Federal Case Study

Wells Fargo

Wells Fargo is a multinational financial services company with offices in 35 countries and servicing over 70 million customers. According to Forbes, it is the 7th largest company in the world and the 2nd largest bank in the world, as measured by market capitalization. They have a highly trained and efficient tax department that is recognized by many as one of the best tax teams in the country.
Corporations are required to pay a higher rate of interest on tax underpayments than they receive from the government on tax overpayments. The interest-netting provisions of Section 6621(d) are intended to eliminate the “interest rate differential”. Interest netting is applicable to be applied across different types of tax, (i.e. exise tax, income tax, employment taxes, etc.) but the netting of the overpayments and underpayments must be applied using the “same taxpayer. Beginning in 2010 Wells Fargo felt it was rightfully entitled to eliminate the “interest rate differential” by netting the underpayments and overpayments of banking groups with different TINs that it had acquired in past years.
Wells Fargo decided to initiate a claim for refund, based on their belief that the definition of “same taxpayer” should be expanded. They anticipated that they would ultimately have to litigate the matter to recover some of the overpaid interest. As part of the preparation for the case, they retained a former member of the IRS Complex Interest Team, based in Ogden, Utah, Robert Ellis (Rob Ellis), now an Ashland technical team member, to prepare the complex interest calculations for all of the tax periods for the many banking groups Wells Fargo had acquired. Transcripts were ordered, and a very comprehensive analysis was done for each of the entities. Using this information, Wells Fargo filed a claim a refund of interest. The IRS rejected the claim and Wells Fargo filed a lawsuit in the US Court of Claims.
The case of Wells Fargo & Company v. United States, No. 11-8081 (June 27, 2014) was decided in 2014 by the US Court of Claims in Wells Fargo’s favor. The IRS appealed to the US Court of Appeals. The decision was rendered by the Court of Appeals in 2016 as a partial win for Wells Fargo, expanding the definition of “same taxpayer”. The final settlement negotiations are continuing and should be finalized in the near future. Rob Ellis and the Ashland interest team continue to provide interest calculation support to Wells Fargo and their outside counsel during ongoing final settlement negotiations. Rob Ellis and the Ashland interest team have technical abilities that are unmatched in the tax industry. Ashland provides interest computation services in support of ongoing litigation or pending negotiations with the Internal Revenue Service. Let us help you evaluate the possible interest overpayments that may be available to be claimed by your company.