American Savings
to appeal tax rulingA Department of Taxation
decision could cost the
company $24 million
American Savings Bank could have to pay up to $24 million in back taxes if it is unsuccessful in appealing a ruling by the state Department of Taxation requiring it to pay back taxes.
The Department of Taxation said ASB, whose parent is Hawaiian Electric Industries Inc., must pay the state $14 million in taxes and $3 million in interest for the tax years 1999 through 2001. In addition, ASB said the potential bank tax liability for 2002 and the first quarter of this year is $7 million even though 2002 and 2003 have not yet been assessed.
The State Review Tax Board last week upheld a decision by the Department of Taxation disallowing dividend deductions ASB took to reduce its taxes for tax years 1999 through 2001. ASB claimed the deduction on dividends its received from ASB Realty Corp., an ASB subsidiary that was formed in March 1998. ASB Realty is taxed as a real estate investment trust.
HEI said in a Securities and Exchange Commission filing that it believes its tax position is proper and the payment of the assessed taxes and interest will be treated like a deposit and will not affect earnings.
The bank said it plans to appeal the decision with the Hawaii Tax Appeal Court. In the meantime, however, the bank is making arrangements to pay the $17 million, according to Stan Chong, vice president and general counsel for ASB.