[Federal Register Volume 61, Number 238 (Tuesday, December 10, 1996)]
[Notices]
[Pages 65053-65058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31208]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Statement of Policy Regarding the Payment of State and Local 
Property Taxes

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Revision and Reissuance of Policy Statement.

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SUMMARY: The Statement of Policy revises and reissues the FDIC's 
``Statement of Policy Regarding the Payment of State and Local Property 
Taxes'' issued on June 4, 1991. As required by section 303(a) of the 
Riegle Community Development and Regulatory Improvement Act of 1994 
(``the RCDRIA''), the FDIC is conducting a systematic review of its 
regulations and statements of policy that might be inefficient, cause 
unnecessary burden, or contain outmoded, duplicative, or inconsistent 
provisions (see 60 FR 62345 (Dec. 6, 1995)). The FDIC has reviewed its 
1991 Policy Statement and has concluded that it should be revised and 
reissued. This revised Statement of Policy would replace the 1991 
Policy Statement.
    The revised Statement of Policy would reflect (1) the statutory 
``sunset'' of the Resolution Trust Corporation (``RTC'') on December 
31, 1995, resulting in the FDIC's succession to the RTC's remaining 
responsibilities; and (2) the developing caselaw in the area.

EFFECTIVE DATE: January 9, 1997.

FOR FURTHER INFORMATION CONTACT: William P. Stewart, Real Estate 
Specialist, ORE, FDIC (202) 416-4229; David N. Wall, Senior Counsel, 
FDIC Legal Division (202) 736-0115; or David Fisher, Counsel, FDIC 
Legal Division (202) 736-3103.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The Statement of Policy does not require any collections of 
paperwork pursuant to section 3504(h) of the Paperwork Reduction Act, 
44 U.S.C. 3501, et seq. Accordingly, no information has been submitted 
to the Office of Management and Budget for review.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq., it is certified that the Statement of Policy will 
not have a significant economic impact on a substantial number of small 
entities. In addition, the Statement of Policy will not impose 
regulatory compliance requirements on depository institutions of any 
size.

DISCUSSION

I. Introduction

    Section 15 of the Federal Deposit Insurance Act (``FDIA''), 12 
U.S.C. 1825, provides immunity from all taxation imposed by any state, 
county, municipal, or local taxing authority, except for ad valorem 
real property taxation. This immunity from taxation, and its limited 
exception for real property taxation, apply to the FDIC both in its 
corporate capacity and when it is acting as a receiver for a failed 
financial institution. 12 U.S.C. 1825 (a) and (b),1 respectively. 
See also 12 U.S.C. 1823(d)(3)(A).
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    \1\ Section 219 of the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989 (``FIRREA'') added subsection (b) to 
clarify that the FDIC's immunity extends to receiverships.
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    On June 4, 1991, the FDIC and the RTC each issued a ``Statement of 
Policy Regarding the Payment of State and Local Property Taxes.'' The 
two policy statements were essentially identical. The RTC statement was 
published at 56 FR 28426 (June 20, 1991); the FDIC statement was not 
published in the Federal Register but was made publicly available in 
FDIC's Law, Regulations, and Related Acts. Since their issuance, 
several cases involving the FDIC's and RTC's tax immunity and the 
Corporations' implementation of their policy statements have been 
litigated to conclusion. Moreover, on December 31, 1995, the RTC 
terminated and the FDIC

[[Page 65054]]

succeeded to its remaining responsibilities. Accordingly, the RTC 
termination, the developing judicial interpretation of the FDIC's tax 
immunity, and the requirements of the RCDRIA warrant a reissuance of 
the FDIC policy statement with certain minor changes.

II. Background

    In providing for the orderly liquidation of a failed financial 
institution, the FDIC has only a limited ability to prepare in advance 
for managing the assets of a financial institution for which it has 
been appointed receiver. Moreover, the difficulties of administration 
may often be compounded by the poor quality of the affected 
institution's records, which may be incomplete or in disarray, or both.
    Frequently, records regarding ad valorem real property tax 
liabilities are not current. In many instances, taxes that are already 
delinquent at the time the receiver is appointed become further 
delinquent, and taxes that are not delinquent become so. Because of the 
importance of property tax revenues for state and local municipal 
finances, and given the magnitude of the FDIC holdings of real property 
and the potential effect thereon of section 15(b) of the FDIA, the FDIC 
in 1991 adopted a Statement of Policy Regarding the Payment of State 
and Local Property Taxes (``Policy'') to provide guidance concerning 
its payment of such taxes. Having had five years of experience with 
that Policy, the FDIC now adopts a revised policy (hereinafter 
``Revised Policy'') to reflect certain minor changes now deemed 
advisable as a result of litigation and practical experience.

