Opinion ID: 1918302
Heading Depth: 3
Heading Rank: 2

Heading: Sovran

Text: Sovran was originally chartered as D.C. National Bank. a national bank with its principal office in Washington, D.C. As a financial institution, D.C. National Bank was subject to the D.C. corporation franchise tax under D.C.Code § 47-1807.1(1) to § 47-1807.2. [10] Following a series of mergers involving D.C. National Bank's parent institution, including a merger into Sovran Financial Corporation, D .C. National Bank (now Sovran) became a member of an affiliated group of corporations within the meaning of IRC § 1504. As such, Sovran participated in filing consolidated federal tax returns along with the other affiliated members for the period at issue. The majority of the other corporations participating in the federal consolidated return, however, were not subject to District taxation. [11] In 1991, Sovran reported to the IRS on the consolidated federal income tax return of the affiliated group that it had sustained a separate NOL of $113,050,947, independent of any income, loss, deduction, or other offset by any other affiliated member. This NOL was, in part, applied in 1991 to offset the federal income of the other affiliates. The remaining NOL was carried back as a deduction on the federal consolidated returns of the group for years preceding 1989, [12] and thus used to offset the taxable income realized in those years by the group, most of whom were not subject to District taxation. In this manner, Sovran's NOL sustained in 1991 was fully absorbed on the federal level by the taxable income reported by other corporations within its affiliated group during the years preceding 1989, and in 1991. Sovran's 1991 NOL was therefore not available to be used as a deduction to the federal consolidated returns for 1989 and 1990, and no consolidated NOL deduction was taken in those years. Sovran's participation in the filing of consolidated federal returns notwithstanding, it was required under D.C.Code § 47-1805.2(5)(B) and 9 DCMR § 109.1 to file separate District tax returns for the years 1986 through 1991 because not all of its affiliated corporations were subject to District franchise taxation. In its amended separate returns filed with the District for each of the years 1988, 1989 and 1990, Sovran carried back its 1991 NOL as a deduction. The District did not dispute Sovran's NOL deduction for 1988, presumably because that deduction had appeared on the federal return for that year. However, the District disallowed the NOL deductions for 1989 and 1990 because no NOL deductions were reported on Sovran's federal (consolidated) returns for those years. Sovran subsequently filed suit in the Tax Division of the Superior Court. The court granted the District's motion for summary judgment. The court adopted the District's interpretation of the statute and held that Sovran's failure to show an NOL deduction on its federal return for the years in question precluded an NOL deduction on its District return. Sovran appeals from this ruling.