Maine’s TD Banknorth owes $5 million in Vermont taxes

MONTPELIER, Vt. – A Maine financial services company owes the state more than $5 million in bank franchise taxes and penalties, a Washington Superior Court judge has ruled.

Judge Mary Miles Teachout agreed with the Department of Taxes, which said TD Banknorth Inc. had set up investment and holding companies for three Vermont banks it had acquired so that it would not have to pay Vermont’s bank franchise tax.

“The reorganizations were an elaborate way of assigning the Vermont banks’ income to the investment companies exclusively for Vermont income tax purposes, not to create new viable businesses in the Banknorth family of businesses,” Teachout wrote in her decision, released Wednesday.

“The subsidiaries had no office space, no real property, no tangible assets, no employees and no payroll,” Teachout noted. “They also had no bank accounts. Payables and receivables were simply reflected in various book entries.”

Tax Commissioner Tom Pelham praised the judge’s ruling. “We expect corporate citizens to fairly pay the taxes owed so other people don’t have to pick up the burden.”

A spokesman for TD Banknorth said the investment companies were created in accordance with Vermont law.

“We believe then as we do [now] that we complied fully with Vermont law and are reviewing the decision and considering whether to file an appeal,” said Jeff Nathanson.

TD Banknorth, based in Portland, Maine, now has $40 billion in assets with more than 600 bank branches in Maine, Connecticut, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and Vermont.