Another company claimed investment credits on new equipment at its “world headquarters.”

Scott Paper Company spent money in the late 1980’s on improvements, equipment and furnishings at its headquarters in Philadelphia. In 1986, Congress repealed an investment tax credit for such spending on new equipment, but it added what it thought was a “rifle shot” transition rule to allow Merrill Lynch to complete work on its world headquarters and still claim investment credits after the repeal.

Unfortunately for Congress, the transition rule was vaguely worded. Other companies have claimed the same relief.

There is a split among US appeals courts about whether others can qualify. The 7th circuit court of appeals said in Kjellstrom that the transition rule covers only Merrill Lynch, notwithstanding the poor drafting. However, the 9th circuit court of appeals said in Airborne that the provision applies to anyone who can satisfy its terms.

A federal district court in Wisconsin said in March that Scott Paper qualifies potentially. The court denied a motion by the government for a judgment in its favor without the need to go to trial. The case is interesting because the Wisconsin court is in the 7th circuit.