ETF News

JPMorgan, FDIC challenge WaMu on tax benefits

NEW YORK (Reuters) - JPMorgan Chase & Co JPM.N and the Federal Deposit Insurance Corp filed court documents on Thursday challenging bankrupt Washington Mutual Inc WAMUQ.PK on whether it has a claim to billions of dollars worth of tax benefits stemming from its collapse.

The FDIC said it disagrees that all of those tax benefits belong to WaMu’s holding company, which filed for bankruptcy protection last month after its bank was seized by the FDIC and sold to JPMorgan for $1.9 billion.

Earlier this week, WaMu filed court documents seeking to limit trading in its common stock to protect tax breaks the company could receive due to losses it incurred throughout 2008.

In the court documents, WaMu said it estimated it has incurred “consolidated net operating tax loss carryforwards” or unrecognized losses in excess of $20 billion. It said the losses could become “valuable assets” for the bankrupt company because the U.S. tax code generally allows companies to carry over their losses and tax credits to offset future income, thereby lowering the amount of taxes owed to the government .

The total tax benefit the company would get from those losses would be a percentage of that $20 billion in losses, based on its tax rate.

The FDIC argued in court documents Thursday that the net operating loss carryforwards should belong to the entity that actually incurred the loss, and said the agency may fight for any rights it has to those benefits in the future.

JPMorgan said in its filing that it wanted assurances that any court orders on this matter would not affect tax benefits that should be allocated to the bank it acquired from WaMu.

Reporting by Emily Chasan and Chelsea Emery; editing by Jeffrey Benkoe