks.

"The STARS Trust transaction itself does not have a reasonable prospect of creating a profit without considering the foreign tax credits, and, as a result,...

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