HENRICO COUNTY (dpa-AFX) - Altria Group Inc. (MO) announced that it has executed a Closing Agreement with the Internal Revenue Service or IRS that, subject to court approval, resolves the federal income tax treatment for all prior tax years of certain leveraged lease transactions entered into by Altria's wholly-owned subsidiary, Philip Morris Capital Corporation or PMCC. The transactions was referred to by the IRS as lease-in/lease-out or LILO and sale-in/lease-out or SILO transactions.
Altria said it expects to pay approximately $500 million in federal and state income taxes and related estimated interest as a result of the Agreement. Of this amount, Altria expects to pay approximately $450 million in federal income taxes and related estimated interest with respect to the 2000 through 2010 tax years by the end of the second quarter of 2012.
The company said that the payment is net of federal income taxes that Altria paid on gains associated with sales of assets leased in the LILO and SILO transactions from January 1, 2008 through December 31, 2011. Of the $500 million, Altria also expects to pay approximately $50 million of state taxes and related estimated interest.
As per the Agreement, the IRS will not assess against Altria any additional taxes or any penalties in any open tax year through the 2010 tax year related to the LILO and SILO transactions; nor will the IRS impose penalties with respect to any prior tax years.
Altria noted that it also has agreed to dismiss, with prejudice, the pending litigation in federal court related to the tax treatment of the LILO and SILO transactions and to relinquish its right to seek refunds for federal taxes and interest previously paid.
As a result of differences between the assumptions and the terms of the Agreement, Altria expects to record a one-time net earnings benefit of approximately $68 million or $0.03 per share to its 2012 second-quarter reported earnings primarily due to lower than estimated interest expense on tax underpayments.
This estimated $0.03 per share benefit results in an increase to Altria's 2012 full-year reported earnings per share guidance to a range of $2.28 to $2.34 from the prior range of $2.25 to $2.31.
Altria reaffirmed its 2012 full-year guidance for adjusted earnings per share to be in the range of $2.17 to $2.23, representing a growth rate of 6% to 9% from an adjusted earnings per share base of $2.05 per share in 2011. Analysts polled by Thomson Reuters expect the company to report earnings of $2.21 per share for fiscal 2012. Analysts' estimates typically exclude special items.
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