J.P. Morgan (NYSE:JPM) is trying to get a $1.4 billion tax refund, something a number of companies have quietly doing as part of the stimulus bill.
The context of the situation is a company is allowed to apply losses incurred in 2008 or 2009 against taxes they had paid over the prior five years, instead of only two years.
What makes J.P. Morgan qualify for the $1.4 billion is when they took over Washington Mutual, which is eligible for around $2.6 billion in tax refunds from major losses in 2008.
Sources say at this time it looks like J.P. Morgan would be allowed to claim a little over half of the $2.6 billion, which is where the $1.4 billion figure came from.
How it would work is $1.55 billion would be held by the FDIC, which would be used against losses J.P. Morgan takes from lawsuits related to their taking over Washington Mutual. Of that, $1.4 billion would be allowed to be used in the form of a tax refund.
Although Washington Mutual bondholders have resisted Chase receiving the tax refund because of taking TARP money, Chase responded by saying the taxes being referred to were paid by Washington Mutual, and have no relevancy to whether or not TARP recipients should be banned from the refund.
The bottom line in all of this is J.P. Morgan is trying to keep from having to pay out damages from its own capital after taking over Washington Mutual.
