§ 136.2     Taxes before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 136.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Taxes can be entitled to priority in two ways: (1) the tax is not secured by a lien1 and fits a category described in § 507(a)(8)2—income taxes for a taxable year for which a return is last due after three years before the date of the filing of the petition, property taxes incurred before the commencement of the case, withholding taxes for which the debtor is liable, employment taxes, excise taxes, customs duties and a compensatory penalty related to any of the above—or (2) the tax is incurred by the estate and satisfies the administrative expense definition in § 503(b)(1)(B).

[2]

Prepetition taxes described in § 507(a)(8) are priority claims entitled to full payment under § 1322(a)(2) but without postpetition interest in a Chapter 13 case.3 The second route to priority status for taxes—administrative expenses under § 503(b)(1)(B)—is controversial.4 After reordering by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),5 § 507(a)(2) provides a second priority for “administrative expenses allowed under section 503(b) of this title.”6 Administrative expenses under § 503(b) include “any tax . . . incurred by the estate, whether secured or unsecured, including property taxes for which liability is in rem, in personam, or both, except a tax of a kind specified in section 507(a)(8).”7 There are many reported cases treating administrative expenses as priority claims entitled to full payment in a Chapter 13 case notwithstanding the absence of a separate reference to administrative expenses in § 1322(a)(2).8

[3]

The Bankruptcy Code and the Tax Code conspire to make it difficult to determine what taxes, if any, are “incurred by the estate” in a Chapter 13 case. The initial barrier is 26 U.S.C. §§ 1398 and 1399, which provide for the creation of a separate taxable estate in individual Chapter 7 and Chapter 11 cases—at least with respect to income taxes. Section 346 of the Bankruptcy Code extends this separate estate concept to state and local taxes measured by income—again in Chapter 7 and Chapter 11 cases only. There is no mention of Chapter 13 in these sections of the Bankruptcy Code and Tax Code, leading to the conclusion that the commencement of a Chapter 13 case does not create a separate taxable entity—at least with respect to state and federal income taxes.

[4]

It would be easy to stop here with the proposition that “administrative tax” is an oxymoron in a Chapter 13 case because there is no separate taxable entity that could “incur” a postpetition tax for § 503(b)(1)(B) purposes. Unfortunately, several reported cases have leaped this hurdle and found a path to administrative expense status for taxes in Chapter 13 cases.

[5]

For example, in United States v. Fowler (In re Fowler),9 the U.S. Court of Appeals for the Ninth Circuit considered debtors that began in a Chapter 11 case. While in Chapter 11, the debtors operated a business and incurred federal employment tax liabilities. It was conceded that these employment tax liabilities were administrative expenses in the Chapter 11 case. The Fowlers converted to Chapter 13 and commenced battle with the IRS with respect to the status of the administrative expense claims for unpaid employment taxes from the Chapter 11 portion of the case.

[6]

The Ninth Circuit stated the question as “whether the debt lost its administrative expense status upon conversion.”10 This question was important because of the different treatment of postpetition interest:

Postpetition tax debt may constitute an administrative expense if it relates to “any tax incurred by the estate,” . . . . The first priority [now second priority] accorded to administrative expense taxes also extends to interest and penalties that accrue on that debt. . . . A Chapter 13 confirmation plan [sic] must provide that administrative expenses, including penalties and interest, be paid in full as priority claims. See § 1322(a)(2) . . . . In contrast, a tax which is prepetition and unsecured is generally given eighth priority. § 507(a)(8). These eighth priority tax claims are also paid in full over the term of the Chapter 13 plan but without interest. See generally § 1322(a) . . . . Therefore, the most important distinction between administrative expense tax claims and unsecured priority tax claims in Chapter 13 is that the IRS cannot recover interest on prepetition unsecured priority tax claims.11
[7]

Citing § 348(d) as “preserving administrative expense status upon conversion from Chapter 11,” the Ninth Circuit held that the employment taxes accrued during the Chapter 11 portion of the Fowler’s bankruptcy case retained administrative expense status after conversion to Chapter 13. The Ninth Circuit rejected the argument by the debtor that the existence of postpetition claims under § 1305 in Chapter 13 cases required a different result.12 The Ninth Circuit also rejected the argument that administrative expense status was impossible because the Chapter 13 estate was not a taxable entity:

[T]he Fowlers argue that the tax debt must be recharacterized as prepetition because a Chapter 13 estate cannot be charged with an administrative claim for taxes, relying on § 346(d) and 26 U.S.C. § 1398. We find this argument to be without merit. Both of these statutes relate to income taxes. Section 346(d) provides that in Chapter 13 bankruptcy state or local taxes “imposing a tax on or measured by income” of the bankruptcy estate or debtor may only be taxed to the debtor, not to the estate. 26 U.S.C. § 1398 is a tax provision that controls the treatment of taxpayers in Chapter 7 and Chapter 11 bankruptcy proceedings for federal income tax purposes. However, the Fowlers’ tax debt involves only employment taxes, not income taxes, so neither § 346(d) nor 26 U.S.C. § 1398 applies here.13
[8]

There are perhaps two ways to read the Ninth Circuit’s decision in Fowler. By one view, Fowler holds that once incurred by an estate—a Chapter 11 estate in Fowler—a claim retains its administrative expense status at conversion even though the chapter to which the case is converted is a chapter in which the estate could not incur an administrative expense tax. Another reading would be that because 26 U.S.C. § 1398 addresses only income taxes, employment taxes can be incurred by a Chapter 13 estate.

[9]

If the second reading of Fowler is right, then Chapter 13 estates can incur taxes other than taxes measured by income and those other taxes could be administrative expenses. Real estate taxes might fall in this category.14 Administrative expense taxes of this sort would be entitled to the second priority in § 507(a)(2) and to full payment—arguably without interest—under § 1322(a)(2). There may be circumstances in which a tax entitled to administrative expense priority would also, or alternatively, be a postpetition claim under § 1305.15

[10]

Another confusing aspect of Fowler is its treatment of the postpetition interest question. As quoted above, the panel in Fowler explains that there are prepetition priority taxes entitled to full payment without interest through a Chapter 13 plan; and there are postpetition taxes incurred by the estate that are administrative expenses entitled to priority and full payment with postpetition interest—citing § 1322(a)(2). The problem here is that § 1322(a)(2) is the only source for the full-payment requirement in a Chapter 13 case, and it applies equally to all priority claims without regard to where they fall in the list in § 507(a).16 If administrative expenses are priority claims entitled to full payment by § 1322(a)(2), it is not obvious why administrative expenses get postpetition interest when priority prepetition taxes would not. Fowler just says it is so. Other courts have said otherwise.17

[11]

Fowler is not alone in its conclusion that a Chapter 13 estate can incur taxes entitled to administrative expense status and priority under § 503(b). In re Hall,18 In re Knudsen,19 In re Dawes20 and In re Schilke21 are all Chapter 12 cases in which postpetition income taxes incurred from the sale of farm property are treated as liabilities of the estate. These holdings are relevant because important parts of the statutory scheme in Chapter 12—in particular, the treatment by 26 U.S.C. §§ 1398 and 1399—are the same in Chapter 12 and Chapter 13.22 These courts all conclude that capital gains taxes on the postpetition sale of property in a Chapter 12 case can be an administrative expense notwithstanding that no separate taxable estate exists in a Chapter 12 case. These holdings go beyond the conclusion in Fowler because there is no doubt that the taxes in these Chapter 12 cases were income taxes that would not fall outside 26 U.S.C. §§ 1398 and 1399 as the Ninth Circuit found with respect to employment taxes in Fowler.

[12]

There are contrary cases. In particular, two cases out of the District of Massachusetts—In re Whall23 and In re Brown24—both hold that governmental claims for postpetition taxes cannot be administrative expenses in a Chapter 13 case because the Chapter 13 estate is not a separate taxable entity. Rejecting the logic in Dawes, the bankruptcy court in Whall explained:

[T]here is simply no separate taxable estate to incur taxes under 11 U.S.C. § 503(b)(1)(B)(i) in a Chapter 13 case. “To hold the Chapter 13 estate liable for [a] tax when it does not exist as a taxable entity defies common sense as well as Congress’ intent.”25
[13]

For the moment,26 it is enough to say that there is controversy whether a Chapter 13 estate can incur taxes that would become administrative expenses entitled to priority under § 507(a)(2) and to full payment under § 1322(a)(2). The issue is complicated enough without mentioning that even courts inclined to follow Fowler, Hall and Dawes must then face the problem that the Chapter 13 estate may vest in the debtor at confirmation under § 1327(b).27 There is also the problem that postpetition taxes eligible for priority as administrative expenses may also “become payable” after the petition for purposes of treatment under § 1305 as postpetition claims.28

[14]

Unpaid federal or state income taxes for the three years preceding the filing are priority claims under § 507(a)(8) entitled to full payment without postpetition interest under § 1322(a)(2).29 For example, in a case filed in 1987, federal income taxes assessed for tax years 1978 through 1982 fail the three-year requirement of (former) § 507(a)(7)(A)(i) (redesignated as § 507(a)(8)(A)(i)) and need not be paid in full.30 There is also a special 240-day assessment period applicable to taxes that are entitled to priority under § 507(a)(8)(A)(ii) (§ 507(a)(7)(A)(ii) of prior law)—income taxes assessed within 240 days of a Chapter 13 petition are priority claims that must be paid in full without regard to the tax year involved.31

[15]

Though not always based on the same analysis—even before the 2005 amendments to § 507(a)(8)—many courts held that the three-year requirement in § 507(a)(8)(A)(i) and the 240-day assessment period in § 507(a)(8)(A)(ii) were suspended for any period during which the debtor was in a bankruptcy case; and these time periods were extended for six additional months after the debtor emerged from a (prior) bankruptcy case by 26 U.S.C. § 6503(b).32 In 2002 in Young v. United States,33 the Supreme Court held that the three-year lookback for priority in § 507(a)(8)(A)(i) was subject to equitable tolling and excluded time during a prior bankruptcy case when the IRS was subject to the automatic stay. Cases applying Young recognize that the three-year lookback for priority and nondischargeability of taxes is tolled during prior Chapter 13 cases.34

[16]

BAPCPA amended § 507(a)(8) in three ways to exclude from the counting of any relevant period the following: (1) § 507(a)(8)(A)(ii)(I) excludes “any time during which an offer in compromise with respect to that tax was pending or in effect during the 240-day period, plus 30 days”; (2) § 507(a)(8)(A)(ii)(II) excludes “any time during which a stay of proceedings against collections was in effect in a prior case under this title during that 240-day period, plus 90 days”; and (3) a hanging sentence was added to the end of § 507(a)(8):

An otherwise applicable time period specified in this paragraph shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or proposed against the debtor, plus 90 days; plus any time during which the stay of proceeding was in effect in a prior case under this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 days.35
[17]

Debtors who have neglected to file tax returns for any prepetition years may need special tax advice to manage the priority claims and nondischargeable claims that result from that failure.36 Because of what some would describe as a glitch in the Bankruptcy Code, in cases filed before October 17, 2005,37 tax claims for willfully omitted income and for the filing of a fraudulent tax return were not entitled to priority in a Chapter 13 case and were dischargeable upon the completion of payments under the plan.38 Section 1328(a)(2) was amended by BAPCPA to except some taxes from discharge at the completion of payments in a Chapter 13 case—including claims for unfiled returns, fraudulent returns and willful evasion of taxes.39

[18]

Certain kinds of property taxes are entitled to priority under § 507(a)(8)(B). In cases filed before the effective date of BAPCPA, the property tax had to be assessed before the commencement of the case and be payable after one year before the filing. Determining when a state or local property tax was “assessed” for (former) § 507(a)(8)(B) purposes was a hair-pulling experience.40 BAPCPA amended § 507(a)(8)(B) to require that the tax be “incurred,” rather than “assessed,” before commencement of the case.41 Also, the property tax must be an unsecured claim to be entitled to the § 507(a)(8) priority—property taxes that constitute a lien under state law are not § 507(a)(8) priority claims in a Chapter 13 case.42 In contrast, a state or local property tax that is not imposed on or measured by income that is “incurred by the estate” after the petition that meets the definition of an administrative expense under § 503(b)(1)(B)(i) might fit the priority in § 507(a)(2) without regard to whether the underlying debt is a lien under state law.43 And then there is the possibility that a property tax that is a personal liability of the debtor under state law that “becomes payable” after the petition is a postpetition claim under § 1305—without regard to when the tax was “incurred.”44 The Bankruptcy Reform Act of 1994 created a new exception to the automatic stay for “the creation or perfection of a statutory lien for an ad valorem property tax . . . if such tax comes due after the filing of the petition.”45 That exception was expanded by BAPCPA to include the creation or perfection of a statutory lien for an ad valorem property tax, “or a special tax or special assessment on real property whether or not ad valorem, imposed by a governmental unit, if such tax or assessment comes due after the date of the filing of the petition.”46

[19]

The problems of characterization of property taxes in Chapter 13 cases are well illustrated in In re Jenkins.47 The debtor in Jenkins filed Chapter 13 on March 31, 2007, owning real property that was in foreclosure. The 180-day deadline for the timely filing of proofs of claim by governmental entities48 was September 27, 2007. On January 28, 2009, the Mercer County Treasurer filed a proof of claim for outstanding real estate taxes in the amount of $8,039.46. Of that amount, $2,021.08 constituted “real estate taxes that were outstanding as of December 31, 2006, the last billing period before the Debtor filed her petition.”49 The balance, $6,018.38, was described by the court as “amounts which accrued postpetition.”50 The debtor objected to the County Treasurer’s claim on the ground that it was untimely filed. The County Treasurer responded that notice of the bankruptcy filing was insufficient but in any case, the claim was allowable as a postpetition claim under § 1305.

[20]

The bankruptcy court found that the County Treasurer had adequate notice in time to file a timely proof of claim before September 27, 2007. But all was not lost for the County. The court then found that the $6,018.38 portion of the claim that “accrued postpetition” was a postpetition claim under § 1305(a)(1). With respect to that portion, “neither the Bankruptcy Court or Rules provide a deadline for a party to file a proof of claim for the kind of obligation described in § 1305.”51 Accordingly, the court allowed the postpetition portion of the real estate taxes and disallowed as untimely the prepetition portion. In a footnote, the Jenkins court said this about the possibility that the property taxes were an administrative expense:

Although not presented as an issue, Ohio law would appear to hold that liability for a real estate tax debt is limited to in rem relief, with no in personam liability attaching to the obligation. . . . A question, thus, arises whether a real estate tax obligation would qualify as a “claim against the debtor” for purposes of § 1305(a). In the end, however, this issue is more of an academic exercise because accrued and owing postpetition real estate taxes will normally qualify as an administrative expense under § 503(b)(1)(B)(i), which specifies that it includes “property taxes for which liability is in rem, in personam, or both.”52
[21]

Jenkins raises more questions than it answers with respect to the status of property taxes in Chapter 13 cases. As noted in Jenkins, § 503(b)(1)(B)(i) includes property taxes in the administrative expense priority but only a property tax “incurred by the estate.” Is there an estate in a Chapter 13 case for property tax purposes? As discussed above, in Fowler the Ninth Circuit concluded that §§ 1398 and 1399 of the Tax Code together with § 346 of the Bankruptcy Code indicate there is no estate for income tax purposes in a Chapter 13 case. A property tax is not an income tax, and Jenkins recognizes the possibility that a postpetition property tax could be either a postpetition claim under § 1305 or an administrative expense under § 503(b)(1)(B)(i). Property taxes that are personal liabilities of the debtor could be both. This is not a comforting picture because the shifting status of property taxes creates the very uncertainty identified in Jenkins—in what form and on what schedule must or can a claim be filed for property taxes?

