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Clark County Bancorporation v. United States Department of Treasury

United States District Court, W.D. Washington, Tacoma

June 16, 2015

CLARK COUNTY BANCORPORATION, Plaintiff,
v.
UNITED STATES DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE, and UNITED STATES OF AMERICA, Defendants.

ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

BENJAMIN H. SETTLE, District Judge.

This matter comes before the Court on Plaintiff Clark County Bancorporation's ("CCB") motion for summary judgment (Dkt. 21) and Defendants Internal Revenue Service, United States Department of the Treasury, and United States of America's ("Government") cross-motion for summary judgment (Dkt. 26). The Court has considered the pleadings filed in support of and in opposition to the motions and the remainder of the file and hereby denies CCB's motion and grants the Government's motion for the reasons stated herein.

I. PROCEDURAL HISTORY

On October 14, 2014, CCB filed a complaint against the Government seeking a judgment for tax refunds. Dkt. 1.

On January 9, 2015, CCB filed a motion for summary judgment. Dkt. 21. On March 10, 2015, the Government responded and filed a cross-motion. Dkt. 26. On April 27, 2015, CCB replied to its motion and responded to the Government's motion. Dkt. 29. On May 12, 2015, the Government replied to its motion. Dkt. 34.

On May 18, 2015, CCB filed a motion for leave to file a surreply. Dkt. 35. On May 19, 2015, the Government responded.[1] Dkt. 37.

II. FACTUAL BACKGROUND

In August 2001, CCB entered into an agreement with the Bank of Clark County regarding the filing and allocation of taxes. Dkt. 1, Exh. 1. The agreement was titled "Tax Allocation Agreement" ("TAA") and lists CCB as the "Parent" with the Bank of Clark County as the "Bank Subsidary." Id .

On January 16, 2009, the Washington Department of Financial Institutions closed the Bank of Clark County and appointed the Federal Deposit Insurance Corporation ("FDIC") as its receiver ("FDIC-R"). Dkt. 26-1, Declaration of Steven Edgmont, Exh. 1. On January 27, 2009, the FDIC-R submitted to the IRS a Form 56-F, Notice Concerning Fiduciary Relationship of Financial Institution. Id., Exh. 2.

On September 11, 2009, the FDIC-R filed a loss year return for the CCB Group's 2008 tax year. Id., Exh. 3. On October 5, 2009, the FDIC-R filed amended returns for the CCB Group's 2006 and 2007 tax years. Id., Exh. 5. The amended returns sought to carry back the Bank of Clark County's 2008 net operating loss to the CCB Group's 2006 and 2007 tax years. Based on the FDIC-R's amended returns, the IRS determined that the CCB Group's tax refunds for the 2006 and 2007 years were attributable to the insolvent Bank of Clark County's losses. Id., ¶ 8. On November 2, 2009, the IRS issued checks to the FDIC-R for the CCB Group's 2006 and 2007 tax years. Id., ¶¶ 8-9, Exh. 7.

On August 12, 2010, the FDIC-R filed amended returns for the CCB Group for the 2003-2007 tax years, carrying back losses from 2008 for the full five-year period permitted under 26 U.S.C. § 172. Id., Exh. 9. On October 20, 2010, the FDIC-R then filed a loss year return for the CCB Group's 2009 tax year. Id., Exh. 10. The FDIC-R carried back a portion of the 2009 losses to the CCB Group's 2007 tax year, as reflected on the amended return for the 2007 year. On April 29, 2010, CCB filed amended returns for the CCB Group for the 2003-2007 tax years. Id., Exh. 12.

The IRS processed the amended and loss year returns that the FDIC-R had filed for these tax years, rather than the returns that CCB had filed. Id., ¶ 15. On August 15, 2011, the FDIC-R sent a letter to the IRS requesting to act as agent for the CCB Group for any matter pertaining to the refund due the CCB Group. Id., Exh. 4. On August 16, 2011, the IRS granted the FDIC-R's request. Id., ¶ 14. Based on the FDIC-R's amended returns, the IRS determined that the CCB Group's tax refunds for the 2003-2007 years were attributable to the insolvent Bank of Clark County's losses. Id., ¶ 18. The IRS issued refund checks to the FDIC-R, as the Bank of Clark County's fiduciary and the CCB Group's agent.

On April 12, 2011, the IRS issued refund checks to the FDIC-R for the 2006 and 2007 tax years. Id., Exh. 8. On November 11, 2011, the IRS issued additional refund checks to the FDIC-R for the 2003-2007 tax years. The IRS made these checks payable to "Clark County Bancorporation c/o FDIC as Receiver. Id., Exh. 15. The FDIC-R returned these checks and requested that the IRS reissue the checks to "Bank of Clark County c/o FDIC as Receiver." Id., Exh. 16. On February 6, 2012, the IRS reissued to the FDIC-R the refund checks for the 2003-2007 tax years, per the FDIC-R's request. Id., Exh. 17. On January 19, 2012, the IRS issued a refund check to the FDIC-R for ...


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