§7507 Exemption of insolvent banks from tax

Summary

When a bank or trust company that takes deposits and makes loans stops doing business because it is bankrupt or insolvent, the government must not assess, collect, or take any tax that would reduce the money or property needed to fully pay the bank’s depositors. For national banks the Comptroller of the Currency can cancel such taxes if the bank is found insolvent. The Secretary can forgive those taxes for state-chartered banks when the facts show the taxes would harm depositors. If depositors accept a lien on future earnings or claims on assets set aside or moved to a trustee or agent instead of full payment, no tax may be imposed that would cut into those assets available to pay them. (Agent includes a corporation acting as a liquidating agent.) Taxes already collected are treated as wrongly taken and can be refunded under tax-refund rules. Taxes blocked, canceled, or refunded may be reassessed later if collecting them will not reduce assets needed to pay depositors, or after depositors are paid from the segregated or transferred assets. The time limit for assessing or collecting is paused while tax collection is barred and for 90 days after. This rule does not apply to taxes under chapter 21 or chapter 23.