[22]

Property taxes are strange birds under state law. It is not unusual for property taxes to become a lien on real property as of the first moment of the current year (for example, property taxes for calendar year 2006 become a lien on January 1, 2006), but property taxes for the current calendar year become payable without penalties or interest at a much later date (perhaps, February 28 of the following calendar year). Because § 1305 postpetition status turns on when a claim against the debtor becomes payable,53 it is not idle to ask the question, when did the 2006 property taxes become payable in Jenkins?

[23]

There is no discussion in Jenkins with respect to when the property taxes for 2006 became payable. If the 2006 property taxes became payable after March 31, 2007—and there are cases, discussed below54 that admit this possibility—then even the 2006 taxes could be allowable § 1305 claims in Jenkins.

[24]

Jenkins identifies two different kinds of property taxes that would have different filing deadlines and different potential treatments in Chapter 13 cases. In a state in which property taxes are not personal liabilities of the property owner, a property tax could not be a § 1305 postpetition claim but could be an administrative expense if incurred by the estate for § 503(b)(1)(B)(i) purposes. In a state where the debtor is personally liable for property taxes, a postpetition property tax could be a § 1305 postpetition claim against the debtor.

[25]

Notice that the Mercer County Treasurer chose to file a proof of claim in 2009 with respect to the 2006 taxes and for subsequent (postconfirmation) years. To the extent the County sought to collect § 1305 postpetition claims, filing that claim voluntarily subjected the creditor to whatever treatment was provided (or not) in the plan for postpetition claims.55 In Jenkins, it just happened that the plan provided full payment for § 1305 claims.

[26]

If the postpetition parts of the proof of claim filed in Jenkins are administrative expenses—and this possibility is suggested in the opinion—then the postpetition part of the taxes would become an administrative expense under § 503(b)(1)(B)(i) which would be a § 507(a)(2) priority entitled to full payment without interest in a Chapter 13 case.56 The taxing authority would probably prefer not to file a claim if § 1305 treatment does not include postpetition interest and penalties. Filing a claim could be characterized as a “request” for payment of an administrative expense—except that after BAPCPA, a taxing authority does not have to file a request to have an allowable administrative expense under § 503(b)(1)(D).57

[27]

So, what happens if the property tax is a personal liability under state law but the taxing authority does not file a proof of claim or a request for payment? It can still be an administrative expense under § 503(b)(1)(D) after BAPCPA, and that administrative expense would be a priority claim under § 507, entitled to full payment without interest under § 1322(a)(2). Can the holder of a § 1305 claim control allowance, payment and discharge by not filing a proof of claim if the claim can also, or alternatively, be characterized as an administrative expense with respect to which no “request” need be filed? BAPCPA took a complicated situation and made it more complicated.

[28]

Many jurisdictions have special “rents” or assessments for the use of water and sewer. Such rents typically are not priority property taxes but are ordinary prepetition debts not entitled to full payment.58

[29]

Employment taxes for which a return was due after three years before the filing of a Chapter 13 petition are priority claims under § 507(a)(8)(D). It has been held that federal unemployment taxes are entitled to priority notwithstanding the time limitations contained in the cross-reference in § 507(a)(8)(D) to § 507(a)(4) (formerly § 507(a)(3))—“[T]he 90-day [now 180-day] period of time before the date of the filing of the petition or the date of the cessation of the debtor’s business is not a consideration in determining the applicability of 11 U.S.C. § 507(a)(8)(D).”59

[30]

Characterization of a tax liability as a “trust fund” tax under § 507(a)(8)(C) or as an “excise tax” under § 507(a)(8)(E) can make a difference in a Chapter 13 case: priority status for excise taxes is limited by § 507(a)(8)(E)(i) and (ii) to returns due after three years before the date of the filing or transactions occurring during the three years preceding the filing; trust fund taxes under § 507(a)(8)(C) are not limited with respect to the date incurred or payable.60 In Peiffer v. Alabama Department of Revenue (In re Peiffer),61 the court determined that Alabama sales taxes for years 1981 through 1983 were trust fund taxes under (former) § 507(a)(7)(C), not excise taxes under (former) § 507(a)(7)(E). Based on this characterization, the taxes were not stale in a Chapter 13 case filed in 1990 and were entitled to full payment priority under § 1322(a)(2). Similarly, in In re St. Hilaire,62 the court determined that a Massachusetts meals tax collected by retailers from customers was a trust fund tax entitled to priority under (former) § 507(a)(7)(C), notwithstanding that the meals taxes related to a period more than three years before the Chapter 13 petition. Surcharges imposed by New Jersey law on violators of certain motor vehicle statutes did not qualify as excise taxes entitled to priority under § 507(a)(8)(E)—the surcharges were penalties, not taxes.63

[31]

Postpetition taxes present other difficult issues in Chapter 13 practice.64 The imprecise and inconsistent words used in the Bankruptcy Code to define the treatment of “postpetition claims”65 affect tax claims in many ways. Depending on when the taxes arise,66 are incurred,67 are assessable,68 become payable69 and to what entity, activity or property the taxes relate, postpetition taxes may be priority claims under § 507(a)(8), postpetition claims under § 1305, administrative expenses under §§ 503(b)(1) and 507(a)(2) or something else altogether.

[32]

For example, in United States v. Ripley (In re Ripley),70 the U.S. Court of Appeals for the Fifth Circuit held that self-employment taxes “become payable” when the debtors are required to file their tax returns, not when estimated tax installment payments are due; thus, in a Chapter 13 case filed in November of 1987, unpaid self-employment taxes for 1987 were postpetition claims under § 1305.71 Courts following Ripley conclude that income taxes for the calendar year ending before the year in which the petition is filed may be prepetition priority claims or postpetition (nonpriority) § 1305 claims depending on individual facts such as whether a return is due or has been filed, whether an extension has been sought or is available, and the like. Courts applying Ripley have struggled to differentiate postpetition taxes under § 1305 from administrative taxes under § 503(b)(1)(B) and to assign appropriate filing deadlines and priorities for payment.72

[33]

The Bankruptcy Appellate Panel for the Tenth Circuit and, most recently, the U.S. Court of Appeals for the Ninth Circuit have rejected Ripley. In Dixon v. IRS (In re Dixon),73 the Tenth Circuit BAP concluded that “become payable” in § 1305(a) referred “to a time before the last permissible day for paying taxes.”74 Applying Dixon, any tax period (event?) ending before the bankruptcy filing would produce a prepetition claim in a Chapter 13 case.

[34]

In Joye v. Franchise Tax Board (In re Joye),75 the Ninth Circuit sided with Dixon, finding support in legislative history that § 1305(a) was intended by Congress to “address taxes ‘incurred after the filing of the chapter 13 case.’”76 Acknowledging that its decision created a circuit split, the Joye court held that state taxes for 2000 were discharged in a chapter 13 case filed March 7, 2001, when the debtors scheduled and noticed the California Franchise Tax Board and the Tax Board did nothing—notwithstanding that the debtors did not file their 2000 tax return until an extension date of October 15, 2001. The Tax Board argued that the postpetition tax return created a postpetition tax claim that would not be dischargeable unless the Tax Board voluntarily filed its § 1305 proof of claim. The Ninth Circuit held that the taxes became payable prepetition. “Although the Joyes were not required to pay these taxes until April 15, 2001 (or at the latest October 15, 2001), their tax liability to the state for the year 2000 was nonetheless capable of being paid, and thus payable, as of January 1, 2001. . . . These taxes were thus properly discharged at the conclusion of Joyes’ bankruptcy case.”77

[35]

Ripley and Joye illustrate that the law is not settled whether taxes “become payable” for § 1305 purposes when the tax return is due or when the tax period (or event?) ends. This disagreement is huge and so fundamental to Chapter 13 practice that it is oddly unresolved. There is a prepetition tax year in every Chapter 13 case. Chapter 13 debtors often owe taxes for that prepetition tax year. Characterizing the claim for taxes for that prepetition tax year determines whether the taxes are prepetition claims that must be timely filed to avoid discharge without payment or are postpetition claims the payment and discharge of which are controlled by the taxing authority’s choice whether to file a claim.78 The taxing authority in Joye lost the bet by failing to file a proof of claim and failing to object to confirmation.79

[36]

BAPCPA adds another wrinkle to the issues in Joye and Ripley. Discussed elsewhere,80 BAPCPA amended § 502(b)(9) to define “timely” for the filing of proofs of claims for taxes related to a tax return “required” to be filed as described in new § 1308.81 There will be “required” tax returns for taxes that “become payable” after the petition that now have a statutory deadline for the timely filing of claims. In other words, BAPCPA has fixed a deadline for the timely filing of a class of § 1305 postpetition tax claims that will undoubtedly surprise and trap some taxing authorities not focused on this change in the filing rules.

[37]

Mentioned above in the context of property taxes, taxing authorities with claims “incurred by the estate” that “become payable” while the Chapter 13 case is pending may have an option to seek administrative expense status under § 503(b)(1)(B) or characterization as a postpetition claim under § 1305(a)(1) if the debtor is also personally liable for the debt.82 The best strategy for the taxing authority may not be obvious. Taxes “incurred by the estate, whether secured or unsecured, including property taxes” can be administrative expenses under § 503(b)(1)(B)(i).83 Administrative expenses under § 503(b)(1)(B) are entitled to priority under § 507(a)(2).84 Courts that treat administrative expenses as priority claims in Chapter 13 cases would require full payment of the postpetition tax under § 1322(a)(2) but without interest.85 By not filing a proof of claim, the holder of a postpetition tax claim under § 1305 controls the allowance and discharge of its claim and may be better positioned to demand postpetition interest.86 And there are significant timing and filing differences between the proof of claim for postpetition claim holders, and a request for payment of an administrative expense under § 503(a).87 For example, when the IRS failed to timely file a proof of claim, the government argued unsuccessfully that its claim was really a postpetition claim the allowance and payment of which were not dependent upon the filing of a timely proof of claim.88

[38]

As if the preceding discussion didn’t present enough complex issues relating to taxes, there is yet another class of priority tax claims that overlaps or severely strains the boundary between priority claims and postpetition claims. Under § 502(i), “[a] claim that does not arise until after the commencement of the case for a tax entitled to priority under section 507(a)(8)” is allowed the same as if the claim arose before the petition.89 Unfortunately, the cases have not added clarity to how § 502(i) applies to the mix of tax claims. Discussed elsewhere,90 it is arguable under §§ 501(d) and 501(c) that the debtor can file a proof of claim on behalf of a § 502(i) priority claim that arises after the commencement of a Chapter 13 case.

[39]

The taxes entitled to priority under § 507(a)(8) include some property taxes “incurred” before the petition,91 some income taxes assessable after the petition92 and allowed unsecured claims for “a tax required to be collected or withheld and for which the debtor is liable in whatever capacity.”93 For example, a sales tax collected by a Chapter 13 debtor after the petition arguably arises after the commencement of the case and would be entitled to priority under § 507(a)(8)(C) for purposes of § 502(i). Such a postpetition sales tax would be allowed and determined as if it were a prepetition priority claim.

[40]

This special class of postpetition priority taxes collides with the provisions for the filing and allowance of postpetition claims in § 1305.94 Section 1305(a)(1) states, “[A] claim against the debtor . . . for taxes that become payable to a governmental unit while the case is pending” is a postpetition claim that can only be filed by “any entity that holds” the claim.95 A § 502(i) postpetition tax claim is determined and allowed or disallowed under § 502 as if the claim arose before the petition, but a § 1305 postpetition tax claim is “determined as of the date such claim arises.”96 A § 502(i) priority tax claim arising after the petition in a Chapter 13 case may be filed by the debtor under § 501(c),97 but a § 1305(a)(1) postpetition claim for a tax that becomes payable while the Chapter 13 case is pending can only be filed by the taxing authority.98

[41]

One bankruptcy court has struggled to make these distinctions with respect to postpetition taxes. In In re Flores,99 the debtor filed Chapter 13 on August 31, 1999, owing sales taxes for the third quarter of 1999. The debtor continued to not pay sales taxes during the Chapter 13 case. After confirmation, the debtor filed a proof of claim on behalf of the state of Texas for pre- and postpetition sales taxes and moved to modify the plan to pay all the taxes through the plan. The state of Texas objected to the proof of claim and to modification of the plan.

[42]

The bankruptcy court held that the debtor could file a proof of claim under § 501(c) for sales taxes that arose after the commencement of the case that “related to prepetition activity” and with respect to which the state had not filed a claim within the 180-day deadline in § 502(b)(9). However, the debtor could not file a claim on behalf of the state for sales taxes arising after the petition and relating only to “postpetition activity.” The sales taxes that were priority claims could be paid in full through the Chapter 13 plan without postpetition interest consistent with § 1322(a)(2).100 The sales taxes related to “postpetition activity” could only be filed by the taxing authority, and the state could probably hold out for postpetition interest and penalties.

[43]

There is a lack of parallelism between §§ 502(i) and 1305. As noted above, under § 502(i), a tax claim entitled to priority that arises after the commencement of the case “shall be determined . . . as if such claim had arisen before the date of the filing of the petition.”101 Under § 1305(b), a claim for taxes that becomes payable to a governmental unit while the case is pending “shall be determined as of the date such claim arises.”102 This difference in timing might have significance if “determining” the tax claim at different times would change the amount of the claim, for example, based on the accrual of interest or penalties under tax law.

