Decision Highlights Importance of Tax Sharing Agreements

Aug. 29, 2013

The recent case Zucker v. FDIC highlights the need for carefully crafted corporate tax sharing agreements among members of a consolidated group. BankUnited Financial Corporation (BankUnited Holding) and its subsidiaries filed a consolidated return for federal income tax purposes. BankUnited Holding and its primary subsidiary, BankUnited FSB (BankUnited), executed a typical tax sharing agreement that required the parent company to allocate any refunds among the members of the consolidated return group and pay those amounts to the respective member.

On May 21, 2009, BankUnited was closed by the Office of Thrift Supervision, and BankUnited Holding filed for bankruptcy protection the next day. After filing for bankruptcy, the BankUnited Holding consolidated return group filed net operating loss carrybacks resulting in refunds of approximately $48 million. The bankruptcy trustee for BankUnited Holding argued that it was entitled to the refund claims, while the Federal Deposit Insurance Corporation (FDIC) claimed it was entitled to the refunds as receiver for the bank. The court held that when BankUnited Holding received the refunds from the IRS, it was merely holding the refunds in escrow for BankUnited and the refunds were assets of the FDIC as receiver for BankUnited and not assets of the bankruptcy estate of BankUnited Holding.

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