Application to Resolution Trust Corporation Assets

    On December 31, 1995, the RTC terminated. Pursuant to 12 U.S.C. 
1441a(m), the FDIC has succeeded the RTC as receiver for all 
institutions for which the RTC was acting as receiver at the time of 
its termination, as well as to any assets which the RTC held in its 
corporate capacity at that point. Therefore, it is appropriate to issue 
this Revised Policy to clarify that its provisions apply equally to all 
receiverships and assets transferred from the RTC.

III. Explanation

A. Scope and Applicability

    Section 15 of the FDIA is silent about the immunity of the FDIC 
when acting as conservator. The legislative history of section 15(b), 
however, as well as the similarity of powers and duties of conservators 
and receivers, suggest that the FDIC, as conservator, should enjoy 
similar tax immunity. On the other hand, the FDIC recognizes that 
financial institutions in conservatorship continue to operate as 
business entities. Similar considerations obtain with respect to a 
bridge bank, and when the FDIC is managing a special asset pool arising 
out of a large bank assisted transaction. Accordingly, the Revised 
Policy conforms with the former Policy and provides that the FDIC, when 
acting in such capacities, will not assert the tax immunity recognized 
in section 15(b), although it reserves the right to reconsider this 
position in the future.
    The FDIC is sometimes appointed as conservator for an institution 
that has acquired certain assets and assumed certain liabilities from a 
receiver pursuant to a purchase and assumption agreement. In such 
cases, the liabilities assumed generally do not include all tax 
obligations. The Revised Policy provides, as did the original Policy, 
that the FDIC, as conservator, will not be liable for those obligations 
not assumed from the receiver. This disclaimer of liability is not 
based on a claim of conservatorship immunity; rather, liability is 
disclaimed because the institution in conservatorship has not legally 
assumed those obligations. A bridge bank that has acquired assets and 
assumed liabilities in a similar manner is also entitled to disclaim 
tax-related obligations it has not legally assumed.
    Section 15 of the FDIA is also silent as to whether immunity 
applies to the operations of a subsidiary of an institution in 
receivership or conservatorship. Certain legal and policy 
considerations may support the position that immunity applies to the 
operations of a subsidiary in the same manner as it applies to the 
operations of the receivership or conservatorship. Nevertheless, 
because of various concerns, including the maintenance of the separate 
corporate identities of subsidiaries, the Revised Policy provides that 
such immunity will not be asserted at this time. The FDIC reserves the 
right to reconsider whether immunity applies to the operations of 
subsidiaries.
    The Revised Policy eliminates the discussion of these points 
appearing in Section A of the original Policy in favor of the more 
extensive discussion in Section H.

B. Taxes

1. Payment of Taxes
    Like the original Policy, the Revised Policy provides that the FDIC 
will pay proper tax obligations, but recognizes that prompt payment 
must be consistent with sound business judgement and the orderly 
administration of receiverships. It confirms that Section 15 immunity 
applies to all assets acquired in the course of the FDIC's liquidation 
operations.
2. Taxes on Owned Real Property
    Section 15(b) of the FDIA expressly waives the FDIC's immunity with 
respect to ad valorem real property taxation. Accordingly, like the 
original Policy, the Revised Policy acknowledges that property which 
the FDIC owns in fee, however acquired, is subject to ad valorem real 
property taxation. Like the original Policy, the Revised Policy also 
recognizes that the waiver of immunity in section 15(b) is only for 
real property taxes assessed according to the property's value. Thus, 
immunity has not been waived for taxes imposed on real property that 
are not based on value, and the Revised Policy so states. For example, 
some types of special assessments, which traditionally are based on 
property factors other than value, such as front footage, are not ad 
valorem real property taxes and therefore the FDIC is not liable for 
them. See Federal Reserve Bank of St. Louis v. Metrocentre Improvement 
District #1, City of Little Rock, Arkansas, 657 F.2d 183 (8th Cir. 
1981); United States v. City of Adair, 539 F.2d 1185 (8th Cir. 1976).
3. Taxes on Secured Interests in Real Property
    The largest category of assets which the FDIC acquires as receiver 
is loans secured by mortgage interests in real property. Like the 
original Policy, the Revised Policy acknowledges that real property 
which is the subject of such interests is also subject to ad valorem 
real property taxation.
4. Taxes on Personal Property
    Because section 15 of the FDIA waives immunity only for ad valorem 
real property taxation, the Revised Policy, like the original Policy, 
provides that the FDIC is immune from all forms of personal property 
taxation.
5. Other Related Taxes
    Like the original Policy, the Revised Policy makes clear that the 
FDIC is immune from taxes imposed on it as a result of transactions 
involving real property, even if the tax is measured by the value of 
the property. Such taxes are not taxes on the property itself, but 
rather excise taxes on transactions involving real property. Among 
these are transfer and recordation taxes, and certain fees for handling 
foreclosure

