Imperial Corp. May Owe IRS $54 Million
Imperial Corp. of America may have improperly collected about $40 million in federal income tax refunds in 1981 and 1982 and could owe the Internal Revenue Service about $54 million, or about 27% of its stockholders equity, the company disclosed Friday.
The possible overpayment, discovered during an IRS audit of Imperial’s tax returns, arises from the company’s carry-back of losses following its acquisition of USLIFE Savings & Loan Assn. in 1981.
Imperial, holding company for Imperial Savings & Loan, said it would “vigorously” protest the IRS’ preliminary position that the refunds should be returned.
“At the time, our tax counsel said we had a reasonable basis for the refunds,” said Bill Haynor, Imperial’s senior vice president of strategic planning and marketing.
If Imperial is forced to pay back the total now owed--$40 million in refunds and $14 million in interest--then it could claim tax-loss carry-forwards to offset future earnings, Haynor said.
As the company fights the IRS’ claim, however, interest payments will continue to mount.
Imperial’s total capitalization is more than 4% of its $8.5 billion in assets--above regulatory net-worth requirements. However, if the company was forced to return the $54 million to the IRS, then its net-worth ratio would fall below the 3% minimum required by regulators, according to Haynor.
However, it is “possible that, if this thing were dragged out, we could earn enough by then” so that the company’s net worth would not fall below the 3% minimum, said Haynor.
Imperial also reported Friday that earnings for the second quarter ended June 30 dropped to $507,000 from $7.6 million last year. The decline was primarily the result of a $4.1-million after-tax loss from the default of $25.1 million in securities that Imperial had pledged as collateral for a loan from Bevill, Bresler & Schulman Asset Management, a government securities dealer that was placed in Chapter 11 in April.
The company will continue to improve its interest-rate spread by placing a “greater emphasis on the sale of fixed-rate loans,” according to Matthew J. Shevlin, Imperial’s departing chief executive.
