Ongoing Receivership issues with the IRS are holding up distribution payments to USFIA victims.

The issue between the USFIA Receivership and the IRS stems from a concern that, should the Receiver make distribution payments, unresolved tax liability might leave the Receivership on the hook.

As detailed in the USFIA Receiver’s March 14th Twenty-Fourth Interim Report;

To that end, the Receiver and counsel have repeatedly followed up with the IRS in pursuit of an expedited review.

The Receiver, his staff and counsel have all continued to press the IRS to resolve outstanding tax issues so that the Receiver can make distributions to the victims.

The IRS has finalized a tax penalty of $29,000, however this doesn’t address any pending liability for unpaid taxes.

While the Receiver believes that the IRS does not have any claims relating to the receivership period (the receivership returns filed do not reflect any tax liability), the Receiver has been unable to confirm this with the IRS.

Nor is the finalized $29,000 penalty set in stone;

The IRS Los Angeles Insolvency Department personnel also recently notified the Receiver’s counsel that the IRS claim could be amended.

Spelled out, if the Receivership makes a claim while resolution of these tax issues are pending, and

the IRS amends its claim after the receivership funds have been distributed, the IRS can pursue recovery against the Receiver based on the personal liability.

This leaves the Receiver in the position of being potentially personally liable if he were to distribute receivership estate funds and the IRS later amends its claim for a larger amount.

The Receiver may be personally liable for federal claims, including tax claims, that the Receiver knew about or should have known about.

The IRS has confirmed there are no USFIA taxes due, however the IRS has also refused

to engage with the Receiver to address the full resolution of the pre and post receivership tax returns, (i.e. address the potential that the IRS could amend its claim).

As a result, the Receiver is unable to distribute any of the $63 million it is currently sitting on.

When the IRS intends to resolve USFIA’s tax issues (potential or realized), is unclear.

As of December 2020, there is $80.7 million in allowed claims waiting to be paid out.

Issues between the IRS and USFIA Receivership were identified as far back as July 2020.


Update 12th June 2022 – The USFIA Receivership and IRS have reached an agreement.

The agreement prioritizes USFIA victim claims over those of the IRS.