[44]

Priority tax claims are not entitled to postpetition interest in Chapter 13 cases;103 however, prepetition interest that accrued on a priority tax claim is allowed as part of the priority claim and is entitled to full payment under § 1322(a)(2).104 The same result has been seen for interest on the prepetition assessment of priority taxes.105 Interest that accrued during a prior Chapter 13 case on tax claims that survived hardship discharge under § 1328(b)106 is allowable and entitled to full-payment priority in a subsequent Chapter 13 case.107

[45]

Prepetition tax penalties may be entitled to the same priority as the underlying tax claim, depending on whether the penalty was compensatory or punitive.108 Tax penalties determined to be punitive are not entitled to priority treatment or to full payment under § 1322(a)(2).109 A prepetition tax penalty that is not entitled to priority treatment becomes an ordinary unsecured claim in the Chapter 13 case.110

[46]

Chapter 13 debtors sometimes want to control which tax claims are paid and in what order through the plan. The general rule is that payments by a Chapter 13 debtor to the IRS are not voluntary; therefore, the IRS has the right to allocate the payments among various taxes due from the debtor.111 With one notable exception, the holding by the U.S. Supreme Court in United States v. Energy Resources Co.,112 that Chapter 11 debtors can sometimes control the allocation of tax payments to the IRS, has not been interpreted to permit Chapter 13 debtors to allocate tax payments through confirmed plans.113

[47]

On unusual facts, one court held that Energy Resources is available to a Chapter 13 debtor and requires the IRS to allocate payments according to the confirmed plan. In In re Klaska,114 the debtor moved to modify the plan after confirmation to require the IRS to allocate payments first to regular income taxes and then to nondischargeable employee withholding taxes. This unusual request—debtors typically prefer to allocate tax payments first in favor of nondischargeable taxes—was occasioned because the withholding taxes were also being paid by the debtor’s partner outside the Chapter 13 case. The debtor wanted payments under the plan allocated to personal income taxes to allow the partner to first reduce the withholding tax debt. The bankruptcy court fit this proposal within the Supreme Court’s analysis in Energy Resources:

IRS policy permits only taxpayers who “voluntarily” submit payments to the IRS to designate the tax liability to which the payment will apply. . . . Courts are split on the question of whether payments made in the bankruptcy context are voluntary or involuntary. . . . United States v. Energy Resources Co., Inc., 495 U.S. 545 . . . did not resolve this issue because it determined that “[W]hether or not the payments at issue are rightfully considered to be involuntary, the bankruptcy court has the authority to order the IRS to apply the payments to trust fund liabilities if the bankruptcy court determines that this designation is necessary to the success of a reorganization plan.” . . . Thus the characterization of payments as voluntary or involuntary is no longer determinative of whether a debtor may designate the application of tax payments. . . . Chapter 13 is a reorganization chapter, and Energy Resources refers generally to “reorganization plan.” Moreover, the authority relied on in Energy Resources is equally applicable in Chapter 13 as it is to Chapter 11. . . . Accordingly, the Court finds that Energy Resources is applicable to Chapter 13. . . . The Court does not read the “necessary” language of Energy Resources as narrowly as the IRS. . . . Allowing the proposed amendment can only decrease the total amount the Debtors will have to pay and shorten the time period needed to complete the payments. This will clearly enhance the feasibility of the plan, and the Court believes that this is sufficient to satisfy Energy Resources. . . . The IRS’ position in this case is difficult to fathom. In Energy Resources and most other cases, the debtor is seeking to pay the trust fund taxes first. . . . Here, the Debtors propose to pay the income taxes first, and save the nondischargeable, trust fund employee taxes for later. This is the position usually advocated by the IRS and in the best interest of the IRS. . . . The IRS will be paid 100% . . . they will get their 100% sooner under the amended plan because another responsible person will contribute to the employee taxes before the Debtors are required to do so. Further, the IRS will be better off under the amendment because the nondischargeable trust fund taxes will be saved till last. Thus, the proposed designation will enhance rather than compromise the IRS’ right to be assured of full payment of its tax claim.115
[48]

Klaska could be good news for Chapter 13 debtors. Though the facts are unusual, the court’s analysis of Energy Resources would permit Chapter 13 debtors in many situations to direct the allocation of tax payments through a confirmed plan.116

[49]

By (strategically?) filing some claims on behalf of the IRS and not filing others, the debtor in In re Jones117 accomplished a sort of forced allocation of payments. In Jones, the IRS failed to timely file any proofs of claim. The debtors filed a proof of claim on behalf of the IRS under Bankruptcy Rule 3004,118 but only for the secured portion of the tax debt. The IRS then filed untimely proofs of claim asserting a larger secured claim and adding priority and general unsecured claims not filed by the debtors. The debtors objected. The bankruptcy court held that the untimely proofs of claim filed by the IRS could not amend the claim filed by the debtors and the IRS’s lien rights were limited by the confirmed plan. The result was that the debtors could pay the secured portion of the tax debt in full through the plan, and release the IRS’s lien, and the priority and general unsecured claims of the IRS would be discharged without payment upon completion of payments to other creditors under the plan. A neat trick that will only work if the taxing authority is asleep and debtor’s counsel is brightly focused.119

[50]

More by lack of attention than design, in United States v. Richman (In re Talbot),120 the order of payments required by the confirmed plan favored the IRS at the expense of other creditors and the debtor. In Talbot, the confirmed plan trifurcated the IRS’s claim into a priority claim of $15,875, a secured claim of $18,674 and a general unsecured claim of $3,111. The plan provided that “allowed claims will be paid in the following order: administrative/attorney, priority, secured, unsecured.”121 Twenty months after confirmation, the debtors sold their residence, and the IRS extracted $38,646 for release of its lien. The Chapter 13 trustee sought disgorgement, arguing that $11,703 plus interest had been paid to the IRS on account of its secured claim between confirmation and sale of the residence. The U.S. Court of Appeals for the Tenth Circuit held that the IRS was limited by the confirmed plan to accept $18,674 (plus interest) in full satisfaction of its tax lien. However, because the plan allocated payments to priority claims in advance of secured claims, the entire lien claim remained unpaid at the sale of the residence, and thus the trustee’s recovery from the IRS was reduced.

[51]

Although Talbot does not depend on Energy Resources, the case is instructive that a seemingly innocent plan provision allocating payments among various kinds of claims can have dramatic effects on who gets paid and when.122

[52]

Several bankruptcy courts have addressed whether the IRS can be ordered to consider a Chapter 13 debtor’s offer in compromise. The process of compromising disputed taxes is not governed by the Bankruptcy Code, and most courts have concluded that the bankruptcy court cannot order the IRS to consider a Chapter 13 debtor’s offer in compromise.123 One contrary decision rests on the interesting logic that consideration of offers in compromise by the IRS is not controlled by statute or regulation but is a purely administrative choice that must not be exercised in a manner that discriminates against Chapter 13 debtors.124

[53]

The U.S. Supreme Court used a Chapter 13 case to announce a rule with respect to the liability of partners for unpaid taxes of a partnership. In United States v. Galletti (In re Galletti),125 the IRS assessed a partnership for unpaid employment taxes but did not assess the individual partners within the three-year limitations period in 26 U.S.C. § 6501. A general partner filed Chapter 13, and the U.S. Court of Appeals for the Ninth Circuit concluded that the IRS did not have a claim in the individual debtor’s case because the IRS failed to obtain an assessment or a judgment against the individual debtor and “the time for doing so has expired.”126 The Supreme Court reversed, finding that timely assessment of the partnership extended to 10 years the limitations period for collection from individual partners. Accordingly, the IRS had a claim in the individual partner’s Chapter 13 case for the employment taxes assessed the partnership.127

[54]

Chapter 13 gets more than its fair share of bankruptcy tax issues. Chapter 13 is attractive to debtors with tax problems because debtors can pay prepetition tax claims through the plan without postpetition interest.128 Tax protesters have been attracted in droves to the Chapter 13 pulpit.129 Chapter 13 debtors regularly arrive with responsible person liability for taxes130 and often litigate the extent of tax liens.131 The exemption claims of Chapter 13 debtors regularly collide with the setoff or lien rights of taxing authorities.132 The burden of proof that favors the IRS in tax claim litigation often is decisive of Chapter 13 debtors’ objections to tax claims.133 Many mainstream and some exotic bankruptcy tax questions have been litigated in Chapter 13 cases.134The determination whether a tax is a priority claim sometimes becomes entangled with the question whether the tax is dischargeable in the Chapter 13 case.135 Dischargeability of tax debt is discussed elsewhere.136


 

1  See § 300.1 [ Secured Priority Claims? ] § 136.18  Secured Priority Claims before BAPCPA.

 

2  Section 507(a)(7) of prior law in cases filed before October 22, 1994.

 

3  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions, 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims, 299.1 [ Postpetition Interest on Priority Claims ] § 136.16  Postpetition Interest on Priority Claims before BAPCPA and 520.1 [ Postpetition Interest on Priority Claims ] § 136.17  Postpetition Interest on Priority Claims after BAPCPA. In Chapter 13 cases filed on or after October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23 (2005), amended 11 U.S.C. § 1322(b)(10) to permit a Chapter 13 plan to provide for the payment of postpetition interest on “unsecured claims that are nondischargeable under section 1328(a).” There are tax debts that are both entitled to priority under § 507(a)(8) and nondischargeable under § 1328(a). Examples include withholding taxes under § 507(a)(8)(C) and unfiled, fraudulently filed or willfully evaded taxes described in § 523(a)(1)(B) and (C). These priority, nondischargeable taxes would be eligible for the payment of postpetition interest under new § 1322(b)(10) when there is excess disposable income available. See §§ 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims, 299.1 [ Postpetition Interest on Priority Claims ] § 136.16  Postpetition Interest on Priority Claims before BAPCPA, 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA and 459.1 [ Postpetition Interest on Nondischargeable Claims: § 1322(b)(10) ] § 88.3  Postpetition Interest on Nondischargeable Claims after BAPCPA: § 1322(b)(10).

 

4  See below in this section, and see §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA, 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

5  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

6  11 U.S.C. § 507(a)(2), as redesignated by BAPCPA.

 

7  11 U.S.C. § 503(b)(1)(B)(i), as amended by BAPCPA. Under prior law, in cases filed before October 22, 1994, the priority for taxes was in § 507(a)(7).

 

8  See below in this section, and see §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2  What Claims Are Priority Claims? and 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims.

 

9  394 F.3d 1208 (9th Cir. Jan. 12, 2005) (Rymer, Tallman, Bea).

 

10  394 F.3d at 1212.

 

11  394 F.3d at 1212.

 

12  Postpetition claims under 11 U.S.C. § 1305 are discussed below in this section and in §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

13  394 F.3d at 1214.

 

14  See below in this section.

 

15  See below in this section, and see §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

16  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment, 100.1 [ Deferred Payments Are Permitted ] § 73.4  Deferred Payments Are Permitted, 100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions, 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims, 299.1 [ Postpetition Interest on Priority Claims ] § 136.16  Postpetition Interest on Priority Claims before BAPCPA and 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

17  See, e.g., In re Kingsley, 86 B.R. 17 (Bankr. D. Conn. May 16, 1988) (Shiff) (When Chapter 13 debtor engaged in business incurred liability for sales taxes after filing but before confirmation, the sales taxes were administrative expenses entitled to priority under (former) § 507(a)(1) and to full payment under § 1322(a)(2) but without postpetition interest.).

 

18  393 B.R. 857 (D. Ariz. Aug. 6, 2008) (Bury).

 

19  389 B.R. 643 (N.D. Iowa June 12, 2008) (Bennett).

 

20  382 B.R. 509 (Bankr. D. Kan. Feb. 11, 2008) (Somers).

 

21  379 B.R. 899 (Bankr. D. Neb. Nov. 27, 2007) (Saladino).

 

22  But see 11 U.S.C. § 1222(a)(2):

(a) The plan shall—
. . . .
(2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507, unless—
(A) the claim is a claim owed to a governmental unit that arises as a result of the sale, transfer, exchange, or other disposition of any farm asset used in the debtor’s farming operation, in which case the claim shall be treated as an unsecured claim that is not entitled to priority under section 507, but the debt shall be treated in such manner only if the debtor receives a discharge; or
(B) the holder of a particular claim agrees to a different treatment of that claim.

 

23  391 B.R. 1 (Bankr. D. Mass. May 28, 2008) (Hillman).

 

24  No. 05-41071, 2006 WL 3370867 (Bankr. D. Mass. Nov. 20, 2006) (unpublished) (Rosenthal).

 

25  391 B.R. at 4 (quoting In re Brown, 2006 WL 3370867, at *3).

 

26  See also the discussion of 11 U.S.C. § 507(a)(8)(B) below in this section.

 

27  See § 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate. See, e.g., In re Brilz, 96 B.R. 308 (Bankr. D. Mont. Feb. 2, 1989) (Peterson) (Property taxes accruing postconfirmation are not administrative expenses when the assets of the estate vested in the debtor under § 1327(b) and thus there was no estate to be preserved under § 503.).

 

28  See below in this section, and see §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA, 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

29  See discussion of providing for priority claims beginning at § 73.1  Plan Must Provide Full Payment.

 

30  In re Youngcourt, 86 B.R. 715 (Bankr. M.D. Fla. 1988). Accord Delgado v. Ramos (In re Delgado), 360 B.R. 406 (B.A.P. 1st Cir. Dec. 18, 2006) (Votolato, Kronreich, Somma) (In a Chapter 13 case filed on February 24, 2005, tax year 2001 satisfies requirements for priority in § 507(a)(8)(A)(i) because 2001 tax return was last due on April 15, 2002—within three years of February 24, 2005; that debtor already filed return for 2004 does not change this result.); In re Jackson, 189 B.R. 206, 210 (Bankr. M.D. Ala. 1994) (In a Chapter 13 case filed on February 7, 1990, “the return due date for taxes for the years 1982 and 1983 was more than three years before the filing of the petition, and the assessment date was more than 240 days before the filing of the petition. Therefore, these taxes fall outside the priority definition. As to 1985 and 1986 taxes, however, they do fall within the priority definition. The date of assessment for both these years was January 1, 1990.”); In re Fernandez, 188 B.R. 34 (Bankr. D. Nev. 1995) (Three-year lookback under § 507(a)(8)(A)(i) is satisfied where debtor sold residence in 1990, deferred gain beyond the two years permitted, filed an amended 1990 tax return in April 1993 and filed Chapter 13 in 1994. Hawaii’s requirement that an amended tax return be filed when there is a gain that must be recognized from the sale of a residence is a “required” return for purposes of § 507(a)(8)(A)(i).); In re Divine, 127 B.R. 625 (Bankr. D. Minn. 1991); In re Healis, 49 B.R. 939 (Bankr. M.D. Pa. 1985); In re Bradley, 36 B.R. 655 (Bankr. D. Md. 1984); In re Boyd, 25 B.R. 1003 (Bankr. S.D. Ohio 1982).

 

31  See De Jesus v. United States (In re De Jesus), 268 B.R. 185 (Bankr. D. Minn. 2001) (Because taxes for 1989 were assessed one month before debtor filed Chapter 13 case in 1994, 1989 taxes were priority claims under § 507(a)(8)(A)(ii) that must be paid in full.).

