Rodriguez v. Federal Deposit Insurance Corp.
Issues
Should state law or federal common law principles govern the ownership of a tax refund paid to a corporate parent, but solely attributable to a corporate subsidiary, as part of a consolidated tax return?
This case asks the Supreme Court to determine whether state law or federal common law principles govern the ownership of a tax refund solely attributable to a single corporate subsidiary but received from the IRS by that subsidiary’s corporate parent as part of a consolidated tax return. Petitioner Simon E. Rodriguez, Chapter 7 Trustee for the bankruptcy estate of United Western Bancorp., Inc., contends that this area of law is not open to federal common lawmaking and thus should be governed by state agency law. Respondent Federal Deposit Insurance Corporation, Receiver for United Western Bank, counters that the issue here is not governed by federal common law in the strict sense, but rather by interpretations of Internal Revenue Service regulations that inform private party contract interpretation. The outcome of this case will have implications on the equitable ownership interests of tax refunds issued to corporate parents on behalf of their subsidiaries as part of consolidated tax returns.
Questions as Framed for the Court by the Parties
Whether courts should determine ownership of a tax refund paid to an affiliated group based on the federal common law “Bob Richards rule,” as three circuits hold, or based on the law of the relevant state, as four circuits hold.
On January 1, 2008, United Western Bancorp, Inc. (“UWBI”), a bank holding company, entered into a Tax Allocation Agreement (“the Agreement”) with its affiliate subsidiary corporations, including its principal subsidiary, United Western Bank (“Bank”). Rodriguez v.
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Additional Resources
- Donald L. Swanson, Who Gets the $4 Million Tax Refund in Bankruptcy: U.S. Supreme Court to Decide (Rodriguez v. FDIC), Mediatbankry (July 18, 2019).
- Spresa Culafi & Brett E. LaBelle, Supreme Court Agrees to Settle Tax Allocation Agreement Refund Dispute, Crowe (Sept. 23, 2019).