Bank Watch

WSJ: More firms using tax-avoidance trick with Charlotte banking roots

Companies use an arcane strategy known as a "Reverse Morris Trust" to avoid the big tax bite that can come with selling off assets like business lines.
Companies use an arcane strategy known as a "Reverse Morris Trust" to avoid the big tax bite that can come with selling off assets like business lines.

American Commercial Bank was long ago deposited into the pages of Charlotte's banking history, and it's likely that some people today have never even heard it.

But a tax-avoidance mechanism American Commercial played a role in creating lives on – and is increasingly being deployed by big U.S. companies, according to The Wall Street Journal.

Companies use the arcane strategy, known as a "Reverse Morris Trust," to avoid the big tax bite that can come with selling off assets like business lines. The mechanism combines a tax-free spinoff with a prearranged merger, and it grew out of some legal wrangling that followed the 1960 merger of American Commercial with Security National Bank of Greensboro, the WSJ reports.

Such deals are enjoying a surge in popularity, as companies, usually pressured by activist hedge funds, concentrate on what they are good at and are eager to rid themselves of businesses that might no longer fit, according to the WSJ.

In a recent example of the strategy being put to use, Dow Chemical Co. announced this past Friday that it plans to merge some businesses with publicly traded Missouri-based Olin Corp.

According to the WSJ, Procter & Gamble Co. also used the mechanism to dispose Crisco shortening, Pringles chips and Folgers coffee in recent years.

Of course, American Commercial Bank’s legacy goes beyond some esoteric tax rules.

By merging with Security National Bank, it created North Carolina National Bank – a predecessor to Charlotte's Bank of America.

Roberts: 704-358-5248;

Twitter: @DeonERoberts

  Comments