In re Colonial BancGroup, Inc., Case No. 09-32303-DHW
| Decision Date | 03 February 2012 |
| Docket Number | Case No. 09-32303-DHW |
| Parties | In re: THE COLONIAL BANCGROUP, INC., Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama |
In re: THE COLONIAL BANCGROUP, INC., Debtor.
Case No. 09-32303-DHW
UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF ALABAMA
Dated: February 3, 2012
The Colonial BancGroup, Inc. ("debtor") filed an objection to the claim of Texas Comptroller of Public Accounts ("TCPA"). The debtor denies that any amount is owed. In the alternative, the debtor contends that any amount owed is not entitled to priority status under 11 U.S.C. § 507(a)(8). Upon consideration of the undisputed facts, the controlling law, and the respective briefs of the parties, the court concludes that the debtor's objection to the claim must be overruled.
The court's jurisdiction in this dispute derives from 28 U.S.C. § 1334 and from an order of the United States District Court for this district wherein that court's jurisdiction in title 11 matters was referred to the Bankruptcy Court. See General Order of Reference of Bankruptcy Matters (M.D. Ala. Apr. 25, 1985). Further, because the dispute concerns the allowance or disallowance of a claim against the debtor's estate, this is a core proceeding, pursuant to 28 U.S.C. § 157(b)(2)(B), thereby extending this court's jurisdiction to the entry of a final order or judgment.
The debtor is a corporation formed under the laws of the State of Delaware, and its headquarters and principal place of business was located in Montgomery, Alabama. Two of the debtor's subsidiaries, Colonial Bank and Colonial Brokerage, conducted business in Texas through August 2009.1 Other
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than through its subsidiaries, the debtor no business in Texas in that year.
The debtor's 2009 Texas Franchise Tax Report was due initially on May 15, 2009. The debtor, on behalf of the combined group, sought an extension for filing the report. Along with the extension request, the debtor paid $575,000 based on its estimate of the tax owed.
On August 14, 2009, Colonial Bank was taken over by bank regulators and closed. On August 25, 2009, the debtor filed a chapter 11 petition for relief in this court. Colonial Brokerage filed a chapter 7 petition for relief in this court on June 7, 2010.
In September 2009, the debtor filed the 2009 Texas Franchise Tax Report. That report reflected a liability of $695,849.54. The debtor had already paid $575,000.00 with the extension request, leaving an unpaid tax, per the report, of $120,849.54.
On February 16, 2010, TCPA filed a claim for taxes, penalties, and interest in the aggregate amount of $133,511.43 for the reporting period of January 1, 2009 through December 31, 2009.2 TCPA designated the claim as a priority unsecured claim under 11 U.S.C. § 507(a)(8).
First, the debtor contends that it does not owe the claim. The debtor argues that because the debtor's affiliates conducted business in Texas for only eight months in 2009, its franchise tax liability should be apportioned accordingly. The debtor contends that its estimated payment of $575,000.00 exceeds the prorated amount due.
Next, the debtor maintains that even if an amount is still owing, it is not entitled to priority under § 507(a)(8). In attacking the priority status of the
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claim, the debtor asserts that: 1) the claim is not an excise tax "on a transaction" within the meaning of § 507(a)(8); 2) the return was due outside the time parameters of § 507(a)(8); 3) the interest and penalty components of the claim are not entitled to priority.
TCPA takes issue with all of the debtor's contentions.
The State of Texas imposes a franchise tax "on each taxable entity that does business in this state or that is chartered or organized in this state." Tex. Tax Code Ann. § 171.001(a). The tax is "imposed on all domestic and foreign corporations for the privilege of doing business in the state. The grant of this privilege confers upon corporations various economic benefits, including the opportunity to realize income and the right to invoke the protection of Texas law." In re National Steel Corp., 321 B.R. 901, 906 (Bankr. N.D. Ill. 2005).
Taxable entities that are part of an affiliated group engaged in a "unitary business" are...
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