Doral Financial Corporation is asking the Puerto Rico Supreme Court to handle its appeal of lower court ruling that would funnel the bank’s $230 million tax fight with the island government through a Treasury Department administrative process.
Doral files appeal with PR top court
Doral, the San Juan-based holding company of Doral Bank, filed a petition Wednesday asking the Supreme Court to take up its appeal of the recent Superior Court ruling.
On Monday, the lower court issued an opinion concluding that Treasury had improperly attempted to invalidate a binding tax agreement with Doral. According to the court, the agency did not identify a proper legal basis for invalidating the agreement.
Despite this conclusion, however, the lower court gave Treasury another opportunity to decide whether the agreement is binding. If the agency decides the agreement is not binding, under the decision by the Superior Court, Doral must litigate that dispute through Treasury’s own administrative process.
“Doral is entitled to a court hearing to determine the validity of the agreement, not biased review by the very entity that declared the agreement null,” said Doral’s counsel Matthew McGill, a partner with Gibson, Dunn & Crutcher.
Doral had filed a lawsuit in the San Juan Superior Court earlier this month arguing that Treasury illegally nullified a 2012 agreement to pay the bank over $230 million in tax overpayments. The suit came after Treasury rejected Doral’s demand for immediate payment and then canceled the accord.
The Puerto Rico government had sought the dismissal of the lawsuit and argued that the dispute belonged in the Treasury administrative process, not the courts.
Treasury has said it nullified the 2012 agreement in part because the statute of limitations had run out and because the deal was not recognized in the government’s accounting books at the end of that fiscal year. The government also has said the bank did not provide any evidence proving it is owed that amount for overpaid taxes.
Doral and Puerto Rico’s government are locked in a heated battle over the $230 million as both sides struggle to regain their financial footing in a wobbly economy.
Doral is grappling with the $230 million hole in its balance sheet after the Federal Deposit Insurance Corp. determined it could no longer include that amount in tax overpayments to the Puerto Rico government as Tier 1 capital. In December, the $230 million accounted for about one-third of the $679 million in the bank’s Tier 1 capital, which is an indicator of a bank’s financial health.
The Federal Reserve Bank of New York determined last month that Doral must classify the $230 million tax deal as a loss and write off the asset on the balance sheet.
Doral has sold of some assets in recent weeks as it moves to stay afloat under regulatory pressures to shore up its balance sheet. It sold its stateside-based healthcare financing arm last month and sold some $242 million in mortgage loans to settle a debt with FirstBank Puerto Rico.
On Monday, the lower court issued an opinion concluding that Treasury had improperly attempted to invalidate a binding tax agreement with Doral. According to the court, the agency did not identify a proper legal basis for invalidating the agreement.
Despite this conclusion, however, the lower court gave Treasury another opportunity to decide whether the agreement is binding. If the agency decides the agreement is not binding, under the decision by the Superior Court, Doral must litigate that dispute through Treasury’s own administrative process.
“Doral is entitled to a court hearing to determine the validity of the agreement, not biased review by the very entity that declared the agreement null,” said Doral’s counsel Matthew McGill, a partner with Gibson, Dunn & Crutcher.
Doral had filed a lawsuit in the San Juan Superior Court earlier this month arguing that Treasury illegally nullified a 2012 agreement to pay the bank over $230 million in tax overpayments. The suit came after Treasury rejected Doral’s demand for immediate payment and then canceled the accord.
The Puerto Rico government had sought the dismissal of the lawsuit and argued that the dispute belonged in the Treasury administrative process, not the courts.
Treasury has said it nullified the 2012 agreement in part because the statute of limitations had run out and because the deal was not recognized in the government’s accounting books at the end of that fiscal year. The government also has said the bank did not provide any evidence proving it is owed that amount for overpaid taxes.
Doral and Puerto Rico’s government are locked in a heated battle over the $230 million as both sides struggle to regain their financial footing in a wobbly economy.
Doral is grappling with the $230 million hole in its balance sheet after the Federal Deposit Insurance Corp. determined it could no longer include that amount in tax overpayments to the Puerto Rico government as Tier 1 capital. In December, the $230 million accounted for about one-third of the $679 million in the bank’s Tier 1 capital, which is an indicator of a bank’s financial health.
The Federal Reserve Bank of New York determined last month that Doral must classify the $230 million tax deal as a loss and write off the asset on the balance sheet.
Doral has sold of some assets in recent weeks as it moves to stay afloat under regulatory pressures to shore up its balance sheet. It sold its stateside-based healthcare financing arm last month and sold some $242 million in mortgage loans to settle a debt with FirstBank Puerto Rico.
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