When Internal Revenue Service commissioner Roscoe L. Egger Jr. was asked recently to name four factors that would increase the chances of a tax audit he replied, "tax shelter, tax shelter, tax shelter, tax shelter."
Undaunted, a new Denver-based firm, Planned Management Co., is setting out to help tax-shelter sponsors reach the market through a new distribution channel -- banks. The plan would take advantage of the stodgy but prudent image of banks to help allay investors' fears. At the same time, many banks are looking for ways to fill the gaps in the lines of investment products they offer their customers, and they see a big gap in tax shelters.
"We don't want to lose control of the customer," confided a trust official at a major bank considering the PMC service. "Our customers like one-stop shopping; we don't want to see them go across the street to Merrill Lynch or E. F. Hutton."
PMC president Jo Ann A. Scoggin says the firm plans to serve as an underwriter for limited partnerships in oil and gas, cable TV, research and development, equipment leasing, and real estate. If a partnership offering passes the due diligence review by PMC's accountants, lawyers, and industry experts, assuring that the prospectus is accurate, it will go on an approved list, which will be circulated to the banks. The banks -- which will be paying as much as $28,000 a year for an annual subscription to PMC's service -- can then make the partnerships available to their clients as part of financial-planning packages or as separate investments.
In addition to the fee income from banks and reimbursements from the program sponsors for the cost of due diligence research, PMC gets a 2% share of each partnership that it successfully underwrites. That has been an important point in selling the program to skeptical bank trust departments, since it means PMC is on the same side of the deal as the bank's customers.
The program is just getting started, with the first list of approved deals due out early this year. But Scoggin has already signed up U.S. National Bank of Oregon ($6.5 billion in assets), First Interstate Bank ($40 billion), and Marine Bank ($2.5 billion). Other banks are presently studying the plan.