Boston, MA 07/04/2014 (wallstreetpr) – Doral Financial Corp. (NYSE:DRL) is seeking up to $230 million in the tax refund from the government of Puerto Rico. The company recently announced that the appeals court in the island reversed a ruling by a lower court that claimed it lack jurisdiction to decide on the weighty matter. That comes as good news for the bank given that the burden of proof in the case will lie on the shoulders of the Treasury Department.
In addition to reversing the ruling, the appeals court also ordered holding of a hearing on the matter in which the company claims the Puerto Rican government unlawfully voided its claims to a tax refund.
Puerto Rico is reeling under the weight of bulging debt that has heightened concerns within Doral Financial Corp. (NYSE:DRL) as the company fears for its money that could be lost as financial situation in the U.S. commonwealth spins out of control.
Impact on shares
Shares of Doral Financial Corp. (NYSE:DRL) have dropped more than 52 percent since the beginning of this year as concerns over Puerto Rican debt situation heighten. However, shares of the company have gone up in the past one month as the company reported positive progress in its quest to recoup its money in the island.
Burden of proof
In the case against the government, Doral Financial Corp. (NYSE:DRL), one of the largest banks in Puerto Rico, wants the Treasury Department to prove the basis on which it voided the bank’s claim to about $230 million in the tax refund.
The bank has been adversely affected by the tough economic situation on the island to the point that it announced that it could end up selling some of its assets so as to meet regulatory compliance.
The bank announced receiving a letter in May from the Federal Reserve Bank of New York that asked it to enter the tax issue as a loss and write off the asset.
Doral Financial Corp. (NYSE:DRL), a bank holding company, has a market value of $49 million and provides a range of retail banking solutions mainly through subsidiaries.