Banks Owe Taxes Linked to REIT Loophole

Port Financial Corp. and Brookline Bancorp are negotiating with the Massachusetts Department of Revenue over how to pay back taxes they became liable for in March in connection with the closing of a loophole related to real estate investment trusts, the companies have announced.A state law that closed a popular tax loophole -- under which banks could receive tax-free income through wholly owned REIT subsidiaries -- also made banks that had taken advantage of the loophole liable for unpaid taxes dating to Dec. 31, 1999. The MDOR said the roughly 60 banks that did so got out of paying $160 million in taxes. Both Port Financial and Brookline said no final deal had been reached, though Port Financial said it expected to settle the matter by the end of the month.