WASHINGTON — In a little noted opinion that could have substantial implications for banks, the U.S. Tax Court recently ruled against the Internal Revenue Service, determining that a bank does not lose its deduction for interest expenses due to the tax-exempt bonds held by its subsidiary investment company.

“It’s a very significant ruling for bank holding companies and banks with affiliates, because this opinion basically helps them out on an issue that concerned them,” Tom Vander Molen, a tax attorney with Dorsey & Whitney LLP in Minneapolis, said about the Nov. 1 ruling and its effect on the growing number of banks that have set up such subsidiaries. “They’ll certainly feel more comfortable doing what they’re doing.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.