Chrysler turned away by bankruptcy court in tax-refund quest

NEW YORK (Bloomberg) -- Chrysler Group couldn't get a New York bankruptcy court's help in its bid to recover an alleged $50 million overpayment of state unemployment insurance premiums.

Michigan, Illinois and Indiana base an employer's unemployment insurance taxes on the number of claims the company was responsible for causing in the three preceding years.

Chrysler has been controlled by Italy's Fiat S.p.A. since its 2009 bankruptcy and Fiat gained full ownership of the U.S. automaker this year.

When a buyer takes over a business, the successor is saddled with the so-called experience rating of the former owner.

Chrysler Group, or New Chrysler, asked a bankruptcy court to declare that the sale-approval order barred the states from using the so-called experience rating of the old Chrysler, or Old Carco LLC.

New Chrysler said the sale order didn't make it a successor.

The order also allegedly gave New Chrysler the business "free and clear" of such claims.

U.S. Bankruptcy Judge Stuart Bernstein never reached the question of what the tax rate should be.

In an opinion last week, he said the federal Tax Injunction Act deprived him of the authority to decide the dispute.

That statute bars a federal court from preventing the collection of state taxes so long as there is a "speedy and efficient" state-court procedure to challenge the levy, the judge said.

Bernstein parted ways with two bankruptcy judges who have said the act didn't preclude them from interpreting their own prior orders.

After filing under Chapter 11 in April 30, 2009, Old Chrysler sold the business in June 2009, creating New Chrysler. Old Chrysler confirmed a liquidating Chapter 11 plan in April 2010.

The bankruptcy petition listed assets of $39.3 billion and debt totaling $55.2 billion.

The plan gave 55 percent ownership of New Chrysler to a UAW trust to provide health benefits for Chrysler workers.

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