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Holding: The bankruptcy court held that the TAA created a debtor-creditor relationship between the debtor bank holding company and its subsidiary bank, meaning the tax refunds were property of the estate when the bank holding company filed its petition. The debtor filed tax returns for a consolidated group consisting of the debtor and its subsidiaries. The debtor's subsidiaries were required to pay the debtor their "stand-alone tax liability" as if a separate return were filed. Tax refunds were to be paid directly to the debtor. Under the TAA, the debtor was to pay to each subsidiary an amount equal to what each subsidiary would have received as a refund had it filed separately. The court reasoned that such language indicated a creditor-debtor relationship because it did not require the debtor to disburse "the actual refund in kind" to the subsidiaries. "Courts across the country have repeatedly held that terms such as 'reimbursement' and 'payment' in a tax sharing agreement evidence a debtor-creditor relationship."
vii. In re Augusta Center, LLC, 491 B.R. 57 (Bankr. S.D. Ga. 2013)
Issue: Whether debtor could use rents from commercial property securing a debt to a lender as cash collateral in operating its business, notwithstanding the lender's claim to a choate interest in such rents.
Holding: The court held that though the lender revoked the debtor's license to use rents from the commercial property, thereby giving the lender a choate interest in the rents, the debtor retained a reversionary interest in the rent, such that the rents were property of the estate, which was sufficient to allow the debtor to use the rents as cash collateral in operating its business. The debtor filed a motion to allow it to use rents from the commercial property securing a loan. The lender objected. The court found that the debtor's residual right to the rents was sufficient to make the rents property of the estate, and the court allowed the debtor to use the rents as cash collateral.
viii. FDIC v. AmFin Financial Corporation, 490 B.R. 57 (N.D. Ohio 2013)
Issue: Whether, under a tax sharing agreement, a tax refund was property of the debtor bank holding company or its subsidiary bank.
Holding: The court held that tax sharing agreement created a debtor-creditor relationship between the debtor bank holding company and its subsidiary bank. The court relied on terms such as "reimbursement" and "promptly settle" in the tax sharing agreement to determine that it was not ambiguous and created a creditor-debtor relationship. The court concluded that the tax refund belonged to the debtor's estate and not its subsidiary bank.
©2014 William L. Norton III
