The 10th Circuit Court of Appeals held in Rodriguez v. FDIC
(No.17-1281) that a subsidiary corporation was entitled to a refund from the IRS pursuant to an agreement between the corporation and the common parent of its consolidated group.
, United Western Bank (UWB) was a federally chartered savings and loan institution. UWB was the principal subsidiary of United Western Bancorp (UWBI), a thrift holding company. UWBI was the common parent of a consolidated group that included UWB. For the taxable year 2008, UWB generated $34,397,709 of taxable income. In 2010, it incurred at least $35,351,690 of losses, which lead to UWBI filing for a refund to recover $4,846,625 of taxes paid on its 2008 tax return.
Prior to UWBI receiving the refund, the Office of Thrift Supervision closed UWB and appointed the FDIC as receiver. UWBI subsequently filed a petition for bankruptcy. The FDIC filed a claim in UWBI’s bankruptcy case that it was entitled to the federal tax refund due from the IRS. However, the trustee of UWBI’s bankruptcy filed a complaint against the FDIC that the tax refund belonged to UWBI.
The court decided the case based on the tax allocation agreement between UWBI and UWB. The agreement provided generally that UWB and other UWBI affiliates were required to pay UWBI an amount equal to their respective federal income tax liability that such affiliate would pay had it filed a separate return. Conversely, UWBI was required to pay each regulated affiliate an amount equal to the refund that it would have received had it not joined in the consolidated return of UWBI.
The court ultimately found that the tax allocation agreement between UWBI and UWB was ambiguous as to whether UWBI should be regarded as an agent for UWB with respect to the IRS, and thus, the refund belonged to UWB, or whether there was a debtor-creditor relationship between UWBI and the UWB with respect to the tax allocation agreement, and thus, the refund belonged to UWBI and UWB merely held a receivable from UWBI as an unsecured creditor.
The court decided that the refund belonged to UWB. It based its decision on precedent established in a prior case that a tax refund resulting solely from offsetting the losses of one member of a consolidated group against the income of that same member should inure the benefit of that member. See In re Bob Richards Chrysler-Plymouth Corp., Inc
., 473 F.2d 262, 265 (9th Cir. 19973). The court also noted that the tax allocation agreement had a provision that provided any ambiguity should be resolved in favor of any insured depository institution.
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