SVB Financial filed a notice of developments detailing an amended proof of claim by the IRS. The claim amounts to a substantial unsecured priority claim totaling approximately $649mn for the audit years 2020 through 2022.
The notice, filed by debtor’s counsel Sullivan & Cromwell in the Bankruptcy Court for the Southern District of New York, indicates that the bulk of this claim—around $605mn—is attributed to the tax year ending December 31, 2022. The 2022 liability arises from the IRS’s decision to reject a deduction claimed by SVB Financial Group under the mark-to-market accounting method as stipulated in 26 U.S.C. §475.
SVB Financial, in its notice, disagrees with the IRS tax assessment and is prepared to litigate the matter, anticipating a trial that may commence as early as July 15 for a determination of tax liability under 11 U.S.C. §505.
SVB Financial had previously requested a private letter ruling concerning the tax treatment of its reorganization plan. However, as disclosed in the recent court filing, the IRS has tentatively opposed the debtor’s position, potentially affecting the characterization of a substantial stock loss and, in turn, the debtor’s ability to offset taxable income.
The company secured approval of its disclosure statement on May 16 and is seeking confirmation on July 15. However, the amended claim from the IRS, coupled with the IRS’s opposition to certain deductions and characterizations of debt claimed by SVB Financial, raises the possibility of further confirmation delays.
Related Documents:
Statement Notice of Development Re Discussions with IRS
Jennifer Lappe, J.D.
Legal Analyst
LevFin Insights