[[Page 65055]]

sales, which the FDIC will not pay. For example, in Resolution Trust 
Corporation v. Lanzaro, 140 N.J. 244, 658 A.2d 282 (N.J. 1995), the New 
Jersey Supreme Court held that a sheriff's fee for handling a 
foreclosure sale so far exceeded the value of the services rendered 
that it amounted to a tax from which the RTC was immune under section 
15(b) of the FDIA.

C. Interest and Penalties

    State statutes typically provide for the accrual of interest and 
penalties if real property taxes are not paid when due. The character 
and amount of such charges vary from state to state. Section 15(b)(3) 
of the FDIA expressly provides that the FDIC is not liable for any 
amounts ``in the nature of penalties or fines, including those arising 
from the failure of any person to pay any . . . tax . . . when due.'' 
This provision expresses the common law rule, see, e.g., Missouri 
Pacific Railway Co. v. Ault, 256 U.S. 554 (1921), and is consistent 
with the general rule that receivers (and innocent creditors) should 
not be burdened by punitive assessments. See Professional Asset 
Management v. Penn Square Bank, 566 F. Supp. 134 (W.D. Okla. 1983). The 
Revised Policy implements this provision by providing that the FDIC 
will neither pay, nor recognize liens for, such amounts. Similarly, the 
FDIC will not pay attorneys' fees or other costs which state law may 
impose upon delinquent taxpayers. Irving Independent School District, 
et. al v. Packard Properties Ltd., et. al., 762 F. Supp. 699 (N.D. 
Texas 1991).
    While the FDIC is not liable for penalties arising from taxes not 
timely paid either by it or by previous owners of the property, the 
Fifth Circuit Court of Appeals has held that liens for such penalties 
that were imposed prior to the FDIC's ownership remain on the property 
during the FDIC's ownership. And, while the FDIC is not obligated to 
pay the penalties secured by such liens during its ownership of the 
property, the liens remain on the property, and the penalties so 
secured become the obligation of any subsequent owner. Irving 
Independent School District, et al. v. Packard Properties Ltd., et. 
al., 970 F.2d 58 (5th Cir. 1992).
    The FDIC believes that the Fifth Circuit decision is directly 
contrary to the decision of the United States Supreme Court in Simonson 
v. Grandquist, 287 U.S. 489 (1961). Accordingly, the FDIC reserves the 
right to challenge this position in jurisdictions not covered by the 
Fifth Circuit Court of Appeals.
    Historically, the United States and its instrumentalities have 
always been immune from claims for interest, except where Congress has 
expressly waived such immunity. See, e.g., Library of Congress v. Shaw, 
478 U.S. 310 (1986). Section 15 of the FDIA is silent as to whether 
immunity is waived for interest accruing on delinquent tax amounts, and 
that silence suggests immunity has not been waived. In analogous 
situations, courts have utilized varying analytical approaches to 
determine whether the waiver of immunity from real property taxes 
implicitly carried with it a waiver for interest. Compare, 
Reconstruction Finance Corp. v. Texas, 229 F.2d 9 (5th Cir. 1956), 
cert. denied, 351 U.S. 907 (1956), with United States v. Consumers 
Scrap Iron Corp., 384 F.2d 62 (6th Cir. 1967).
    Recent Supreme Court decisions raise further uncertainty whether 
immunity from interest should be considered to be waived in the absence 
of an express provision. Compare, Loeffler v. Frank, 486 U.S. 549 
(1988), with Library of Congress v. Shaw, 478 U.S. 310 (1986). The FDIC 
recognizes the importance to state and local governments of revenues 
derived from real property taxes. Thus, the Revised Policy continues to 
provide that the FDIC generally will pay interest on delinquent real 
property taxes, but adds language clarifying that payment of a 
delinquency charge in the nature of interest for periods before and 
during FDIC ownership will be made only to the extent the interest 