 

32  [References to § 507(a)(7) in this note are references to the Bankruptcy Code prior to amendment in 1994. Section 507(a)(7) was redesignated as § 507(a)(8) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994), effective in cases filed after October 22, 1994.] See Young v. United States (In re Young), 233 F.3d 56, 60 (1st Cir. 2000) (“We follow the majority view in favor of automatic tolling. In some cases, the equities alone might justify tolling, but the automatic tolling rule rests on a broader basis: it preserves for the government the benefit of the 1966 compromise by giving it the full three years to assess and collect taxes.”), aff’d, 535 U.S. 43, 122 S. Ct. 1036, 152 L. Ed. 2d 79 (2002); In re Morgan, 182 F.3d 775 (11th Cir. 1999) (For purposes of the priority in § 507(a)(8)(A)(i), three-year priority period for income taxes is not automatically tolled by § 108(c) for a successive bankruptcy filer, but bankruptcy court has equitable power under 11 U.S.C. § 105 to toll the priority period on appropriate facts.), on remand, 255 B.R. 247 (Bankr. N.D. Ga. 2000) (Government had a reasonable opportunity to collect taxes for 1987 and 1988 before first bankruptcy case in 1990, but the government had only 70 days from the date of assessment in which to collect taxes for 1989. Accordingly, the 1989 taxes are entitled to priority, but the three-year period is not equitably tolled for 1987 and 1988.); In re Taylor, 81 F.3d 20, 22 (3d Cir. 1996) (Three-year lookback period in § 507(a)(7)(A)(i) was suspended during pendency of prior Chapter 13 case. “[T]he fact that there is no explicit provision within § 507(a)(7)(A)(i) which tolls the three-year lookback provision during a period when an automatic stay is in effect under § 362 cannot defeat the statutory purpose of either the Bankruptcy Code or the Internal Revenue Code. To limit § 507(a) in this regard would lead to absurd results, as the government would lose its priority claim to back taxes as a result of the taxpayer’s abuse of the bankruptcy process.”); West v. United States (In re West), 5 F.3d 423, 426 (9th Cir. 1993) (240-day assessment period for priority tax claims in § 507(a)(7)(A)(ii) is suspended while the debtors were in a prior Chapter 13 case by interpreting 11 U.S.C. § 108(c) to incorporate the suspension of the priority period as described in 26 U.S.C. § 6503. “[L]iteral interpretation of § 108(c) would frustrate the Bankruptcy Code’s intricate scheme for the payment of tax claims. . . . By incorporating the suspension provisions of the Internal Revenue Code, § 108(c) reflects a policy determination that ‘it would be unfair to allow the statute [of limitations] to run against the government’s right to enforce a tax lien when, even if the government did bring suit, it couldn’t collect because it couldn’t ‘again get at’ the tax payer’s assets.’ . . . Interpreting § 108(c) literally would allow a debtor to create an ‘impenetrable refuge’ by filing a bankruptcy petition, waiting for § 507(a)’s priority periods to expire, and then dismissing the case and refiling shortly thereafter.”); United States v. Richards (In re Richards), 994 F.2d 763 (10th Cir. 1993) (Bankruptcy court has authority under 11 U.S.C. § 105(a) to suspend the 240-day assessment period in 11 U.S.C. § 507(a)(7)(A)(ii) for the time a Chapter 13 debtor is in a prior bankruptcy case. Suspending the 240-day period “fulfills and preserves Congress’s intent to afford the government certain time periods to pursue collection efforts, and at the same time prevents the debtor from avoiding priority by prolonging the initial bankruptcy proceeding.”); Pagnac v. Minnesota Dep’t of Revenue (In re Pagnac), 228 B.R. 219 (B.A.P. 8th Cir. 1998) (Three-year period for priority of taxes is suspended during the time that the automatic stay was in place in the debtor’s prior Chapter 12 case. Waugh v. IRS (In re Waugh), 109 F.3d 489 (8th Cir.), cert. denied, 522 U.S. 823, 118 S. Ct. 80, 139 L. Ed. 2d 38 (1997), controls.); Gurney v. Arizona Dep’t of Revenue (In re Gurney), 192 B.R. 529, 537–39 (B.A.P. 9th Cir. 1996) (Three-year priority for Arizona excise taxes under § 507(a)(7)(E)(i) was equitably tolled under § 105(a) during the periods Arizona was subject to automatic stays in the debtor’s prior three bankruptcy cases. Under Arizona law, there was no limitation on the state’s right to collect taxes. West v. United States (In re West), 5 F.3d 423 (9th Cir. 1993), and Brickley v. IRS (In re Brickley), 70 B.R. 113 (B.A.P. 9th Cir. 1986), were not controlling because there was no tolling provision under Arizona law that could be grafted onto § 507(a)(7)(E) through the use of 11 U.S.C. § 108(c). The panel looked instead to the Tenth Circuit’s United States v. Richards (In re Richards), 994 F.2d 763 (10th Cir. 1993), and held that “equitable authority found in Section 105(a) is broad enough to suspend the priority periods in Section 507(a)(7)(E)(i) . . . . The equities in favor of tolling are compelling. In this case, Appellant systematically filed and voluntarily dismissed Case 1, Case 2, and Case 3. During this period, and continuing through the filing of Case 4, Appellant enjoyed the protection of the automatic stay . . . . It is undisputed that Appellant’s prior bankruptcies and the pendency of the automatic stay worked as a barrier preventing Appellee’s collection efforts.”); Savini v. United States (In re Savini), 260 B.R. 689 (D.N.J. 2001) (Three-year look-back period for priority of taxes is tolled during a prior Chapter 13 case and for six months thereafter under 26 U.S.C. § 6503(h)(2).); In re Eysenbach, 183 B.R. 365, 368–69 (W.D.N.Y. 1995) (The three-year and 240-day time periods in § 507(a)(7) are tolled during prior bankruptcy case. The debtor’s first Chapter 13 case was filed in 1990 and dismissed in 1993. The debtor refiled two months later and challenged the priority status of income taxes for the years 1988 and 1989. “Courts considering the issue of whether the three-year/240 days priority time provisions contained in § 507(a)(7) are tolled during the pendency of a prior bankruptcy filing of the debtor have overwhelmingly held that the prior bankruptcy tolled the priority period. . . . [C]ourts have almost uniformly interpreted § 108(c) to activate IRC § 6503, thereby preventing the periods for nondischargeability from running during the course of a debtor’s bankruptcy case and for six months thereafter.”); United States v. Deitz, 116 B.R. 792 (D. Colo. 1990), rev’g 106 B.R. 236 (Bankr. D. Colo. 1989) (240-day period in § 507 “was tolled and extended by 11 U.S.C. § 108 and 26 U.S.C. § 6503.” Taxes assessed 329 days before the filing of debtor’s Chapter 13 petition were not dischargeable when intervening Chapter 7 petition was filed 181 days after the assessment and Chapter 13 case was filed 148 days after the Chapter 7 case was concluded. Debtor’s Chapter 7 case suspended the running of the 240-day statutory period for its duration under 11 U.S.C. § 108(c) and for six additional months after that case concluded, pursuant to 26 U.S.C. § 6503(b).); In re Breaux, No. 05-53183, 2006 WL 3909535 (Bankr. W.D. La. June 29, 2006) (unpublished) (Schiff) (Applying § 507(a)(8)(A)(ii) and Solito v. United States, 172 B.R. 837 (W.D. La. 1994), 240-day assessment period was suspended during pendency of prior bankruptcy case, allowing IRS’s priority claim. Debtor was required in prior Chapter 13 case to file delinquent tax returns. After those filings, IRS assessed tax liability, and five months later, Chapter 13 was filed.); In re Pattalochi, 269 B.R. 60 (Bankr. D. Wyo. 2001) (The three-year period in § 507(a)(8) is tolled during prior Chapter 13 case without regard to equitable considerations; but 11 U.S.C. § 108(c) does not incorporate the additional six-month period in 26 U.S.C. § 6503(h) into the three year period in § 507(a)(8)(A)(i).); In re Hicks, 261 B.R. 306 (Bankr. M.D. Fla. 2001) (Statute of limitations with respect to taxes was tolled during debtor’s eight bankruptcy cases.); In re Fiels, 260 B.R. 362 (Bankr. D. Md. 2001) (Three-year priority period in § 507(a)(8)(A)(i) is tolled during prior bankruptcy cases without regard to equitable considerations.); In re Hoppe, 259 B.R. 852, 855 (Bankr. E.D. Tex. 2001) (240-day period in § 507(a)(8)(A) was equitably tolled during debtor’s prior bankruptcy case. “The Debtor offered this Court testimony that she did not file any of her bankruptcies to frustrate the IRS or prevent it from collecting her taxes due, rather her filings were motivated by her efforts to save her home from foreclosure. While this certainly may be true, it certainly does not constitute a demonstration that equity requires that her taxes which would have been priority claims be classified as general unsecured claims just because she happened to be in a previous bankruptcy proceeding.”); In re Evoli, 258 B.R. 839 (Bankr. M.D. Fla. 2001) (Applying Morgan v. United States (In re Morgan), 182 F.3d 775 (11th Cir. 1999), three-year period in § 507(a)(8) may be tolled during prior bankruptcy case when the IRS was actually prohibited from pursuing collection activities; however, the additional six-month period in 26 U.S.C. § 6503 does not extend the three-year period in § 507(a)(8).); In re Schultz, 253 B.R. 135 (Bankr. D.N.H. 2000) (Three-year lookback period in § 507(a)(8)(A)(i) is tolled during prior bankruptcy case, and additional six-month period in I.R.C. § 6503(h)(2) is added to the priority period when a debtor files successive bankruptcy petitions.); Burt v. IRS (In re Burt), 237 B.R. 914, 918 (Bankr. N.D. Miss. 1999) (Applying Quenzer v. United States (In re Quenzer), 19 F.3d 163 (5th Cir. 1993), three year lookback for the priority of taxes in § 507(a)(8) is not automatically tolled by § 108(c); however, “an evidentiary hearing is necessary so that a record can be made as to whether the debtor’s previous bankruptcy filings constitute an abuse of the bankruptcy system or misconduct by the debtor. The presentation of proof is essential . . . in order for the court to conclusively decide whether the equitable authority found in § 105(a) should be implemented to give priority status.”); In re Barton, 236 B.R. 613 (Bankr. W.D. Va. 1999) (Section 105 provides authority for suspension of the priority periods in § 507(a)(8)(A) during prior Chapter 7 case, thus IRS’s claim is entitled to priority in current Chapter 13 case.); In re Avila, 228 B.R. 63 (Bankr. D. Mass. 1999) (Three-year period for priority under § 507(a)(8)(A)(i) was tolled during the debtor’s prior Chapter 7 case, but not for the additional six months provided in 26 U.S.C. § 6503(h).); In re Thomas, 222 B.R. 742 (Bankr. E.D. Pa. 1998) (1992 and 1993 income taxes and responsible person liability for unpaid trust fund taxes are priority claims in Chapter 13 case filed on October 17, 1997 because extensions of time for filing returns are not counted toward the three-year lookback in § 507(a)(8)(A)(i), and time the debtor spent in a prior bankruptcy case is also excluded.); In re Genung, 220 B.R. 505 (Bankr. N.D.N.Y. 1998) (Tax claims were not discharged in the debtor’s prior Chapter 7 case because offers of compromise by the debtor extended the statutory period of limitations, and only 194 of the 240 days in § 507(a)(8)(A)(ii) passed before the filing of the prior Chapter 7 case.); In re Thomas, 219 B.R. 721 (Bankr. W.D. La. 1998) (Tax claims for tax year 1993 are priority claims in Chapter 13 case filed in July of 1997 because the three-year lookback for priority in § 507(a)(8)(A) was suspended for the period during which the debtor was a debtor in a prior Chapter 13 case.); In re Moss, 216 B.R. 556, 558 (Bankr. E.D. Tex. 1997) (IRS’s claim for income taxes for 1991 and 1992 has priority in Chapter 13 case filed on November 11, 1996, because “§ 105(a) should be used to equitably toll the three year limitation under § 507(a)(8)(A)(i)” for the time the debtor spent in a prior Chapter 13 case.); In re Shabazz, 206 B.R. 116, 126 (Bankr. E.D. Va. 1996) (“[T]he majority view appears to be that both the three-year and the 240-day periods are suspended during a prior bankruptcy case, when the IRS is barred by the automatic stay from collecting the tax.” Taxes for 1990–95 are priority claims in a Chapter 13 case filed on May 30, 1996, because debtor filed four Chapter 13 cases in two and one-half years.); In re Strickland, 194 B.R. 888 (Bankr. D. Idaho 1996) (Applying West v. United States (In re West), 5 F.3d 423 (9th Cir. 1993), and Brickley v. IRS (In re Brickley), 70 B.R. 113 (B.A.P. 9th Cir. 1986), three-year period for priority under § 507(a)(8)(A) is tolled during the time debtor was in a prior bankruptcy case without regard to whether the debtor’s conduct was egregious or inequitable with respect to the payment of taxes.); Tibaldo v. United States (In re Tibaldo), 187 B.R. 673 (Bankr. C.D. Cal. 1995) (In a Chapter 7 case filed after the dismissal of a prior Chapter 13 case, the two-year period in § 523(a)(1)(B)(ii) was suspended by 26 U.S.C. § 6503(b) and (h) during the Chapter 13 case and for six months after dismissal.); In re DiCamillo, 186 B.R. 59, 62 (Bankr. E.D. Pa. 1995) (“[T]his Court agrees with the majority of courts that incorporation of the suspension provisions of the IRC through § 108(c) is appropriate to protect the government’s interests during the pendency of a bankruptcy case. Pursuant to IRC § 6503(h), a bankruptcy case suspends the running of the 240-day period of § 507(a)(8)(A) from the date of the bankruptcy petition until six months after the case is dismissed. . . . The Debtor’s initial Chapter 13 case suspended the running of [the] 240 day priority period. . . . Since the Debtor’s instant Chapter 13 case was filed within the following six months, the IRS claim . . . is entitled to priority.”); In re Jalufka, 184 B.R. 562, 568–69 (Bankr. E.D. Ark. 1995) (A priority tax claim allowed in prior Chapter 13 case survived hardship discharge and is entitled to full payment in subsequent Chapter 13 case because the three-year period in § 507(a)(7)(A)(i) is tolled during the prior case and extended for six months by 11 U.S.C. § 108(c) and 26 U.S.C. § 6503(b) and (i). “Taking into consideration the tolling effect of the first bankruptcy and second bankruptcy, three (3) years, five (5) months, and twenty (20) days elapsed between the time the 1983 return first became due, and the filing of the second bankruptcy. . . . Accordingly, the IRS’s claim based on these taxes would be entitled to priority because the claim arose within the three (3) year and six (6) month period.”); In re Reed, 165 B.R. 959, 961–63 (Bankr. N.D. Ga. 1993) (Amended proof of claim filed by IRS in October of 1992 for unpaid 1984, 1986 and 1987 federal income taxes is not stale because the three-year period under § 507(a)(7) was tolled during the time the debtor was in prior bankruptcy cases. “Here, prior to the dismissal of the Debtor’s previous case on April 30, 1992, she had been in bankruptcy continuously since November 24, 1987. That being so, Debtor’s 1984 and 1986 liabilities still fall within the scope of § 507(a)(7). . . . [T]he additional 1986 tax liability may still be assessed under applicable law after the instant chapter 13 case is either completed or dismissed. Section 6501 of the Internal Revenue Code permits tax liability to be assessed within three years after the date the tax return is filed. Debtor’s joint tax return, with her spouse, was filed on April 15, 1987. That being true, the period of assessments of addition[al] tax income for the tax year would normally have expired on April 15, 1990. However, this statute of limitations was tolled during the time debtor was in her previous bankruptcy. 26 U.S.C. § 6503(h). . . . Debtor has been continuously in bankruptcy, with an approximate one month exception, since November 1987. Therefore, Debtor’s additional 1986 tax liability is still assessable against her.”); In re Grogan, 158 B.R. 197, 201–02 (Bankr. E.D. Cal. 1993) (“Section 507(a)(7)(A) requires a tax measured by income to have been due either within three years prior to the petition date or assessed within 240 days of the petition date in order to be afforded priority status. . . . [T]he [debtors’] 1987 taxes were first due on April 15, 1988. The [debtors] filed their first Chapter 13 case within three years of April 15, 1988, on September 21, 1990. This case lasted for 159 days and was dismissed on February 21, 1991. The [debtors] filed their second Chapter 13 case on May 1, 1991, exactly three years and fifteen days from the date the 1987 taxes were first due. . . . [C]ourts . . . have nearly unanimously considered the running of those periods to be suspended under section 108(c) as a statute of limitations. . . . [T]his court agrees with established judicial interpretation regarding the applicability of section 108(c) in determining priority taxes.”); In re Ross, 130 B.R. 312 (Bankr. D. Neb. 1991) (Three-year statute of limitations provided by § 507(a)(7)(A)(i) is suspended while the debtor is in a bankruptcy case, plus six months. Debtor was in a Chapter 13 bankruptcy case on April 15, 1987, when 1986 income taxes became due. The United States is entitled to priority under § 507(a)(7)(A)(i) in a Chapter 13 case filed in January of 1991 for taxes for the tax year 1986, because the three-year period did not begin to run until debtor’s prior bankruptcy case was dismissed in August of 1988—less than three years before the refiling in January of 1991. 26 U.S.C. § 6503(b) is activated by 11 U.S.C. § 108(c), thus suspending the three-year period until debtor’s assets are no longer under court control, and for six months thereafter.); In re Wise, 127 B.R. 20 (Bankr. E.D. Ark. 1991) (Reading 11 U.S.C. § 108(c) and 26 U.S.C. § 6503(b)(i) together, the three-year statutory limitation for priority tax claims in § 507(a)(7)(A)(i) was suspended for the period of 23 months and 15 days, plus 6 months, during which debtor was protected by the automatic stay in a prior Chapter 7 case. Allowed claims of the IRS for taxes and interest for 1985, 1986 and 1987 are entitled to priority in Chapter 13 case filed in 1990.); In re Bryant, 120 B.R. 983 (Bankr. E.D. Ark. 1990) (Tax claims for 1985 and 1986 satisfy the three-year requirement in § 507(a)(7) because intervening Chapter 7 case filed in 1987, in which debtor received a discharge in 1989, tolled or suspended the running of the statute of limitations for tax collection under § 108 of the Bankruptcy Code and § 6503(b) of the Internal Revenue Code.). Contra Palmer v. IRS (In re Palmer), 219 F.3d 580 (6th Cir. 2000) (“Section 523(a)(1)(A) provides that tax debts as defined by § 507(a)(8) are excepted from discharge in a Chapter 7 case. . . . We find the meaning of these sections to be clear and unambiguous. . . . [I]ncome taxes for which a debtor’s return was due within the three years preceding the filing of a bankruptcy petition are not dischargeable, and taxes for which the return was due more than three years prior to the filing of a bankruptcy petition are dischargeable. . . . There is no other provision within the Bankruptcy Code that explicitly extends § 507(a)(8)(A)(i)’s three-year period while a debtor is engaged in a bankruptcy proceeding. . . . We find the cases relying upon § 108(c) and § 6503 to be unpersuasive, because they impute a meaning to the Bankruptcy Code that contradicts its plain language. . . . We hold that the three-year look-back period of § 507(a)(8)(A)(i) is not automatically tolled by the filing of a prior bankruptcy petition, but that the government is free to argue that other provisions of the Code—including § 105(a) and § 523(a)(1)(C)—require tolling of the look-back period in a particular case.”); In re Little, 216 B.R. 769 (Bankr. E.D.N.C. 1997) (IRS’s claim is not entitled to priority in debtors’ Chapter 13 case because 240-day assessment period in § 507(a)(8)(A)(ii) was not tolled by the filing of the debtors’ prior Chapter 7 case.); In re Macko, 193 B.R. 72, 74–75 (Bankr. M.D. Fla. 1996) (Citing Turner v. United States (In re Turner), 182 B.R. 317 (Bankr. N.D. Ala. 1995), aff’d, Civ. Action No. 96-C-1463-S (N.D. Ala. Sept. 23, 1997), neither Bankruptcy Code § 108 nor the Internal Revenue Code tolls, suspends or extends the priority period for tax claims under § 507(a)(8)(A)(ii). “The Bankruptcy Code clearly states that the 240 day priority period of section 507(a)(8)(A)(ii) may only be suspended while an offer in compromise is pending. . . . Bankruptcy Code § 108 and the I.R.C. do not toll, suspend, or extend the priority period because ‘sections 108(c) and 6503(h) do not apply to bankruptcy law.’ . . . [T]olling the priority of § 507 in any manner beyond that permitted by § 507 would frustrate congressional intent to limit the IRS collection period.”); In re Dodson, 191 B.R. 869, 874 (Bankr. D. Or. 1996) (Applying Brickley v. IRS (In re Brickley), 70 B.R. 113 (B.A.P. 9th Cir. 1986), and West v. United States (In re West), 5 F.3d 423 (9th Cir. 1993), cert. denied, 511 U.S. 1081, 114 S. Ct. 1830, 128 L. Ed. 2d 459 (1994), 1984 tax is not entitled to priority in a Chapter 13 case filed on November 1, 1994, because “[t]he principle of equity for which these cases stand supports a finding, under our particular facts, that the 1984 income taxes are not entitled to priority status in the debtors’ latest bankruptcy case. In this case the government was given a large window of opportunity to collect these taxes. This window was much greater than the language of § 108(c) and [26 U.S.C.] § 6503 contemplates. It did not collect the taxes. The equities support a treatment of a tax debt . . . as a general unsecured claim.” Government’s failure to expeditiously collect taxes during periods when no stay was in effect from three prior Chapter 13 cases defeated its arguments for priority status in fourth case.).

