An Ongoing Tax Refund Saga For Bank Holding Companies
Law360, New York ( March 18, 2015, 10:14 AM EDT) -- The Third Circuit recently weighed into the ongoing debate over the ownership of tax refunds generated by a failed bank in Federal Deposit Insurance Corp. receivership but paid to a failed bank holding company due to the existence of a tax sharing agreement (TSA) between the bank and the holding company. In Cantor v. FDIC (In re Downey Financial Corp.), No. 14-1586 (3d Cir. Jan. 26, 2015), the Third Circuit affirmed a bankruptcy court decision finding that a creditor-debtor relationship existed between the bank holding company, Downey Financial Corp. (DFC), and the failed bank, Downey Savings and Loan FA (Downey Bank). As a result, the tax refunds were found to be property of DFC's bankruptcy estate. The Downey decision furthers a division in the circuits regarding this issue, which will likely need to be resolved by the U.S. Supreme Court....
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