payment obligation is secured by a valid lien. Otherwise, post-
ownership interest will be paid pursuant to generally applicable FDIC 
rules and procedures.
    The purpose of interest is to compensate for the loss of the use of 
funds resulting from the failure to pay taxes when due. Thus, interest 
is to be distinguished from additional amounts which are charged as 
punishment for failure to pay when due. There is no uniformity among 
the states regarding the imposition of interest or penalties for late 
payment of taxes. Some states impose both an interest charge and a 
penalty, while others impose only interest or a penalty.
    The characterization of the charge under state law as ``interest,'' 
``penalty,'' ``compensatory,'' or ``punitive'' is not determinative. 
That is a question determined under federal law. See Missouri Pacific 
Railroad v. Ault, 256 U.S. 554 (1921). Compare United States v. La 
Franca, 282 U.S. 568 (1931). Nonetheless, the FDIC has determined to 
follow generally the characterization of additional charges as 
``interest'' or ``penalty'' as determined by the law of the state, and 
will normally pay those charges which state law denominates as 
``interest'' at the state statutory rate. In some states, although the 
state statute denominates a charge as ``interest,'' the supreme court 
of the state has held that the charge is a penalty. In such instances, 
the judicial rule will be applied and no interest will be paid.2
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    \2\ While this was formerly the case in the State of Texas, its 
legislature amended the pertinent Texas Tax Code section, effective 
August 26, 1991, to provide that interest payable under that section 
``is to compensate the taxing unit for revenue lost because of the 
delinquency.'' Tex. Tax Code Ann. section 33.01(c). The purpose of 
that amendment was to reverse the Texas Supreme Court's decision in 
Jones v. Williams, 121 Tex. 94, 45 S.W.2d 130 (Tex. 1931), which 
held that amounts denominated as interest were in reality penalties 
imposed for failure of duty to pay taxes in a timely manner, rather 
than charges made for the use or detention of money.
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    In addition, state law will continue to be monitored and, in the 
event that a state legislature or court characterizes as interest a 
charge which is clearly and demonstrably a penalty, the FDIC will not 
pay such amount. This could be the result, for example, if a fixed 
``interest'' amount is charged without reference to the time the base 
tax amount is delinquent. The FDIC specifically reserves all rights to 
challenge any interest charge it believes to be a penalty.

D. Tax Liens

1. Foreclosure
    Section 15(b)(2) of the FDIA provides that ``no property of the 
Corporation shall be subject to levy, attachment, garnishment, 
foreclosure, or sale without the consent of the Corporation.'' Even in 
the absence of such an express provision, the courts have held that a 
real estate tax lien could not be foreclosed in derogation of an 
interest (whether fee or mortgage interest) held by an entity invested 
with federal immunity where that immunity had not been waived. See New 
Brunswick v. United States, 276 U.S. 547 (1928); Rust v. Johnson, 597 
F.2d 174 (9th Cir. 1979).
    Section 15(b)(2) makes clear that, notwithstanding the waiver of 
immunity for ad valorem real property taxation, state and local taxing 
authorities may not sell or foreclose against property in which the 
FDIC holds an interest without fully protecting that interest. This 
prohibition recognizes the considerable burden faced by the FDIC in 
administering the assets involuntarily acquired by it, and that 
substantial value would be lost to the Corporation solely because of 
lack of knowledge of the property interest if real estate tax liens 
could be enforced through traditional sale or foreclosure remedies. The 
original Policy asserted the