 

33  535 U.S. 43, 122 S. Ct. 1036, 152 L. Ed. 2d 79 (2002).

 

34  See, e.g., In re Brensing, 337 B.R. 376, 387 (Bankr. D. Kan. Jan. 24, 2006) (Berger) (Equitable tolling saves priority for postpetition taxes incurred during prior Chapter 13 case. Citing Young v. United States, 535 U.S. 43, 122 S. Ct. 1036, 152 L. Ed. 2d 79 (Mar. 4, 2002), equitable tolling applied “because during the first bankruptcy the IRS was prohibited from seeking collection on the [debtors’] postpetition 1997 Income Tax Liability absent relief from the automatic stay. . . . As a result, the Three-Year Rule was tolled as to the 1997 Income Tax Liability until a discharge order was entered in the [debtors’] first bankruptcy case on October 19, 2001.” Since current case was filed less than three years after discharge, three-year period under § 507(a)(8)(A)(i) was tolled and taxes incurred during first case remain priority. Even though parties consented to IRS filing postpetition claim in prior case, unpaid taxes remained priority claim in second case.); Hartford v. IRS (In re Hartford), Nos. 02-22247, AP 02-2187, 2003 WL 1559948 (Bankr. W.D.N.Y. Mar. 24, 2003) (unpublished) (Applying Young v. United States, 535 U.S. 43, 122 S. Ct. 1036, 152 L. Ed. 2d 79 (2002), the three-year lookback for nondischargeability of taxes under § 523(a)(1) is extended for the eight months and 22 days that prior Chapter 13 case was open.).

 

35  11 U.S.C. § 507(a)(8), as amended by BAPCPA, discussed in § 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

36  See, e.g., In re Greenspan, No. 01-24731-DK, 2002 WL 31934321 (Bankr. D. Md. Nov. 27, 2002) (unpublished) (Claim for 1988 income taxes is not time barred in Chapter 13 case filed in December 2001, because the debtor did not file a 1988 tax return; debtor’s testimony that he earned no income in 1988 overcame IRS’s evidence that a Form 1099 was submitted by an unknown employer.); Daniel v. United States (In re Daniel), 170 B.R. 466, 471 (Bankr. S.D. Ga. 1994) (Estimated tax liabilities for tax years 1989 through 1992, years in which the debtor did not file returns, are entitled to priority in a Chapter 13 case filed on May 3, 1993. “[A] literal reading of § 507(a)(7)(A) and its use of the word ‘or’ establishes that a § 523(a)(1)(B) or (C) liability may be given priority status if it falls within § 507(a)(7)(A)(i) or (ii). . . . Applying the literal reading of the statute . . . income taxes where a return was due within three years before the filing of the petition . . . are afforded priority treatment.”).

 

37  The effective date for most of BAPCPA. See § 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

38  See In re Zieg, 194 B.R. 469, 474 (Bankr. D. Neb. 1996) (Tax claim for willfully omitted income and for the filing of an admittedly fraudulent return loses its priority under § 507(a)(8)(A)(iii) because of cross-reference to § 523(a)(1)(C). In a Chapter 7 case, such a claim would be nondischargeable under § 523(a)(1)(C). That same claim is dischargeable in a Chapter 13 case under § 1328(a), and “Congress has not, however, acted to make claims due for a fraudulent return nondischargeable in Chapter 13.”), aff’d, 206 B.R. 974, 977 (D. Neb. 1997) (“The bankruptcy court properly found that tax of a kind specified in § 523(a)(1)(C) is not entitled to priority. . . . [I]f the law needs to be changed, Congress must change the law.”); In re Verdunn, 160 B.R. 682, 684–85 (Bankr. M.D. Fla. 1993) (Tax fraud claims are excluded from priority by § 507(a)(7)(A)(iii) [redesignated as § 507(a)(8)(A)(iii) by 1994 Act] and thus are general unsecured claims in a Chapter 13 case. “Bankruptcy Code Section 507(a)(7)(A)(iii) [redesignated as § 507(a)(8)(A)(iii) by 1994 Act] establishes priority for tax claims ‘ . . . other than a tax of a kind specified in section . . . 523(a)(1)(C).’ Section 523(a)(1)(C) states ‘a tax . . . with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax. . . .’ Thus, a fraud tax claim is specifically excluded as a priority claim. . . . It is up to Congress to change this result, not this Court. . . . [F]raud claims of the Service are not priority, they are generally unsecured.”), aff’d, 187 B.R. 996 (M.D. Fla. 1995), rev’d on other grounds, 89 F.3d 799 (11th Cir. 1996).

 

39  See § 548.1 [ Taxes ] § 159.1  Taxes.

 

40  See, e.g., White Plains v. A & S Galleria Real Estate, Inc. (In re Federated Department Stores, Inc.), 270 F.3d 994 (6th Cir. 2001) (“Assessed” for § 507(a)(8)(B) purposes means when the taxpayer’s responsibility to pay the tax arises, not when the underlying property value is determined; applying New York law, property taxes were not assessed on the tax status day but after the petition when city council adopted the city’s budget.).

 

41  It remains to be seen whether this was an improvement.

 

42  Work v. County of Douglas, 58 B.R. 868 (Bankr. D. Or. 1986).

 

43  BAPCPA made this “clear” by amending 11 U.S.C. § 503(b)(1)(B)(i) to include as an administrative expense any tax “incurred by the estate, whether secured or unsecured, including property taxes for which liability is in rem, in personam, or both.” See below in this section, and see §§ 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA, 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA and 523.1 [ Miscellaneous Administrative Expenses and Priority Claims ] § 136.15  Miscellaneous Administrative Expenses and Priority Claims after BAPCPA.

 

44  See below in this section, and see §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

45  See 11 U.S.C. § 362(b)(18), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 401, 108 Stat. 4106 (1994).

 

46  11 U.S.C. § 362(b)(18), as amended by BAPCPA (emphasis added). See § 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

47  417 B.R. 462 (Bankr. N.D. Ohio Aug. 3, 2009) (Speer).

 

48  See 11 U.S.C. § 502(b)(9), discussed in §§ 276.1 [ Governmental Units ] § 132.3  Governmental Units and 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.

 

49  417 B.R. at 466.

 

50  417 B.R. at 466.

 

51  417 B.R. at 470.

 

52  417 B.R. at 470 n.5.

 

53  See below in this section, and see §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

54  See, e.g., United States v. Ripley (In re Ripley), 926 F.2d 440 (5th Cir. Mar. 5, 1991) (Brown, Smith, Wiener), discussed below in this section.

 

55  See §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

56  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment, 100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions and 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

57  See §§ 279.1 [ Priority Claims, Including Requests for Payment of Administrative Expenses ] § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses and 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.

 

58  See In re Mitchell, 398 B.R. 557 (Bankr. N.D. Miss. Nov. 20, 2008) (Houston) (County waste disposal fee is not priority tax under § 507(a)(8) when county had not specified that fee was ad valorem tax.); In re Delafuente, No. 05-13151-13, 2005 WL 3628861 (Bankr. W.D. Wis. Oct. 17, 2005) (unpublished) (Martin) (Water district utility bill was not assessed as tax and is not entitled to priority under § 507(a)(8)(B).); In re Adams, 40 B.R. 545 (E.D. Pa. 1984).

 

59  In re Dawson, 244 B.R. 92, 94 (Bankr. W.D. Va. 1999). BAPCPA amended § 507(a)(8)(D) to adjust the cross-reference to § 507(a)(4), and the time limitation in § 507(a)(4) was changed from 90 to 180 days. The maximum amount entitled to priority under § 507(a)(4) was increased to $10,000. That amount has subsequently increased by automatic adjustment to $11,725. See § 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

60  Discussed below in this section, “responsible party” status is often outcome determinative of the debtor’s liability for trust fund taxes. See, e.g., In re Palmer, 403 B.R. 18 (Bankr. D. Minn. Apr. 7, 2009) (Kressel) (Debtor was not responsible for employer’s failure to withhold employee wage taxes; under Anderson v. United States, 561 F.2d 162 (8th Cir. Aug. 30, 1977) (Webster, Henley, Van Pelt), debtor did not have sufficient control over employer’s disbursements to be responsible party.).

 

61  126 B.R. 364 (Bankr. N.D. Ala. 1991).

 

62  102 B.R. 1 (Bankr. D. Mass. 1989).

