The Internal Revenue Service (IRS) is suing the Federal Deposit Insurance Corp. (FDIC) over a tax debt owed by the failed Silicon Valley Bank.
The FDIC seized the bank and its assets in March following its collapse. Now, the IRS is asking a judge to determine how much the FDIC must pay to cover an estimated $1.45 billion tax debt owed by Silicon Valley Bank, Reuters reported Tuesday (Feb. 13).
The FDIC has rejected the entire tax claim, according to a complaint led in a Washington federal court. The FDIC is acting as a receiver for Silicon Valley Bank and using the bank’s assets to repay its creditors, per the report.
The FDIC has also been sued by SVB’s former parent company, SVB Financial, over its seizure of $1.93 billion in cash during its takeover of the bank, Reuters said.
SVB Financial, which filed for bankruptcy last March after Silicon Valley Bank’s collapse, argued that the FDIC should repay cash that had been held in the parent company’s accounts because it had promised to fully backstop “all deposit” at the bank, even those over the $250,000 guaranteed by U.S. law, per the report. Conversely, the FDIC disagreed, saying that SVB Financial’s cash could be seized to cover the cost of bailing out the failed bank.
Silicon Valley Bank’s collapse was one of the worse banking failures in U.S. history, sending shockwaves through the banking industry and upending tech startups that housed their cash at the bank, per the report.
The collapse prompted an investigation from the Federal Reserve, as well as a Senate Banking Committee hearing.
It also hit tech startups, causing their funding to plummet 55% during the first quarter of 2023, PYMNTS reported last year, as other lenders withdrew funding amid heightened fears.
Likewise, IPO funding took a beating, falling 70% year over year and reaching the lowest comparable level since 2019 as uncertainty surround interest rates grew.
In May, the FDIC announced that it would take $15.8 billion in extra fees from the biggest banks over two years in order to recoup its losses after the rescues of Silicon Valley Bank and Signature Bank.
The FDIC said in the release that 113 banks would pay this “special assessment,” with those that have at least $50 billion in assets covering 95% of the cost.