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Thursday, October 06, 2011 11:03:52 PM
(ii) Tax Refunds
69. The Receiver claims entitlement to possible future Tax Refunds. It asserts that such refunds are the property of the FDIC and not property of the Debtors. Significantly, however, the Receiver offers no legal basis for its alleged entitlement to these funds. That very point was made by Wilmington Trust in its opposition to the Receiver‘s Relief Stay Motion. In that opposition, Wilmington Trust showed that there existed uncertainty both as to whether the Tax Refunds are the property of the Debtors or the property of the Receiver, and the actual dollar amount that may be owing to each. The Receiver grounded its allegations of entitlement to refunds in unspecified and uncertain amounts merely on its stated belief that its own allegations of ownership were true. Wilmington Trust, however, demonstrated that rather than allow the Receiver to avoid a challenge to its claims, ?a more prudent course would be to postpone setoff until such time as the disputes, contingencies, and liquidation issues surrounding the FDIC‘s
claims can be resolved appropriately.? (Wilmington Trust Opposition 11). Again, the moving papers give no indication that that more prudent course was followed.
70. In opposition to the Receiver Claims and Relief Stay Motion, the Debtors established, as the Receiver conceded, that any entitlement to any Tax Refunds was unknown at the time, and the relief sought by the Receiver was premature.
71. Moreover, two recent court decisions have held that tax refunds belong to debtor holding companies rather than the FDIC. In Zucker v. FDIC (In re Netbank, Inc.), No. 08-00346, slip op. (Bankr. M.D. Fl. Sept. 30, 2010), a receiver for a bank asserted its right to a tax refund based on a tax sharing agreement which the debtor holding company opposed. The court concluded that the tax sharing agreement was not specific so as to provide that the debtor held any portion of the tax refund in trust for the bank or restrictions on how the money might be used. Further, under the tax sharing agreement the debtor was obligated to pay the bank an amount of benefits to which the bank would have been entitled based on its tax attributes if the bank had filed separate tax returns. The obligation was not conditioned upon the receipt by the debtor of a refund but rather an independent contractual commitment. Accordingly, the court concluded that based on the debtor-creditor relationship established between the debtor and the bank under the tax sharing agreement, the right to the tax refunds belonged to the debtor rather than the FDIC. See also Team Fin. Inc, et al., v. FDIC (In re Team Fin. Inc., et al.), No. 09-5084, slip op. (Bankr. D. Kan. Apr. 27, 2010) (denying FDIC summary judgment as the tax sharing agreement created ordinary contractual obligations with respect to tax liability and refunds akin to that of a debtor and creditor which allowed claims against the estate but that the tax refunds were property of the debtor holding company‘s estate).
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