 

63  In re DeJesus, 243 B.R. 241, 251–52 (Bankr. D.N.J. 1999) (Motor vehicle surcharges are a civil penalty, not an excise tax, and are not entitled to priority through a Chapter 13 plan. “The motor vehicle surcharge in New Jersey is the negative civil consequence of a violation of certain motor vehicle statutes, imposed only on violators, with a further punitive consequence of the mandatory suspension of driving privileges if the assessment is not paid. The non-tax attributes of the surcharge . . . compel the conclusion that the surcharge is not a tax.”), aff’d sub nom. In re Marcucci, 256 B.R. 685, 696–97 (D.N.J. 2000) (“[B]ecause the DMV surcharges operate as a penalty for violating New Jersey’s motor vehicle laws, they do not operate as a ‘tax’ within the meaning of the Bankruptcy Code as explained by the Court in [United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 116 S. Ct. 2106, 135 L. Ed. 2d 506 (1996)]. . . . The surcharges are not enforced contributions for the support of the government, but rather are exactions imposed by statute as a penalty for violating certain motor vehicle laws. Even if the subject surcharges are taxes for bankruptcy purposes, they would not qualify as ‘excise taxes’ entitled to priority under § 507(a)(8)(E) . . . . The surcharges are imposed whether or not the driver intends to resume New Jersey’s roadways, and thus the surcharges are not assessed for exercising the privilege of driving in New Jersey.”).

 

64  See also § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses, § 132.9  Postpetition Claims, § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 136.3  Taxes after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

65  See § 136.3  Taxes after BAPCPA, § 136.15  Miscellaneous Administrative Expenses and Priority Claims after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

66  See 11 U.S.C. § 502(i), discussed below in this section and in § 132.9  Postpetition Claims, § 134.1  Timing, Form, Superseding and Amended Claims before 2005, § 136.3  Taxes after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

67  See 11 U.S.C. § 503(b)(1)(B)(i), discussed below in this section and in § 136.3  Taxes after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

68  See 11 U.S.C. § 507(a)(8)(A)(iii), discussed in § 136.3  Taxes after BAPCPA§ 137.1  Postpetition Claims before BAPCPAand § 137.2  Postpetition Claims after BAPCPA. See, e.g., In re Harrell, 318 B.R. 692, 695 (Bankr. E.D. Ark. Jan. 5, 2005) (Mixon) (State income taxes for tax years 1996, 1997 and 1998 with respect to which the debtor filed tax returns postpetition on August 4, 2003, are not entitled to priority under § 507(a)(8)(A)(iii) and are dischargeable at the completion of payments in a Chapter 13 case. “[I]n a chapter 13 case, taxes that are unassessed but assessable but also of a kind described in section 523(a)(1)(B) or (C) are not entitled to priority under section 507(a)(8)(A)(iii) and will also be discharged upon completion of the plan, a result that occurs only in chapter 13.”).

 

69  See 11 U.S.C. § 1305(a), discussed below in this section and in § 136.3  Taxes after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and  § 137.2  Postpetition Claims after BAPCPA.

 

70  926 F.2d 440 (5th Cir. Mar. 5, 1991) (Brown, Smith, Wiener).

 

71  Accord In re Seyden, 294 B.R. 418, 419–20 (Bankr. S.D. Ga. 2002) (Chapter 13 debtor has no standing to file a claim for 2001 taxes in a Chapter 13 case filed in December 2001. “Debtor has no standing to file a post-petition claim for her 2001 tax shortfall . . . . Because Section 1305 grants the right to file post-petition claims only to claimholders, not to Chapter 13 debtors, Debtor has no standing to file her post-petition tax claim over the IRS objection. . . . Because subsection (b) of § 1305 expressly states that § 502 applies to claims filed in accordance with subsection (a) of § 1305 . . . there is no indication that the drafters intended debtors to have the option of filing such claims.”); In re Jagours, 236 B.R. 616, 619 (Bankr. E.D. Tex. 1999) (Claim for income taxes for postpetition years is not an amendment of priority claim for prepetition taxes; postpetition taxes are not entitled to priority under § 507(a)(8) or to full payment under § 1322(a)(2). The “amended” claim for tax years 1994, 1995 and 1996 could not be an amendment to proof of claim for 1991 taxes in a Chapter 13 case filed in 1994. “[T]he Amended Claim, while allowable under § 1305(a)(1), can not [sic] be granted priority status under 11 U.S.C. § 507(a)(8). . . . [T]he only way a tax liability can attain priority status is to be for a tax year that ends prior to the petition date with a return due date prior to the petition date. None of the tax periods represented by the amended claim fall within this category and therefore, cannot constitute a priority debt.”); In re Zook, 144 B.R. 489 (Bankr. D. Idaho 1991) (Taxes that accrued both pre- and postpetition and that were payable on the date of the petition are postpetition claims under § 1305.); In re Martin, 130 B.R. 349 (Bankr. M.D. Fla. 1991) (Taxes for 1990 are postpetition claims in a Chapter 13 case filed on November 13, 1990.); In re Ryan, 78 B.R. 175 (Bankr. E.D. Tenn. 1987) (1981 taxes are postpetition taxes under § 1305(a)(1) when the debtors file a Chapter 13 petition in September of 1981.). See also §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

72  See, e.g., In re Turner, 420 B.R. 711, 712–16 (Bankr. E.D. Mich. Dec. 21, 2009) (McIvor) (Embracing United States v. Ripley (In re Ripley), 926 F.2d 440 (5th Cir. Mar. 5, 1991) (Brown, Smith, Wiener), and rejecting Dixon v. IRS (In re Dixon), 218 B.R. 150 (B.A.P. 10th Cir. Mar. 6, 1998) (McFeeley, Pusateri, Clark), and Joye v. California Franchise Tax Board (In re Joye), 578 F.3d 1070 (9th Cir. Aug. 21, 2009) (Wallace, Thomas, Graber), income taxes for 2008 are § 1305 postpetition claims in Chapter 13 case filed on January 13, 2009, and debtor cannot file a “priority claim” on behalf of the taxing authority. “[F]or any Chapter 13 bankruptcy filed between January 1 and April 15, the taxes for the prior year are a postpetition § 1305 claim because the taxes do not ‘become payable’ until April 15 after the date of the filing of the bankruptcy. . . . In a Chapter 13 case, whether a tax claim is treated as prepetition or postpetition is controlled by 11 U.S.C. § 1305(a). Under that section, taxes ‘become payable’ when the tax is ascertainable by the taxing authority, that is, when the return is filed. . . . Debtor filed for bankruptcy on January 13, 2009. The claims bar date for governmental units is 180 days from the date of filing . . . . Debtor had until April 15, 2009 to file his 2008 income tax return. Until the return was filed, Treasury had no idea whether it had a claim. If all taxes incurred by Debtor ‘become payable’ on December 31, 2008, the tax debt was a prepetition debt and the claims bar date would apply to Treasury even though Treasury had no knowledge as to whether a claim existed until the return was filed. . . . The Court recognizes that § 502(i) provides a general rule for determining the allowance or disallowance of tax claims which arise after the commencement of the case, for a tax period which ends on or before the filing of the case. . . . Notwithstanding the general rule, however, the rules of statutory construction require that specific statutory provisions control over broader provisions. . . . 11 U.S.C. § 1305 is a specific provision, drafted to address claims of taxing authorities which ‘arise’ or ‘become payable’ after the petition is filed. . . . [T]he primary purpose of § 502(i) is to differentiate priority tax claims from administrative tax claims. 11 U.S.C. § 502(i) makes clear that a claim for a tax period which ends prior to the filing of the petition, but for which the return is not due until after the petition, is a priority claim as defined by 11 U.S.C. § 507(a)(8), not an administrative expense claim under 11 U.S.C. § 503(b). 11 U.S.C. § 502(i) simply does not address the specific issue of how a tax claim entitled to priority status under § 507(a)(8)(A) is to be treated in a Chapter 13 case. Thus a § 1305 claim (should Treasury choose to file a claim) is entitled to priority, rather than administrative expense status.”).

 

73  218 B.R. 150 (B.A.P. 10th Cir. Mar. 6, 1998) (McFeeley, Pusateri, Clark).

 

74  218 B.R. at 152.

 

75  578 F.3d 1070 (9th Cir. Aug. 21, 2009) (Wallace, Thomas, Graber).

 

76  578 F.3d at 1076 (quoting Dixon v. IRS (In re Dixon), 218 B.R. 150, 153 (B.A.P. 10th Cir. Mar. 6, 1998) (McFeeley, Pusateri, Clark), quoting S. Rep. No. 95-989, at 140 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5926).

 

77  578 F.3d at 1077.

 

78  See also §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA, 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

79  See §§ 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See also Illinois Dep’t of Revenue v. Ayre (In re Ayre), 360 B.R. 880, 886 (C.D. Ill. Jan. 16, 2007) (Scott) (Although § 1322(a) provides that priority claims must be fully paid, confirmation process litigated disputed tax claim and state is bound by plan. “[T]he confirmation process and the claims adjudication process are alternative methods to resolve a disputed claim. Since both result in litigation as contested matters, due process is met through the use of either method.” Department was properly noticed and filed its proof of claim for $104,000, which was disputed in the plan, but Department did not object to confirmation. Plan paid Department in full at $10,500.).

 

80  See §§ 276.1 [ Governmental Units ] § 132.3  Governmental Units, 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

81  See §§ 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors, 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA, 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

82  See also §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

83  See above in this section for discussion whether there is a taxable estate in a Chapter 13 case. See also § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses, § 136.3  Taxes after BAPCPA, § 136.14  Miscellaneous Administrative Expenses and Priority Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

84  BAPCPA moved administrative expenses to the second priority in § 507(a)(2). See §§ 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA and 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

85  See § 73.5  Interest Not Required, with Exceptions, § 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.1  Treatment of Priority Claims, § 136.16  Postpetition Interest on Priority Claims before BAPCPA§ 136.17  Postpetition Interest on Priority Claims after BAPCPA, § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

86  See §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA. See, e.g., In re Wilkoff, No. 98-34354DWS, 2001 WL 91624 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (Income taxes for 1998 are a postpetition claim in a Chapter 13 case filed on November 6, 1998; because the IRS did not file a proof of claim, postpetition claim is not allowable under § 1305, cannot be provided for by the plan and is not discharged at the completion of payments. The confirmed plan providing for full payment of claims entitled to priority does not bind or affect the claim for 1998 taxes because § 507(a)(8)(A)(i) limits the priority to income taxes for a prepetition taxable year. The IRS is entitled to relief from the stay after confirmation to collect the 1998 postpetition tax claim from the debtor or from property of the debtor.).

 

87  These differences were exacerbated by the 1994 amendments to § 503(a). See §§ 275.2 [ In General: Filing is Required for Allowance ] § 132.2  In General: Filing is Required for Allowance, 279.1 [ Priority Claims, Including Requests for Payment of Administrative Expenses ] § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses, 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims and 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA. BAPCPA totally confounded the allowance of administrative expenses for taxes by doing away with any requirement that a governmental unit file a request for payment of a tax incurred by an estate. See 11 U.S.C. § 503(b)(1)(D), as amended by BAPCPA, mentioned above in this section and discussed in §§ 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA and 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

88  United States v. Lee, 184 B.R. 257 (W.D. Va. 1995) (Claim for responsible person liability under § 6672 of the Tax Code was a prepetition claim because the tax to which it related came due during a prepetition tax year. As a result, IRS’s failure to timely file a proof of claim for the § 6672 taxes is fatal to the distribution rights of the IRS with respect to that claim. IRS argued that § 6672 liability was a postpetition debt in an effort to avoid discharge of its claim without payment.). See also Joye v. Franchise Tax Bd. (In re Joye), 578 F.3d 1070 (9th Cir. Aug. 21, 2009) (Wallace, Thomas, Graber), discussed above in this section and in § 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA.

 

89  11 U.S.C. § 502(i) (emphasis added). Under 11 U.S.C. § 501(d), “a claim of a kind specified in section . . . 502(i) of this title may be filed under [§ 501(c)] . . . the same as if such claim . . . had arisen before the date of the filing of the petition.” The cross-reference in § 501(d) to § 502(i) incorporates “a claim that does not arise until after the commencement of the case for a tax entitled to priority under section 507(a)(8).”

 

90  See § 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1  Timing, Form, Superseding and Amended Claims before 2005.

 

91  Prior to amendment in 2005, § 507(a)(8)(B) referred to property taxes assessed before commencement of the case. See 11 U.S.C. § 507(a)(8)(B), discussed above in this section. It was at least theoretically possible for a property tax to be “assessed” before the petition but to “arise” after commencement of the Chapter 13 case.

 

92  11 U.S.C. § 507(a)(8)(A)(iii). See § 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA.

 

93  11 U.S.C. § 507(a)(8)(C).

 

94  See §§ 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims, 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1  Timing, Form, Superseding and Amended Claims before 2005, 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

95  11 U.S.C. § 1305(a), (b). See §§ 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims, 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

96  11 U.S.C. § 1305(b).

 

97  See § 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1  Timing, Form, Superseding and Amended Claims before 2005.

 

98  See §§ 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims, 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1  Timing, Form, Superseding and Amended Claims before 2005, 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPAand 524.1 [ Postpetition Claims ] § 137.2  Postpetition Claims after BAPCPA.

 

99  270 B.R. 203 (Bankr. S.D. Tex. 2001).

 

100  See §§ 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claimsand 520.1 [ Postpetition Interest on Priority Claims ] § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

101  11 U.S.C. § 502(i).

 

102  11 U.S.C. § 1305(b).

 

103  See §§ 100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions, 299.1 [ Postpetition Interest on Priority Claims ] § 136.16  Postpetition Interest on Priority Claims before BAPCPAand 520.1 [ Postpetition Interest on Priority Claims ] § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

104  Jones v. United States (In re Garcia), 955 F.2d 16 (5th Cir. 1992) (Prepetition interest on tax is entitled to the same priority as the underlying tax.). Accord Bates v. United States (In re Bates), 974 F.2d 1234 (10th Cir. 1992); In re Lottman, 87 B.R. 32 (Bankr. N.D. Ohio 1988); In re Mikrut, 79 B.R. 404 (Bankr. W.D. Wis. 1987); In re Healis, 49 B.R. 939 (Bankr. M.D. Pa. 1985).

 

105  In re Vignola, 377 B.R. 271, 282–83 (Bankr. N.D. Cal. Oct. 16, 2007) (Weissbrodt) (Interest on taxes assessed within 240 days prior to petition has priority status under § 507(a)(8)(A). “While it may seem, and in fact be, unfair to afford priority status to the interest portion of the FTB’s claim . . . interest is a mandatory component of the tax owed—not an independent liability that can be afforded separate treatment. Just as a deficiency assessment is ‘part and parcel’ of the underlying tax debt, so is the interest on that deficiency.”).

