CONTAINER LESSORS, IRS AT ODDS OVER INVESTMENT TAX CREDIT

CONTAINER LESSORS, IRS AT ODDS OVER INVESTMENT TAX CREDIT

The container-leasing industry is locked in a dispute with the Treasury and Internal Revenue Service over whether the now-expired investment tax credit was available to leasing companies for investing in marine containers.

A related issue may involve whether they were allowed to depreciate those containers under the more rapid write-off schedule that applied prior to 1986 when both that schedule and the 10 percent credit were repealed.The key point is whether the IRS and Treasury will regard the credit and write-off provisions as applicable to marine containers.

Dale W. Wickham, an attorney here representing some eight of the major leasing companies, hopes this issue can be resolved within the next month or two.

While he said it was impossible to estimate the potential in back taxes the companies may have to pay if the ruling sought goes against them, he did indicate he thought it could be enormous for the industry.

Mr. Wickham declined to identify the companies involved, in part because some haven't been singled out for IRS audits of past tax years yet, but nonetheless have an interest in the outcome. He did say that all the big ones are in it.

The industry is disturbed because until the last few years the expanding ranks of container lessors had been allowed to take the credit, and the accelerated write-off.

Although the credit was repealed, reinstated and repealed again in the meantime, the provisions in the tax code that had permitted the investment in marine containers to be used for tax credit - just as ships and aircraft used in foreign commerce - continued unchanged, Mr. Wickham said.

More recently, the IRS has moved to deny the credit to some companies, and a uniform national policy is lacking.

In April 1984, the IRS's Manhattan (New York) District decided that to claim the investment tax credit for marine containers companies must establish that they are used in the foreign or domestic commerce of the United States.

Companies leasing their containers are hard-pressed to demonstrate precisely where their boxes are used or how frequently they might move between this country and overseas points.

The ruling, which opened the entire subject, affected only the company or companies filing in that district. The industry hopes that any final nationwide rule is not retroactive.

The industry does want a national rule on the expired credit because, given the lag time on IRS audits, the potential liability for back taxes could be sizable.

Part of the problem in gauging the possible dollar amount at stake, Mr. Wickham said, is that not all the leasing companies have been the object of adverse rulings.

But if a national policy that deprives them of the use of the credit prior to 1986 is established, they, too, might be assessed.

Use of the accelerated depreciation comes under the same eligibility ruling as the investment tax credit.

The IRS declined to discuss the case, other than to confirm it was considering resolution of the dispute. Treasury, of which IRS is a key agency, must approve such rulings before they can be enforced.