[[Page 65056]]

position, based on the New Brunswick and Rust cases, that a mortgage 
interest held by the FDIC is ``property'' and that a taxing authority 
could not foreclose out that interest without the FDIC's consent.
    In Matagorda County, et al. v. Law, et al., 19 F.3d 215 (5th Cir. 
1994), the Fifth Circuit Court of Appeals upheld the FDIC's position 
that a mortgage lien interest held by it is ``property'' within the 
meaning of section 15(b)(2) of the FDIA. Thus, the court of appeals 
concluded that, while the taxing unit's lien was valid and senior to 
the FDIC's lien interest, the tax lien could not be foreclosed so as to 
extinguish the FDIC's interest in the property unless the FDIC so 
consents. Accordingly, like the original Policy, the Revised Policy 
continues to provide that a mortgage lien held by the FDIC cannot be 
eliminated without its consent. See also, Simon v. Cebrick, et al., 53 
F.3d 17 (3rd Cir. 1995).
2. Attachment
    Section 15(b)(2) of the FDIA provides that no involuntary lien 
shall attach to the property of the Corporation. One example of an 
involuntary lien is a lien that automatically attaches for delinquent 
taxes. Because the assets of a financial institution for which the FDIC 
has been appointed receiver do not become the ``property of the 
Corporation'' until the receivership appointment, any involuntary liens 
that attached prior to the appointment of the receiver are valid. 
Although in most states a real estate mortgage interest represents an 
interest in the real property, it is not tantamount to ownership of the 
property itself. Because the involuntary lien for delinquent real 
property taxes attaches to the property itself, nonconsensual liens 
purporting to attach to property owned in fee by the FDIC are 
considered void, but liens may attach to property in which the FDIC 
holds only a mortgage interest as security for a loan. See New 
Brunswick v. U.S., supra.
3. Priority
    The waiver of immunity from ad valorem real property taxes 
indicates that, with respect to liens that properly attached to 
property before the FDIC obtained fee title to such property (whether 
by appointment as receiver, lien foreclosure, or otherwise), the taxing 
authority is entitled to have its lien satisfied from the value of the 
property. With respect to property owned in fee, therefore, the effect 
of the prohibition against foreclosure or sale by the taxing authority 
is that the FDIC, by granting or withholding consent to foreclosure, 
can control the time and manner in which property is sold.
    The FDIC takes the same position with respect to such tax liens 
when it holds only a mortgage interest in the property. Thus, a valid 
lien for ad valorem real property taxes and interest will be recognized 
as being entitled to priority over the FDIC's mortgage interest 
(assuming that the tax lien would be entitled to priority under state 
law over a non-federal mortgage holder).
    The FDIC will recognize any state law priority given to property 
tax liens that attached prior to its obtaining any interest in the 
property. However, because immunity is not waived for taxes other than 
ad valorem real property taxes (such as personal property taxes), any 
liens for taxes other than ad valorem real property taxes that attach 
to property after the FDIC acquires a lien or security interest in such 
property will be subordinate to the Corporation's interest. Such 
subordination is required because if the value of the property is not 
sufficient to cover both the FDIC's lien and the tax lien, to provide 
priority for the tax lien would diminish the value of the Corporation's 
interest, thereby subjecting it to the taxation from which it is 
immune.
4. Sale of Tax Liens
    Some states provide for a different, usually higher rate of 
interest if the tax lien has been sold in satisfaction of tax claims. 
Moreover, this rate is applied to the entire amount of taxes, interest, 
and penalties paid by the tax lien or property purchaser. In this case, 
if a tax sale takes place before the FDIC obtains a fee interest in the 
property, or with respect to a tax lien that has priority over a lien 
held by the Corporation, the FDIC will pay the entire amount due to the 
purchaser of the lien. The charges are considered to be merged together 
in the hands of the purchaser to whom the amount paid is simply the 
purchase price for the release of the lien or property, subject to 
redemption. For a sale that takes place with respect to a lien that is 
junior to the lien of the FDIC, or after the FDIC obtains a fee 
interest in the property, the sale must protect fully the FDIC's fee 
interest or lien. Some states may provide for the accrual of an 
additional penalty after the tax lien on the property has been sold in 
satisfaction of the tax claims. Regardless of when the sale takes place 
with respect to the FDIC's acquisition of an interest in the property, 
such penalties will not be paid.
5. Liens for Undetermined Amounts
    A new section has been added to the former Policy Statement to 
address a minor difference between the FDIC's and the RTC's treatment 
of certain non ad valorem taxes. Generally, the FDIC does not recognize 
claims against a receiver unless the amount of the claim is fixed and 
certain at the time of receivership. In most cases, property tax 
assessments are for fixed amounts, and a statutory lien arises on the 
tax assessment date to secure that fixed amount. If such a fixed tax 
obligation arises prior to the receiver's ownership of the property, 
section 15(b)(1) does not eliminate the liability. Similarly, the lien 
may attach if the FDIC does not own the property (although under some 
circumstances the lien may effectively be subordinated to the FDIC's 
interest--see discussion under D.3., supra).
    Under some municipal tax procedures, however, such as those 
established pursuant to the California Mello-Roos Community Facilities 
Act of 1982, a non ad valorem tax lien may be recorded at the time such 
tax is authorized (such as upon the establishment of a community 
facilities district), but the amount of a particular periodic tax 
obligation will not be fixed until a date in the future. The amount may 
fluctuate from period to period depending on a factor such as a 
prevailing interest rate or the rate of delinquency in the tax 
district.
    Such a tax is in fact not imposed until the date the amount is 
determined and therefore is barred by section 15(b)(1) if that date 
does not precede the date upon which the receiver became owner of the 
property. Similarly, any lien that purports to secure such a tax is 
inchoate and therefore void under section 15(b)(2), even if the lien 
was recorded prior to the receiver's ownership of the property. The RTC 
as a matter of policy elected to pay such taxes in the particular case 
of California Mello-Roos special taxes when the notice of lien was 
recorded prior to receivership. In view of the past reliance of 
California local community facilities districts on the RTC policy 
(particularly in their assumptions as to revenues), and the potentially 
disruptive effect of any change in such policy, the FDIC has elected to 
continue the RTC's policy in California with respect to Mello-Roos 
assessments on those properties now owned by the FDIC that (1) were 
owned by the RTC on December 31, 1995, or (2) have become property of 
the FDIC through foreclosure of a security interest held by the RTC on 
that date. Otherwise, the FDIC may challenge such assessments.