 

106  See § 354.1 [ Exceptions to Hardship Discharge ] § 160.6  Exceptions to Hardship Discharge before BAPCPA.

 

107  Putnam v. United States, 131 B.R. 52 (Bankr. W.D. Va. 1991). Accord United States v. Hampton, 197 B.R. 297 (E.D. Ark. 1995) (Consent order in dismissed Chapter 13 case that fixed the amount of the IRS’s priority claim does not preclude IRS from filing a larger claim including additional penalties in second Chapter 13 case.); In re Hess, 173 B.R. 426, 429 (Bankr. W.D. Okla. 1994) (Interest that accrued on a tax claim during a prior Chapter 13 case is allowable where the debtor dismisses and refiles. “[D]uring the pendency of a bankruptcy case, the taxing authorities nevertheless continue to accrue, for bookkeeping purposes, penalties and interest on pre-petition tax obligations. If a discharge is entered in the case, the accrued penalties and interest are abated, but if no discharge is received by the debtor, the authorities will attempt to collect the accrued amounts from the debtor after bankruptcy. . . . [T]he failure of Congress to specifically include tax penalties and interest in the § 349(b) list of items reinstated upon dismissal does not indicate an intention not to reinstate them. . . . After the case is dismissed and a new case filed, the penalties and interest accrued during the previous case on tax obligations which arose prior to the filing of the earlier case are no longer unmatured. Under the language, and clear intent of § 349(b), it is as though the earlier case had never been filed.”). See also In re Broadus, No. 02-15358-MAM-13, 2009 WL 47354 (Bankr. S.D. Ala. Jan. 7, 2009) (Mahoney) (When agreed order required payment of interest to IRS but interest was not paid prior to discharge, unpaid interest survives discharge and further hearing is necessary to determine whether debtor must file new case or whether trustee will attempt recoupment of payments to other creditors.), superseded by 2009 WL 348859 (Bankr. S.D. Ala. Jan. 29, 2009) (unpublished) (Mahoney); Anderson v. IRS (In re Anderson), 228 B.R. 844 (Bankr. W.D. Va. 1998) (IRS’s failure to file a proof of claim for § 941 withholding taxes was not fatal because withholding taxes are excepted from hardship discharge under § 1328(b) and § 1328(c)(2). Different outcome had debtor received a full payment discharge under § 1328(a).).

 

108  See 11 U.S.C. § 507(a)(8)(G).

 

109  Bates v. United States (In re Bates), 974 F.2d 1234, 1236 (10th Cir. 1992) (“As a general rule, penalties and the interest thereon are not in compensation for pecuniary loss and are not entitled to priority. Prepetition tax penalties that are punitive in nature and not evidenced by recorded federal tax liens encompassing otherwise unencumbered properties of debtor are unsecured, nonpriority claims.”); In re Burden, 109 B.R. 107 (E.D. Pa. 1989) (Bankruptcy court appropriately subordinated prepetition tax penalties to the status of general unsecured claims.); In re Cespedes, 393 B.R. 403, 405 (Bankr. E.D.N.C. Sept. 8, 2008) (Small) (Agreeing with United States v. Dumler (In re Cassidy), 983 F.2d 161 (10th Cir. Dec. 7, 1992) (McKay, Seth, Brorby), “10% early IRA withdrawal assessment is a penalty that is not compensation for actual pecuniary loss, and the claim related to that assessment shall be treated as a general unsecured claim, and not a priority claim.”); In re Divine, 127 B.R. 625 (Bankr. D. Minn. 1991) (Portion of penalty that is not secured by tax lien is not entitled to priority under § 507(a)(7)(G) [redesignated as § 507(a)(8)(G) by 1994 Act], because the penalty did not compensate the government for actual pecuniary loss, but was punitive.); In re Moran, 121 B.R. 879 (Bankr. E.D. Okla. 1990) (Earned prepetition interest on a tax claim is entitled to priority status; any penalty is necessarily punitive, not compensatory, and is not afforded priority.); In re Healis, 49 B.R. 939 (Bankr. M.D. Pa. 1985) (Tax penalties intended to be punitive are not entitled to priority payment. Prepetition interest is presumably compensatory and is entitled to full payment priority.); In re Buzek, 116 B.R. 82 (Bankr. N.D. Ohio 1990). See also Gran v. IRS (In re Gran), 964 F.2d 822 (8th Cir. 1992) (Sale of cattle to the debtors was a sham transaction designed solely to create fictitious tax deductions. IRS claim for penalties and interest is allowed over debtor’s objection.); In re Allen, 272 B.R. 913 (Bankr. E.D. Va. 2002) (Nonpecuniary loss penalties for nonpayment of income taxes were nondischargeable under § 523(a)(7)(B) in debtor’s prior Chapter 7 case and are allowed over objection in subsequent Chapter 13 cases.); In re Hall, 191 B.R. 814 (Bankr. D. Ala. 1995) (Increased interest payable on tax-motivated transactions under 26 U.S.C. § 6621(d) is interest not penalty, is entitled to priority and must be paid in full through a Chapter 13 plan under § 1322(a)(2).); In re Schneider, 162 B.R. 199, 202 (Bankr. E.D. Wis. 1993) (0.5% per month “penalty” added to real estate taxes by Wisconsin law “is a penalty, pure and simple” and is not allowable in a Chapter 13 case notwithstanding that the taxing authority is an oversecured creditor entitled to receive postpetition interest. “[G]overnmental fines and penalties, which are non-dischargeable in chapter 7 become dischargeable in a successfully completed chapter 13 case.”); Putnam v. United States, 131 B.R. 52 (Bankr. W.D. Va. 1991) (Penalties that accrued during a prior Chapter 13 case on tax claims that survived hardship discharge under § 1328(b) were entitled to priority in debtor’s subsequent Chapter 13 case.); In re Lottman, 87 B.R. 32 (Bankr. N.D. Ohio 1988) (Debtor filed Chapter 13 case in 1982 that provided for full payment of priority claim of IRS. In 1986, IRS filed amended claim asserting postpetition taxes, interest and penalties as an administrative expense. Debtor voluntarily dismissed first case and immediately filed second Chapter 13 petition. IRS filed claim in second Chapter 13 case asserting interest and penalties on tax claims filed during administration of first case. IRS was not entitled to assess interest and penalties after the filing of the first Chapter 13 petition for tax claims that arose before the filing of the first petition. IRS was entitled to assess interest and penalties in the second Chapter 13 case on tax obligations that arose after the filing of the first case and until the filing of the second case.). See also In re Fitzgerald, No. 08-60013-LYN, 2008 WL 5412906 (Bankr. W.D. Va. Oct. 10, 2008) (unpublished) (Anderson) (Debtors failed to rebut prima facie validity of priority claim for penalty assessment of taxes owed by debtors’ business.).

 

110  Bates v. United States (In re Bates), 974 F.2d 1234, 1236 (10th Cir. 1992) (“Prepetition tax penalties that are punitive in nature and not evidenced by recorded federal tax liens encompassing otherwise unencumbered properties of debtor are unsecured, nonpriority claims.”); In re Burden, 109 B.R. 107 (E.D. Pa. 1989); In re Moran, 121 B.R. 879 (Bankr. E.D. Okla. 1990); In re Mitchell, 39 B.R. 696 (Bankr. D. Or. 1984).

 

111  Bates v. United States (In re Bates), 974 F.2d 1234 (10th Cir. 1992); Junes v. United States, 99 B.R. 978 (B.A.P. 9th Cir. 1989); In re Frost, 47 B.R. 961 (D. Kan. 1985); In re Divine, 127 B.R. 625 (Bankr. D. Minn. 1991); In re Lambert, 124 B.R. 345 (Bankr. W.D. Okla. 1991); In re Buzek, 116 B.R. 82 (Bankr. N.D. Ohio 1990); In re Davis, 111 B.R. 234 (Bankr. E.D. Mo. 1990); Riley v. Wisconsin, Dep’t of Revenue (In re Riley), 88 B.R. 906 (Bankr. W.D. Wis. 1987); In re Mikrut, 79 B.R. 404 (Bankr. W.D. Wis. 1987); In re Junes, 76 B.R. 795 (Bankr. D. Or. 1987), aff’d, 99 B.R. 978 (B.A.P. 9th Cir. 1989). See In re Lawson, 187 B.R. 6, 8 (Bankr. D. Idaho 1995) (As a condition of relief from the stay, the debtor cannot require the IRS to set off its prepetition tax refund against the priority portion of the IRS’s claim. IRS’s “best course” is to apply the tax refund against its nonpriority claim first, and “there is nothing inequitable about the IRS’s choice.”). But see In re Williams, 109 B.R. 179 (Bankr. W.D.N.C. 1989) (Payments under a Chapter 13 plan are voluntary, and thus the debtor can designate which tax liability is to be paid and in what order.).

 

112  495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990).

 

113  See Bates v. United States (In re Bates), 974 F.2d 1234 (10th Cir. 1992) (United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), does not assist a Chapter 13 debtor to classify some taxes as priority claims and other taxes as nonpriority, unsecured debts when all of the IRS’s claim is either entitled to priority or is secured by prepetition tax liens.); In re Ferguson, 197 B.R. 161, 164 (Bankr. S.D. Fla. 1996) (Chapter 13 debtor cannot require reallocation of payments made to the IRS by the trustee in a prior Chapter 7 case. Assets in prior Chapter 7 estate were proceeds from preference actions. IRS tax liens attached to preference recovery, and thus it was appropriate for the Chapter 7 trustee to distribute the estate to the IRS on account of its secured claim. In subsequent Chapter 13 case, debtor cannot use United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), to require the IRS to reallocate the payments to the nondischargeable portions of the IRS’s unsecured, priority claim. “[P]ayments by a Chapter 7 trustee are involuntary payments and may not be directed to a specific tax period by the debtor.”); In re Divine, 127 B.R. 625 (Bankr. D. Minn. 1991) (United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), does not permit Chapter 13 debtor to allocate portions of tax liability to reduce the total amount of taxes, interest and penalties that must be paid under the plan. Debtor’s plan proposed to classify certain taxes for the period between 1980 and 1989 as secured, other taxes as unsecured priority and still other taxes as unsecured nonpriority. Proposed classification would minimize the amount debtors would be required to pay to satisfy § 1322. “In this case, the debtors are simply attempting to rearrange the tax claims in order to avoid paying as much as possible. This is not what Energy Resources Co. contemplated.”); In re Lambert, 124 B.R. 345 (Bankr. W.D. Okla. 1991) (Distinguishing United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), court denied confirmation of proposed modified plan that would require the IRS to apply tax payments in inverse chronological order. Proposed modification would apply tax payments under the plan first to the most recent tax periods. Modification would retire the secured portion of the taxes, with interest, would retire the taxes that would be nondischargeable and would leave unpaid only the oldest taxes, which would be dischargeable. Attempt to avoid entirely the payment of a portion of the tax liability exceeds any reasonable inference from Energy Resources.).

 

114  152 B.R. 248 (Bankr. C.D. Ill. 1993).

 

115  152 B.R. at 250–52. See also In re Zersen, 189 B.R. 732, 735, 743 (Bankr. W.D. Wis. 1995) (Applying “common law rule of payment” and citing United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), Chapter 13 debtor can direct that bank apply payments to cosigned obligation secured by homestead rather than to earlier business note. Debtors had homestead note and “business note” at same bank. Documentation was “ambiguous” whether homestead secured both notes. Note to acquire homestead was co-signed by the debtor’s wife’s parents. “[T]he issue of the debtors’ right to direct application of payments under the plan is controlled by the general rule that the creditor must do as the debtor directs. . . . If a debtor may direct which debts are paid at common law, there does not appear to be any reason for holding that the bankruptcy code somehow interferes with this right. . . . 11 U.S.C. § 1322(b)(10) is identical to § 1123(b)(5), and provides that the court may approve any provision in a chapter 13 plan which is not inconsistent with the other provisions of the bankruptcy code. Clearly, there is nothing about the debtors’ intent to allocate payments to the cosigned debt which is inconsistent with the code. Instead, it is contemplated by § 1301 and it is authorized by state law. Further, a similar directive was approved in Energy Resources. There is simply no reason to deny the debtors the right to allocate payments as they see fit within the parameters of the code and applicable state law if the allocation is necessary to effectuate the debtors’ reorganization plan.”).

 

116  See also United States v. Martinez (In re Martinez), No. 1:06-CV-1130, 2007 WL 295406 (M.D. Pa. Jan. 29, 2007) (unpublished) (Conner) (When IRS is permitted to set off prepetition tax refund against prepetition tax liability, bankruptcy court has discretion to also order that the setoff be allocated first to the payment of unsecured priority tax claims before any portion of the refund is allocated to general unsecured tax debt.).

 

117  238 B.R. 338 (Bankr. W.D. Mich. 1999).

 

118  See §§ 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1  Timing, Form, Superseding and Amended Claims before 2005 and 286.1 [ Strategic Considerations: When to File Claims for Creditors ] § 134.3  Strategic Considerations: When to File Claims for Creditors.

 

119  Tax creditors must also be watchful for plan amendments that effectively allocate or reduce a tax liability. See, e.g., In re Foltz, 324 B.R. 250, 254 (Bankr. M.D. Pa. Mar. 3, 2005) (France) (Internal Revenue Service was enjoined from pursuing post-discharge levy when amended Chapter 13 plan provided for payment of only one-third of corporate liabilities for which the debtor had been assessed as a responsible officer and IRS did not object to amended plan. Original Chapter 13 plan proposed to pay IRS in full on account of trust fund taxes remaining unpaid from a business. The IRS filed a claim. Almost three years after confirmation, debtor amended plan to provide that the debtor would be responsible for only one-third of the corporate liabilities. The IRS received notice of the amended plan but did not object. Debtor completed payments under the plan. IRS received payments attributable to one of the debtor’s businesses, York Finishing, but, because the IRS had not filed any claim relating to another of the debtor’s businesses, Yorktown Construction, it received no distribution for penalties related to that business. Subsequent to discharge, the IRS assessed the penalty for Yorktown Construction, and the debtor brought an action against the IRS. Because the IRS was scheduled as a creditor and the IRS received adequate notice of both its treatment and the relationship of the debtor to the various companies, the IRS’s claim was subject to discharge. “[I]n order to provide for an unsecured tax claim, the plan itself does not always have to specifically name the governmental creditor. Instead it may be ‘sufficient if the plan provides for full payment of priority unsecured claims and payment of some percentage on nonpriority unsecured claims.’ . . . The plan was confirmed thus binding the parties to its terms. When Debtor moved to amend the plan in 1994, the IRS would have been barred from filing a proof of claim alleging a new unrelated debt after confirmation of the plan. Further, it is clear that the plan was amended to provide that Debtor no longer would be paying the full amount of the allowed tax claim and intended to pay only one-third of the assessed penalty.”).

 

120  124 F.3d 1201 (10th Cir. 1997).

 

121  124 F.3d at 1210.

 

122  See also § 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA.

 

123  See In re Shope, 347 B.R. 270, 275–77 (Bankr. S.D. Ohio June 28, 2006) (Preston) (“[T]his Court finds no authority under either § 525 or § 105 to order the IRS to process and consider the Debtors’ offer in compromise.” “[W]hen the IRS refuses to consider a taxpayer’s offer in compromise, it does not deny a license, permit, charter or franchise . . . . This Court declines to stretch the plain meaning of these words to the degree necessary to include the IRS’ refusal to consider an offer in compromise among those other government actions prohibited by § 525. . . . Compelling the IRS, a creditor in bankruptcy, to address its claims against the Debtors in a non-bankruptcy process cannot be seen as ‘necessary or appropriate to carry out the provisions of [Title 11].’”); In re Uzialko, 339 B.R. 579 (Bankr. E.D. Pa. Mar. 29, 2006) (Raslavich) (Motion to compel IRS to consider debtors’ offer in compromise of federal tax liability denied. IRS cannot be compelled to process an offer in compromise. IRS’s policy does not violate § 525(a), and remedy of mandamus or other equitable relief under § 105(a) would require IRS to negotiate with debtors outside plan process.).

