Bank of America (BAC.N), opens new tab has asked a U.S. appeals court to revive its lawsuit seeking more than $163 million in interest from the Internal Revenue Service in a dispute over tax liability involving mergers, including its 2013 tie-up with Merrill Lynch.
Bank of America in a Monday night court filing, opens new tab told the Richmond, Virginia-based 4th U.S. Circuit Court of Appeals that a judge “rewrote” a key federal tax provision when he substantially rejected the case last year. The bank called the decision “unfair to taxpayers.”
The bank sued the IRS in North Carolina federal court in 2017, claiming it was owed tax-related interest related to a series of mergers.
Federal law allows a taxpayer to “net,” or cancel out, interest owed on both underpayments and overpayments of taxes. A central question in Bank of America’s case is whether it was the “same” taxpayer after the mergers, making “interest netting” available.
Bank of America declined to comment on Tuesday. The Justice Department did not immediately respond to a request for comment.
U.S. District Judge Robert Conrad said in his 2023 ruling, opens new tab that “because two corporations are separate taxpayers before they merge, their premerger underpayments and overpayments were not made by the same taxpayer.”
Conrad allowed Bank of America to take an immediate appeal, writing that “there is substantial ground for difference of opinion on the interest-netting issue in this case.”
In the appeals court, Bank of America said Conrad “overlooked” a central part of state merger law that says the remaining company after a merger is considered to be the “same taxpayer” as the merged companies.
The bank said that under relevant state law, “the survivor of a corporate merger is responsible for all of the assets and liabilities of the merged companies, including tax overpayments and underpayments.”
Bank of America said that as the “surviving” company it should have been allowed to net the interest on pre-merger tax overpayments by Merrill Lynch, and an underpayment by Bank of America.
“The overpayments and underpayments at issue were ‘by the same taxpayer,’” Bank of America told the appeals court. “Bank of America is the ‘taxpayer.’”
The case is Bank of America Corp et al v. United States, 4th U.S. Circuit Court of Appeals, No. 23-2319.
For Bank of America: Nicole Saharsky of Mayer Brown
For United States: Norah Bringer of the Justice Department
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