KPMG LLP is embroiled in yet another tax-shelter controversy.
The Internal Revenue Service has been looking into a tax shelter called Insureco that was sold by KPMG in the late 1990s, reported The New York Times. The newspaper citing papers filed by the Justice Department in a dispute involving Yum Brands, which is known for its Pizza Hut, Taco Bell, and KFC chains.
According to the Times, former executives of the accounting firm asserted that Insureco was marketed and promoted in the late 1990s and early 2000. A KPMG spokesman didn’t offer comment to the paper.
Regarding the specific transaction being examined by the IRS, in late 1999 Yum, then known as Tricon Global Restaurants, reportedly sold a small stake in its wholly owned insurer, Glenharney, to Credit Suisse First Boston for $8 million, including fees. Yum reported a $112.5 million tax loss from the transaction because Glenharney held offsetting liabilities in the form of unpaid claims, according to the paper.
The IRS alleged that Yum effectively bought an Insureco shelter, the Times explained. The paper added that according to the IRS, the sale served no legitimate business purpose and functioned solely to generate tax losses for Yum, to offset capital gains.
In a statement, Yum told the Times it had done nothing improper with Glenharney. In its court filing, the company reportedly maintained that Glenharney was created to handle its own insurance needs and that any tax-related benefits were coincidental.
In August KPMG reached a deferred-prosecution agreement with federal regulators under which it will pay $456 million stemming from the firm’s sale of questionable tax shelters.