[[Page 65057]]

E. Challenges to Assessed Valuation

    Section 15(b)(1) of the FDIA provides that ``notwithstanding the 
failure of any person to challenge an assessment under State law of 
such property's value, such value, and the tax thereon, shall be 
determined as of the period for which such tax is imposed.'' This 
language permits the receiver to challenge the assessed value of a real 
property it currently owns whether or not the receiver was the owner of 
the property at the time of assessment.
    The statute is very broad on its face. For example, it authorizes a 
receiver to challenge a prior assessment which served as the basis for 
a tax paid by a borrower prior to the receivership, when the 
institution held only a mortgage interest. The apparent purpose of this 
provision, however, was to permit the receiver to contest tax 
assessments made at the time property was owned in fee and especially 
where such tax has not been paid, on the ground that the taxes were 
based on an incorrect assessed valuation.
    Because high assessed valuations could help a troubled institution 
avoid required regulatory write downs, it was often not in the 
institution's interest to challenge overstated assessment valuations. 
Like the original Policy, the Revised Policy focuses on this and 
provides that challenges generally will be limited to the current and 
immediately preceding tax years, and to situations involving previously 
filed tax protests. The Revised Policy also recognizes, however, that 
where substantial amounts are at issue, and the likelihood of success 
is great, assessments may be challenged to the full extent permitted by 
federal law, including periods when the property was owned in fee by 
the FDIC as receiver or by an institution subsequently placed in 
receivership. The Tenth Circuit Court of Appeals has affirmed the 
FDIC's position, holding that ``we perceive nothing in the plain 
language of the statute temporally limiting the right of the FDIC to 
seek and obtain revaluation. The Congress established that right 
without limitation, and it is improper to judicially ingrain such a 
restriction on that right.'' FDIC v. Lowery, et al., 12 F.3d 995, 997 
(10th Cir. 1993).
    Although under the statute the FDIC is not obligated to pay any 
amounts based on a challenged assessment until the challenge is 
resolved, the Revised Policy permits the Corporation to tender payment 
of taxes during the pendency of a challenge based on the assessment 
level it deems appropriate, provided such payment will not prejudice 
any challenge.
    The text of the Revised Policy Statement follows:

FDIC Statement of Policy Regarding the Payment of State and Local 
Property Taxes

    After considering (1) the powers granted to it under the 
Constitution and federal law, (2) its obligation to maximize recoveries 
from the disposition of financial institutions and their assets, and 
(3) the potential effect of its actions upon state and local tax 
administration, the Federal Deposit Insurance Corporation (the 
``FDIC'') has issued the following policy statement to provide guidance 
as to how it will administer its statutory responsibilities in this 
area.

