IRS sues FDIC over Silicon Valley Bank’s $1.4 billion tax debt

By Thomson Reuters Feb 13, 2024 | 2:47 PM

By Dietrich Knauth

(Reuters) – The U.S. Internal Revenue Service on Tuesday sued the Federal Deposit Insurance Corporation, asking a judge to determine how much the FDIC must pay to cover an estimated $1.45 billion tax debt owed by the failed Silicon Valley Bank.

The FDIC, which seized SVB and its assets in March 2023, has denied the entire tax claim, according to a complaint filed in federal court in Washington. The IRS said the court should overrule the FDIC’s decision to deny the tax claim, and make a new determination on the validity and amount of taxes owed.

The FDIC is acting as a receiver for the bank, gathering the bank’s assets and using them to repay SVB’s creditors.

The IRS said its initial $1.45 billion claim was an estimated total for taxes due between 2020 and 2023, and that it was still reviewing SVB’s tax returns when it filed the claim. The IRS later learned that some of the employment taxes included in its claim have already been paid.

The IRS and the FDIC did not immediately respond to requests for comment on the dispute.

Santa Clara, California-based SVB became one of the largest bank failures in U.S. history when it collapsed on March 10, sending shockwaves through the regional banking industry in the U.S. and disrupting many tech startups that housed their cash at the bank.

The FDIC has also been sued by SVB Financial, SVB’s former parent company, over its seizure of $1.93 billion in cash during its takeover of the bank.

SVB Financial, which filed for bankruptcy after Silicon Valley Bank’s collapse, has argued the FDIC should repay cash that had been held in the parent company’s accounts because it had promised to fully backstop “all deposits” at the bank, even those over the $250,000 guaranteed by U.S. law. The FDIC disagreed, and has said that SVB Financial’s cash could be seized to cover the cost of bailing out the failed bank.

(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Jonathan Oatis)