53.7 F
San Diego
Thursday, Mar 28, 2024
-Advertisement-

Aerospace Goodrich Battles IRS over $85.3 million tax ruling



Aerospace: Firm Appeals Decision on Work Done By Rohr Before Takeover

WASHINGTON , Chula Vista-based BF Goodrich Aerospace Aerostructures Group, formerly Rohr, Inc., has found itself with an $85.3 million problem.

It surfaced with Internal Revenue Service demands that the company and a Guam-based subsidiary pay that much in additional taxes for 1986-89, when Rohr was still an independent company.

The companies are not alone. BF Goodrich Co. of Charlotte, N.C., which absorbed Rohr in a $1.3 billion takeover four years ago, and its foreign sales subsidiary, have also been named in carbon copy cases brought by the IRS.

All four filed petitions asking the U.S. Tax Court here to overturn the IRS ruling. The dispute centers around what was then Rohr’s manufacture of jet aircraft engine covers (nacelles) and pylons that attach the engines to wings.

The companies complained the IRS erred by denying the division’s deductions for pre-production costs, depreciation for special tooling required to make the nacelles and pylons, losses, research expenses and commissions on foreign sales.

An Aerostructures spokeswoman referred questions about the case to Goodrich officials. An IRS spokesman said the agency does not comment on pending tax cases.

“The petition follows extensive, good-faith negotiations with the Internal Revenue Service which failed to resolve all issues,” a statement released by Goodrich attorneys said. “BF Goodrich believes the company will prevail on the merits of the case.”

No Impact On Company

The statement emphasized Goodrich does not believe the case would impact the company’s tax rate. The statement accused the IRS of erring in the way it applies tax accounting standards and the tax law in targeting Rohr for the additional taxes.

“These cases go back quite a bit,” said Kevin Ramundo, vice president of communications for Goodrich. “These issues pre-date our takeover of the company … We think our point of view has merit, and we intend to press our point of view of the case.”

The petitions challenge IRS identical demands for $84.9 million in back taxes for the four-year period, and the ones for Guam-based Rohr Foreign Sales and Goodrich’s foreign sales subsidiary dispute orders for $396,819 in additional 1989 taxes from each.

Goodrich began making chemicals and tires 130 years ago, evolving into a $4.5 billion-a-year defense contractor. The petition for Rohr Foreign Sales, which was formed in 1984, argued the IRS erroneously denied the company deductions for $1.16 million in commissions it paid on foreign sales.

“This is a very technical case having to do with a number of issues,” Ramundo said in a telephone interview. “The large issue is over when to take deductions for pre-production costs as well as depreciation. When is it appropriate to deduct pre-production expenses?”

Company’s Arguments

The company petitions argued that IRS made numerous errors, including:

– Denying $72.9 million in deductions for depreciation of special-purpose tooling.

– Ruling that instead of multiple-contracts, Rohr had a single contract with International Aero Engines for the manufacture of nacelles for the jet engines on the Airbus 320, increasing Rohr’s taxable income by almost $134 million.

– Determining that Rohr had one instead of several contracts with Valsan Partners Limited Partnership to build nacelles and struts for Pratt & Whitney jet engines used on Boeing 727-200 aircraft, increasing taxable income by $12.5 million.

– Finding that Rohr could not take $31.5 million in depreciation deductions on long-term contracts.

– Not allowing Rohr to deduct a $28.7 million loss from 1987 in the 1988 tax year.

– Failing to allow $15.9 million in tax credits for research and development for the four-year period.

“We’re a pretty substantial company,” Ramundo said. “Even if we were unsuccessful in our point of view, it would not effect the future of the company.”

But, he stressed, he did not expect that to happen.

The IRS notices of deficiency were issued Oct. 12, and the agency has 60 days to respond to the Jan. 10 petitions. If the IRS and the companies fail to negotiate a settlement, the cases could go to trial before a tax court judge.

Moskal is a freelance journalist based in Washington, D.C.

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-