UPS Takes Write-off In Tax Case

United Parcel Service said it will take a $1.44 billion charge against earnings in the quarter ended June 30, basically setting aside money to pay back taxes, penalties and interest in response to a federal tax court ruling against the company.

As a result of the write-off, UPS said it will post an $854 million net loss for the quarter instead of the previously announced net income of $588 million. The non-cash charge does not affect revenue or operating profits, which were $6.56 billion and $1 billion, respectively, in the three-month period.

On Aug. 9, Judge Robert P. Ruwe held UPS liable for taxes on revenue generated by a Bermuda company set up by the Atlanta-based package carrier in 1983 to provide excess value insurance to package shippers.

Although the ruling applied only to tax years 1983 and 1984, the government has made similar claims for the years 1985 through 1990, and UPS says it expects the Internal Revenue Service to raise similar questions about tax issues for years from 1990 to 1999.

UPS is considering an appeal of the U.S. Tax Court decision, but also said it is in the process of determining a new arrangement for providing excess value package insurance for its customers through a subsidiary.

The revised arrangement should eliminate future claims by tax authorities, the company said.