A. Authority

    This Statement of Policy is issued pursuant to the FDIC's powers 
and authorities granted by the Federal Deposit Insurance Act 
(``FDIA''), 12 U.S.C. Secs. 1811, et seq., and in particular section 15 
of the FDIA, 12 U.S.C. Sec. 1825.

B. Scope and Applicability

    This policy statement supersedes the Statements of Policy issued by 
the FDIC and the Resolution Trust Corporation (``RTC'') in 1991. It 
generally applies to the Corporation when it is liquidating assets of 
an insured depository institution in its corporate or receivership 
capacities (the ``Corporation''). It applies to any tax, penalty, 
interest, or other related charge imposed or sought to be imposed on 
property to whose ownership the FDIC succeeds in such capacities.

C. Taxes

    Payment of Taxes: The Corporation will pay its proper tax 
obligations when they come due. Furthermore, the Corporation will pay 
claims for delinquencies as promptly as is consistent with sound 
business practice and the orderly administration of the insured 
depository institution's affairs. The Corporation may decline to pay 
property taxes, including delinquency charges or other claims, in 
situations where abandonment of its interest in the property is 
appropriate.
    Owned Real Property: Owned real property of the Corporation is 
subject to state and local real property taxes, if those taxes are 
assessed according to the property's value. The Corporation is immune 
from real property taxes assessed on other bases.
    Secured Interests in Real Property: Real property which is subject 
to a security or lien interest in favor of the FDIC is subject to ad 
valorem taxes and taxes assessed on other bases.
    Personal Property: The Corporation is immune from all forms of 
taxation on personal property.
    Other Related Taxes: The Corporation is immune from taxes other 
than ad valorem real property taxes. Taxes on sales, transfers, or 
other dispositions of Corporation property are generally in the nature 
of excise taxes which are levied on the transaction and not on the 
property (although the calculation of the amount of tax may be based on 
the property's sales price); the Corporation is immune from such taxes.

D. Interest and Penalties

    Interest: The Corporation will pay interest for periods before and 
during FDIC ownership on delinquent taxes properly owed at the rate 
provided under state law but only to the extent the interest payment 
obligation is secured by a valid lien. The Corporation will generally 
follow a state's own characterization as to whether a delinquency 
charge constitutes a penalty, but will reserve its right to challenge 
any charge (or portion thereof) called interest that is demonstrably a 
penalty.
    Penalties: The Corporation is not liable for any amounts in the 
nature of fines or penalties. The Corporation will not pay, or 
recognize liens for, such amounts. The Corporation will not pay 
attorneys' fees or other similar costs that may be imposed under state 
law in connection with the resolution of tax disputes.

E. Tax Liens

    General Principles: If any ad valorem real property taxes 
(including interest) on Corporation owned property are secured by a 
valid lien (in effect before the property became owned by the 
Corporation), the Corporation will pay those claims. With respect to 
property not owned by the Corporation, but in which the Corporation has 
a lien interest, any ad valorem real property taxes (including 
interest) will be paid so long as they are secured by a valid lien with 
priority over the Corporation's lien interest. Any taxes other than ad 
valorem real property taxes which are secured by a valid lien in effect 
before the Corporation acquired an interest in the property, and which 
have priority under state law over any lien interest of the 
Corporation, will be paid. However, if abandonment of its interest in 
the property is appropriate, the Corporation may elect not to pay such 
claims.
    Foreclosure: No property of the Corporation is subject to levy, 
attachment, garnishment, foreclosure, or

