By Ananda Shorey
WASHINGTON – The Supreme Court on Tuesday rejected an appeal from an area homebuilder that wanted a refund of $6.8 million in transfer and recordation taxes it paid to the state while it was under bankruptcy protection.
An attorney for NVR Inc. said the homebuilder wanted the Supreme Court to hear its case to resolve a conflict on bankruptcy law between the 4th and 2nd U.S. circuit courts. Andrew Weiner said it is unfortunate that the Supreme Court declined to take the opportunity to resolve the conflict.
Weiner said property transfers made “under a plan confirmed” in bankruptcy law are exempt from taxes, but the U.S. 4th Circuit Court of Appeals in Richmond disagreed in July.
“It appears that until the conflict is resolved there will be different rules of exemption, (depending on) whether a case arrives in the 4th Circuit or another circuit,” Weiner said.
But Maryland Assistant Attorney General Julia Andrew said the 4th Circuit was correct to apply the 11th Amendment in this case and she welcomed the high court’s refusal to take up the issue.
According to court documents, NVR filed for Chapter 11 bankruptcy in April 1992. It continued to sell homes throughout the Mid-Atlantic, paying recordation and transfer taxes on those sales, until a bankruptcy plan was confirmed Sept. 30, 1993.
After the bankruptcy plan was confirmed, NVR asked for a refund of the recording taxes it had paid since filing for bankruptcy protection in 1992. Andrew said Virginia, New York, Delaware and North Carolina refunded about $1.2 million in taxes to NVR. But officials in Maryland and Pennsylvania refused to do so.
Andrew said NVR paid Maryland $6.3 million in taxes on sales it made between April 6, 1992, and Sept. 30, 1993. The company sought to get that money back, plus $500,000 in interest that had accrued on that amount.
Weiner said NVR filed a motion in the U.S. Bankruptcy Court, claiming that its transfers were exempt from taxation because they were made under a plan of reorganization confirmed by the bankruptcy court two years before. He said NVR was entitled to refund of taxes after the plan was approved and before the reorganization was fully consummated.
But Maryland and Pennsylvania officials argued that, under the 11th Amendment, states cannot be brought to federal court to face such a lawsuit.
Weiner said now the case will go back to a Maryland tax court to apply the 4th Circuit decision.