The D.C. Metro accident that killed nine riders this week has renewed calls for rail safety upgrades and reminders that car travel remains far riskier than transit. But the crash is also shedding light on a problem that goes beyond Washington: tax shelter deals between banks and struggling transit agencies -- deals that were given a retroactive pass by Congress even though the IRS considers them illegal.
The tax shelters at issue are called "sale in, lease out" deals, also known as SILOs. Starting in the 1980s, local transit agencies began selling rail cars and other equipment to Wall Street firms, which would then turn around and lease the goods back to the agencies.
Why would either side want to get into such arrangements? Sarah Lawsky, an associate professor at George Washington University Law School, has explained the situation in detail. But the short answer is that banks got tax write-offs for their newly leased transit equipment, while local agencies got a cash benefit for giving away tax deductions they could not use.
Thanks to Aaron Naparstek