It’s Time for US Consolidated Tax Groups to Assess What They Need in an Intercompany Tax-Sharing Agreement

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The US Supreme Court and Congress recently changed rules governing tax-sharing agreements (TSA) between affiliated groups of corporations, so it’s time for companies to evaluate whether they need such an agreement or, if they have one, whether it’s adequate.

A TSA, also known as an intercompany tax agreement or a tax allocation agreement, is a legal contract between related entities that defines rights and obligations on various tax matters, such as who is responsible for preparing and filing returns and paying taxes and how disputes among the parties are handled, among many other items. For corporate members of a consolidated group, a TSA is a must—but existing agreements may require modifications to accommodate a 2020 Supreme Court ruling and relevant provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the stimulus bill enacted in March 2020 to counter the dire economic impact of the COVID-19 pandemic.

In Rodriguez v. Federal Deposit Insurance Corporation,1 the Supreme Court struck down a judicial federal common law rule—known as the Bob Richards rule—that courts had used for decades to allocate tax refunds among members of corporate affiliated groups that lacked a written TSA or when their agreement was ambiguous about the allocation of refunds.2

Facts of the Case

In 2008, United Western Bancorp Inc. (UWBI), a bank holding company, and subsidiaries including United Western Bank (hereafter “the bank”), entered into a tax allocation agreement. UWBI filed a tax return for the consolidated group that year based on the bank’s taxable income. (UWBI had no income for that year.) In 2010, the bank generated net operating losses (NOLs), and UWBI requested a $4.8 million refund from the Internal Revenue Service to recover taxes the bank paid on its 2008 income.

The bank closed in 2011, and the Federal Deposit Insurance Corporation (FDIC) was appointed as its receiver. In 2012, UWBI filed for bankruptcy protection. The FDIC filed a claim in bankruptcy court arguing that, as the bank’s successor, it was entitled to the $4.8 million tax refund, because the refund stemmed exclusively from the bank’s business loss carrybacks.

In 2013, Simon Rodriguez was appointed the Chapter 7 trustee for the bankruptcy estate. He sued the FDIC, arguing that the tax refund was owned by UWBI and was part of the bankruptcy estate. The bankruptcy court agreed and granted summary judgment in his favor. However, the US District Court for the District of Colorado reversed the bankruptcy court’s decision, and the Tenth Circuit Court affirmed its ruling—finding that the tax refund belonged to the bank.

It’s important to note that the UWBI consolidated tax group had a tax allocation agreement in place, but the Tenth Circuit concluded the agreement was ambiguous regarding the ownership of tax refunds.

The court relied on the Bob Richards rule, which established that in the absence of an intercompany tax-sharing agreement (or when the agreement is ambiguous about refund ownership), the tax refund belongs to the entity that incurred the losses and not to the holding company.

However, the US Supreme Court vacated and remanded the Tenth Circuit’s decision and rejected the longstanding deference by certain federal courts to apply the Bob Richards rule. The Court’s singular focus in Rodriguez was not which party was entitled to the tax refund, but whether state law or federal common law applied to make that determination. In finding that state law is well equipped to handle disputes involving corporate property rights, the Court directed the Tenth Circuit to consider whether the case would yield the same or a different result without the Bob Richards rule.

Questions to Consider

In light of the Rodriguez ruling, members of a consolidated group should consider these questions:

  • What does your TSA say about tax refunds? What are the parties’ rights and obligations? Is there any discretion regarding the amount to refund a member?
  • Is it clear from the TSA that there is an agency relationship between the parties, or is it ambiguous? Should there be some language requiring the use of a trust or escrow for tax refunds?
  • Does the TSA contain provisions that indicate a debtor-creditor relationship? If so, is that what the parties intend?
  • Overall, is the language of the TSA explicit and clear? When read in their entirety, are the various provisions of the TSA consistent? and
  • Is there any terminology used in the TSA that is not explicitly defined in its “Definitions” section?

Additionally, the law firm O’Melveny advises consolidated tax groups to consider:

  • whether they have a TSA or an informal arrangement and, if so, how refunds would be apportioned between members under the agreement;
  • under an existing TSA, where a claim for payment would rank relative to other claims against a debtor;
  • the impact of applicable state law and Treasury regulations on the interpretation of a TSA or on group members’ entitlement to tax refunds in the absence of a TSA; and
  • whether the elimination of the Bob Richards rule might impact a consolidated group member’s expectation of recovery.3

O’Melveny further states that:

consolidated groups generally should examine whether to implement a TSA that provides clear rules regarding the entitlement to tax refunds in addition to the payment among members for the use of tax attributes. Moreover, consolidated groups that have historically relied upon an informal practice regarding the use of tax attributes and entitlement to refunds should consider formalizing their practice in written and unambiguous formal agreements.


The federal stimulus bill enacted in response to the COVID-19 crisis also has implications for TSAs. Mayer Brown notes that the CARES Act gave US taxpayers the ability to carry NOLs back five years—but a company’s access to that asset may depend on its TSAs.4

This is the third new NOL scheme in as many years, Mayer Brown writes, in that:

  • before 2018, two-year carrybacks were allowed;
  • for 2018 and 2019, no carrybacks were allowed; and
  • now, five-year carrybacks are temporarily allowed for NOLs from 2018, 2019, and 2020—including carrybacks to years with higher tax rates.

As a result of the CARES Act, as well as the Supreme Court ruling in the Rodriguez case, many TSAs are now out of date, Mayer Brown says. To wit:

They may not contemplate NOL carrybacks. If they do, they may not contemplate tax rate differences. And either way, their drafters may have assumed that a different body of law would govern open questions. In short, it’s time for companies to focus on the NOL provisions of the CARES Act and to evaluate their TSAs.

Kristin B. Jones, JD, LLM, is the founder and president of Section 382 Solutions LLC, a privately held corporate tax software and strategic consulting firm. She is also a corporate tax subject matter expert in the national tax office of CBIZ.



  1. Rodriguez v. Fed. Deposit Ins. Corp., No. 18-1269 (February 25, 2020).
  2. “The Supreme Court’s Rejection of the Bob Richards Rule Creates Uncertainty Regarding the Entitlement of Members of a Consolidated Group to Tax Refunds,” Shearman & Sterling, March 3, 2020,
  3. “Supreme Court Strikes Down ‘Bob Richards’ Rule, Impacting Consolidated Group Members’ Entitlement to Tax Refunds in Bankruptcy Proceedings,” O’Melveny, March 2, 2020,
  4. Geoffrey M. Collins, Thomas Kittle-Kamp, Brian W. Kittle, Gary B. Wilcox, Thomas A. Humphreys, and Remmelt Reigersman, “The Time to Review Tax Sharing Agreements Is Now: Effects of the CARES Act and Rodriguez v. FDIC,” Mayer Brown, June 3, 2020,

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