[[Page 65058]]

sale without the Corporation's consent. Furthermore, a lien for taxes 
and interest may attach to property in which the Corporation has a lien 
or security interest, but the Corporation will not permit a lien or 
security interest held by it to be eliminated by foreclosure without 
the Corporation's consent.
    Sale of Tax Liens: In cases in which a tax lien has been sold to a 
private party under state law, if (1) the sale takes place before the 
Corporation obtains a fee interest in the property, or if the 
Corporation has a lien interest in the property and the tax lien has 
priority over the Corporation's lien, and (2) the Corporation desires 
to eliminate the tax lien purchaser's interest, the Corporation will 
pay the amount required by state law to satisfy such interest (other 
than any fees or penalties specifically imposed to redeem such 
interest). If the tax lien does not have priority, the Corporation will 
take whatever action is necessary to ensure that its own interest is 
satisfied first. If the Corporation has a fee interest, the sale must 
protect the Corporation's interest.
    Liens for Undetermined Amounts: The Corporation generally will not 
pay non ad valorem taxes, including special assessments, on property in 
which it has a fee interest unless the amount of tax is fixed at the 
time that the Corporation acquires its fee interest in the property, 
nor will it recognize the validity of any lien to the extent it 
purports to secure the payment of any such amounts. With respect to 
property in California now owned by the Corporation that was owned by 
the RTC on December 31, 1995, or that became property of the 
Corporation through foreclosure of a security interest held by the RTC 
on that date, the Corporation will continue the RTC practice of paying 
special taxes imposed pursuant to the Mello-Roos Community Facilities 
Act of 1982 if the taxes were imposed prior to the RTC's acquisition of 
an interest in the property.

F. Challenges to Assessments

    The Corporation is only liable for state and local taxes which are 
based on the value of the property during the period for which the tax 
is imposed, notwithstanding the failure of any person, including prior 
record owners, to challenge an assessment under the procedures 
available under state law. In the exercise of its business judgment, 
the Corporation may challenge assessments which do not conform with the 
statutory provisions, and during the challenge may pay tax claims based 
on the assessment level deemed appropriate, provided such payment will 
not prejudice the challenge. The Corporation will generally limit 
challenges to the current and immediately preceding taxable year and to 
the pursuit of previously filed tax protests. However, the Corporation 
may, in the exercise of its business judgment, challenge any prior 
taxes and assessments provided that (1) the Corporation's records 
(including appraisals, offers or bids received for the purchase of the 
property, etc.) indicate that the assessed value is clearly excessive, 
(2) a successful challenge will result in a substantial savings to the 
Corporation, (3) the challenge will not unduly delay the sale of the 
property, and (4) there is a reasonable likelihood of a successful 
challenge.

G. Dispute and Notification Procedures

    Disputes: The Corporation will attempt to advise taxing authorities 
of its statutory rights and resolve all tax disputes as taxes become 
due. In order to dispose of property subject to disputed tax claims, 
the Corporation may, as business judgment dictates, enter into 
agreements with taxing authorities, title companies, or prospective 
purchasers which provide for the disputed amount to be held in escrow. 
When the closing of a transaction is threatened because of the disputed 
tax amounts, the Corporation may, as business judgment dictates, elect 
to pay the disputed tax claims under protest. In all such cases the 
Corporation shall reserve its legal rights to a refund of such disputed 
amounts and may pursue, through litigation if necessary, a 
reimbursement of the disputed amounts and any attendant costs, expenses 
and interest.
    Notification: The Corporation will attempt to notify state and 
local taxing authorities of the existence of an interest in property 
which the Corporation believes to be within the authority's 
jurisdiction.

H. Subsidiaries, Bridge Banks and Conservatorships

    For the present, the Corporation will not assert section 15 tax 
immunity for bridge banks, special asset pools covered by assistance 
transactions where the Corporation does not retain ownership, or 
conservatorships. However, a bridge bank, conservatorship of a newly-
formed institution, or an assisted acquirer is not liable for any 
obligations not specifically assumed from a receiver (as in a ``pass-
through receivership''). In this situation, the acquiring institution 
may not be liable for any penalties that continue to accrue after the 
establishment of the de novo institution.
    Additionally, for the present, the Corporation has determined 
generally not to assert section 15 tax immunity on behalf of state-
chartered corporations, the stock of which is wholly or partially owned 
by the Corporation acting in any of its capacities.

    By Order of the Board of Directors. Dated at Washington, D.C., 
this 26th day of November 1996.

Federal Deposit Insurance Corporation.
Jerry Langley,
Executive Secretary.
[FR Doc. 96-31208 Filed 12-9-96; 8:45 am]
BILLING CODE 6714-01-P