A controversial change in tax rules provides only a "modest" benefit to Wells Fargo & Co. in its deal to buy Wachovia Corp. and would not have a material impact on Wells' results after it closes the deal, it said in a regulatory filing Friday.
Wells is poised to reap significant tax benefits from the deal, but not because of the new rules, it said in the Securities and Exchange Commission filing.
The new tax benefit, created through a ruling by the Internal Revenue Service and the Treasury Department on Sept. 30, was part of a series of moves by the government designed to ease bank acquisitions. The ruling, which lets banks more quickly use the tax losses of banks they acquire, has been criticized as too expensive and beyond the authority of the agencies.
Wells said that in the course of its deliberations on the Wachovia deal, it considered plans that would have involved assistance from the Federal Deposit Insurance Corp. Citigroup Inc. had previously agreed to buy Wachovia with FDIC backing, but Wells eventually won out with a bid that did not include FDIC assistance.
Wells said its initial deliberations were rushed, taking place "during a highly compressed timeframe in the late evening and early morning hours of Sept. 28-29." After more analysis, however, the San Francisco company determined that the ability to use Wachovia's losses in an unassisted transaction made a deal more attractive than it had previously thought.