 

124  In re Peterson, 317 B.R. 532, 533–36 (Bankr. D. Neb. Sept. 2, 2004) (Mahoney) (Bankruptcy court orders IRS to “process and consider an offer of compromise” contained in plan. “The plan proposes to make an ‘offer in compromise’ to the Internal Revenue Service which would provide an initial payment of $500 and then the waiver by the debtor of hundreds of thousands of dollars of loss carry forward credits. . . . [T]he Internal Revenue Service has an official policy that it will not process an offer in compromise made by a taxpayer in bankruptcy. That policy, however, is not required by the Internal Revenue Code, and is not included in the Internal Revenue regulations. . . . That policy is clearly discriminatory with regard to individuals in bankruptcy. . . . The position taken by the IRS on this issue is set forth in a revenue procedure and in a notice from chief counsel. Neither of these carry [sic] the force and effect of law, and may not even be entitled to much deference. . . . In this case, the IRS may either process an offer in compromise, which the tax code authorizes any taxpayer to submit, or take seriously its stated position that it will, in good faith, consider accepting less than the bankruptcy code requires in a Chapter 13 plan.”), upon reconsideration, 321 B.R. 259, 261–62 (Bankr. D. Neb. Nov. 4, 2004) (Mahoney) (On reconsideration, IRS can be ordered to process a Chapter 13 debtor’s offer in compromise as if the debtor was not in bankruptcy because the IRS guideline that prohibits the IRS from processing an offer in compromise from a Chapter 13 debtor is not a statute or treasury regulation and thus is not binding or mandatory. “Neither the Internal Revenue Code nor the Treasury Regulations contain the prohibition against accepting offers in compromise from taxpayers in bankruptcy. . . . [T]he IRS wants me to enforce a non-mandatory agency procedure so it does not have to entertain the debtor’s offer in compromise. . . . [T]he IRS may either process an offer in compromise, which the tax code authorizes any taxpayer to submit, or take seriously its stated position that it will, in good faith, consider accepting less than the bankruptcy code requires in a Chapter 13 plan.”).

 

125  298 F.3d 1107 (9th Cir.), as amended, 314 F.3d 336 (9th Cir. 2002), rev’d, 124 S. Ct. 1548 (2004).

 

126  298 F.3d at 1114.

 

127  Accord In re Chauncey, 282 B.R. 34, 38 (Bankr. M.D. Fla. 2002) (Disagreeing with United States v. Galletti (In re Galletti), 298 F.3d 1107 (9th Cir.), as amended, 314 F.2d 336 (9th Cir. 2002), rev’d, 124 S. Ct. 1548 (2004), “a judgment is not necessary to make a debtor jointly and severally liable for a partnership’s debts. State partnership laws establish a partner’s liability. . . . The Internal Revenue Service’s right to look to Debtor Paul Chauncey for payment of the partnership’s tax obligations is sufficient to give the Service an allowable claim. . . . [A] separate tax assessment against an individual partner for employment taxes incurred by the partnership is not required to establish liability against the individual partner.”).

 

128  See above in this section and see §§ 100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions and 299.1 [ Postpetition Interest on Priority Claims ] § 136.16  Postpetition Interest on Priority Claims before BAPCPA.

 

129  See Gdowik v. United States (In re Gdowik), 228 B.R. 481, 483 (S.D. Fla. 1997) (Rejects pro se tax protestor’s appeal of orders granting relief from the stay to the IRS, denying confirmation and dismissing case. Bankruptcy court found “lack of cooperation in the Chapter 13 process” and found that Chapter 13 case had been filed as retaliation for IRS’s seizure of office building.); Holland v. Louisiana Secretary of Revenue & Taxation (In re Holland), 208 B.R. 26 (W.D. La. 1997) (Bankruptcy court appropriately rejected typical tax protestor challenges to claims of IRS and Louisiana Secretary of Revenue and Taxation.); Vomhof v. United States, 207 B.R. 191, 193 (D. Minn. 1997) (Tax protestors’ objection to claim of IRS appropriately denied because “legal exhortations concerning the taxability of self-employed citizens” is not sufficient to rebut claim.); Hopkins v. IRS (In re Hopkins), 192 B.R. 760 (D. Nev. 1995) (Debtors’ arguments that they are not taxpayers and that their wages do not constitute taxable income are “frivolous”); Abbate v. United States (In re Abbate), 187 B.R. 9, 12 (D. Nev. 1995) (Court overrules objection to claim of IRS where debtor “merely reiterated arguments about not being subject to the federal income tax laws, arguments which have been uniformly rejected by the Courts.”); Lilley v. IRS (In re Lilley), 185 B.R. 489, 494 (E.D. Pa. 1995) (Debtor “acted willfully and with intentional disregard of the tax laws in his multiple attempts to evade satisfying his Federal income tax debts.”), rev’d and remanded on other grounds, 91 F.3d 491 (3d Cir. 1996); In re Goodell, No. 05-16948DWS, 2006 WL 23568 (Bankr. E.D. Pa. Jan. 4, 2006) (unpublished) (Sigmund) (Claim for priority taxes is allowed over debtor’s objection that he has no legal obligation to file tax returns.); In re Hicks, 261 B.R. 306 (Bankr. M.D. Fla. 2001) (Tax protestor’s objections to IRS claim are rejected; statute of limitations with respect to taxes was tolled during debtor’s eight bankruptcy cases.); In re Bertelt, 250 B.R. 739, 746 (Bankr. M.D. Fla. 2000) (Tax protestor’s third bankruptcy case is dismissed with prejudice to refiling for 180 days. Debtor’s argument that Florida was a “foreign country” for tax purposes was “utterly without merit.”); In re Davis, 239 B.R. 305, 306 (Bankr. D. Md. 1999) (Pro se tax protestor’s fifth bankruptcy case is dismissed “with prejudice for a year in order to enable the parties to work out their disputes.” IRS was only creditor, and debtor claimed that he was not liable to pay federal income taxes.); In re Graffy, 233 B.R. 894 (Bankr. M.D. Fla. 1999) (Pro se tax protestor violated Rule 9011 by submitting false and misleading documents in three Chapter 13 bankruptcy cases filed for the improper purpose of forestalling collection by the IRS. Attorney fees of $7,748.21 based on 244.5 hours of work at $31.69 was appropriate sanction.); In re Larsen, 232 B.R. 482 (Bankr. D. Wyo. 1998) (Pro se debtor’s objections to tax claims are based primarily on misunderstanding of the Bankruptcy and Tax Codes.); In re Shabazz, 206 B.R. 116 (Bankr. E.D. Va. 1996) (In tax protestor’s fourth Chapter 13 case in two and one-half years, court rejects all the usual objections, including that the proof of claim was not signed under oath, that the person signing the proof of claim did not attach a power of attorney, that official certificates of assessment were not attached and that the debtor’s wages are not subject to income taxation.); In re Hale, 196 B.R. 122, 123 (Bankr. E.D. Ark. 1996) (Tax protestor’s objection to claim of IRS is frivolous. “The debtor’s objection to the proof of claim, asserting that he was not a citizen of the United States, was denied as frivolous . . . . Fifteen months later, the debtor filed the instant motion to ‘dismiss’ the IRS proof of claim. The debtor’s motion, brief, rebuttal, and supplement all assert time-worn tax protester rhetoric, including assertions that the IRS must ‘evidence’ the law and regulations. Debtor further asserts that he made no contract with the United States for taxes and is not subject to the ‘colorable law jurisdiction of the United States in the corporate monopoly of the Federal and State Governments.’ He rails against the ‘concealed’ bankruptcy of the United States and recites at length the history of the illegal gold standard. . . . This legalistic gibberish has been so repeatedly and soundly dismissed that the courts no longer analyze each issue, unless imposing sanctions for filing such frivolous babble.”); In re Jackson, 189 B.R. 206 (Bankr. M.D. Ala. 1994) (Resolving 19 separate pro se objections to the IRS’s claim, “no authority” requires the IRS to provide the debtors with notice of the filing of a proof of claim; the failure of the IRS to provide supporting documentation does not affect the validity of the proof of claim; an unappealed tax court default judgment is a final determination of tax liability; and the IRS did not violate the automatic stay by filing a proof of claim.); In re Rosemiller, 188 B.R. 129 (Bankr. D.N.J. 1995) (Rejects pro se tax protestor’s arguments that “substitute for return” was not properly signed and that proof of claim failed to clearly specify to whom the term “United States” refers.); In re Burrell, 186 B.R. 230 (Bankr. E.D. Tenn. 1995) (It is cause for dismissal that debtor is a tax protester in prison who filed the Chapter 13 case primarily to further the debtor’s tax protest.); In re Gros, 173 B.R. 774 (Bankr. M.D. Fla. 1994) (Fifth bankruptcy case within two years and 22 days was filed to avoid paying taxes.); In re Paulson, 170 B.R. 496 (Bankr. D. Conn. 1994) (Court denies confirmation of tax protester’s plan filed solely to stop IRS collection activity.); In re Crayton, 169 B.R. 243 (Bankr. S.D. Ga. 1994) (Debtor failed to file tax returns for six years prior to filing bankruptcy and failed to file the delinquent tax returns after being told to do so.); In re White, 168 B.R. 825 (Bankr. D. Conn. 1994) (Court rejects pro se debtor’s objections to IRS proof of claim where debtor failed to present any evidence to rebut the prima facie effect of the claim, the IRS had no obligation to file tax returns for the debtor, the debtor’s failure to file returns so that assessments could be made does not relieve the debtor of tax liability, the failure of the Service to make assessments does not defeat its claim, and the Service was not required to file a proof of claim under oath or under penalty of perjury.), dismissed in part sub nom. White v. United States (In re White), 183 B.R. 356 (D. Conn. 1995); In re Spurgeon, 166 B.R. 150 (Bankr. D. Neb. 1993) (Chapter 13 case was filed solely to delay the collection of taxes.); In re Norman, 162 B.R. 581 (Bankr. M.D. Fla. 1993) (Debtor delayed filing delinquent tax returns until after the filing of the Chapter 13 case so that the earlier tax years involved would be ordinary dischargeable unsecured claims.); In re Hazel, 68 B.R. 287, 290 (Bankr. E.D. Mich. 1986), aff’d, 95 B.R. 481 (E.D. Mich. 1988) (It was bad faith for self-styled “tax protester” to seek confirmation of a 1% plan that would discharge tax claims “arising from the debtor’s unlawful refusal to pay those taxes.”).

 

130  See, e.g., United States v. Lartz (In re Lartz), 301 B.R. 807 (M.D. Pa. 2003) (Debtor was neither a responsible person nor a person who willfully failed to pay trust fund taxes.); In re Noronha, 382 B.R. 363 (Bankr. W.D. Ky. Dec. 5, 2007) (Fulton) (Priority claim of IRS for responsible person liability is allowed when debtor failed to carry burden of proving that tax assessment was incorrect.); Mini v. California Bd. of Equalization (In re Mini), Nos. 01-43201 TG, 06-4219 AT, 2007 WL 2223820 (Bankr. N.D. Cal. July 30, 2007) (unpublished) (Tchaikovsky) (Responsible person liability for sales tax debt arose prebankruptcy, rather than at date of assessment. Failure to file proof of claim results in discharge of tax liability.); Grillo v. United States (In re Grillo), 331 B.R. 614, 620 (Bankr. D.N.J. Oct. 7, 2005) (Wizmur) (Assessment of responsible person liability is valid based on debtor’s position as president of corporation; debtor “always retained the authority to control the company, even if he did not exercise that authority.”); In re Chabrand, 301 B.R. 468 (Bankr. S.D. Tex. 2003) (Debtor was sole shareholder, president and only board member of corporation that failed to remit trust fund taxes; debtor was responsible for $129,489.75 of unpaid trust fund liabilities.); In re Sloan, 298 B.R. 377 (Bankr. W.D. Mo. 2003) (Debtor was responsible person for § 6672 purposes and by signing Form 2751, consented to assessment of penalties to which he now objects.); In re Rainey, 257 B.R. 792, 794–95 (Bankr. W.D. Va. 2001) (At conversion from Chapter 13 to Chapter 7, responsible person liability for sales and use taxes incurred by the debtor’s corporation during the pendency of the Chapter 13 case is not an administrative expense under § 503(b)(1)(B) but is entitled to eighth priority under § 507(a)(8)(C) by virtue of § 348(d). Debtor was personally liable for corporate sales and use taxes under Tennessee law. After conversion, Department of Revenue asserted an administrative expense priority in the Chapter 7 case. “[P]ostpetition sales and use tax liabilities may well be an administrative expense in the bankruptcy case of the party that originally incurs the liability . . . . However, this Court rejects the apparent assumption . . . that the . . . ‘responsible person’ statute . . . transforms what would be an administrative expense in the corporation’s bankruptcy during the time it operated while in bankruptcy, into an administrative expense in this Debtor’s personal bankruptcy. . . . [Section] 503(b)(1)(B) . . . sets forth a second requirement for taxes to be administrative expenses—that not only must the tax be incurred postpetition, but it must also be incurred ‘by the estate’ itself, and not a corporation owned by a debtor or a debtor himself. . . . [A]t the time the sales and use taxes were incurred the corporation was a separate legal entity and as such would not have ever been and is not now part of the bankruptcy estate. Any sales or use tax incurred in the operation of the corporation does not become tax incurred in the administration of the Debtor’s individual bankruptcy estate by virtue of the Debtor’s personal liability for that tax.”); Sheppard v. United States (In re Sheppard), 253 B.R. 397 (Bankr. D.S.C. 2000) (Chapter 13 debtor was a responsible person for purposes of trust fund tax liability.); In re Aboody, 250 B.R. 1 (Bankr. D. Mass. 2000) (Debtor was not a “responsible person” for purposes of assessing unpaid trust fund taxes from failed restaurant.).

 

131  See § 300.1 [ Secured Priority Claims? ] § 136.18  Secured Priority Claims before BAPCPA. See, e.g., McIntyre v. United States (In re McIntyre), 222 F.3d 655 (9th Cir. 2000) (Nothing in ERISA or in California community property law prevents the IRS from levying on all of a debtor’s pension benefits notwithstanding spouse’s claim of a one-half interest in those benefits.); Pletz v. United States (In re Pletz), 221 F.3d 1114 (9th Cir. 2000) (Debtor’s interest as tenant by the entirety in real property subject to an IRS lien was properly valued using joint-life actuarial tables. When properly valued, the amount of the IRS lien exceeded the debtor’s ability to pay the IRS’s secured claim through the plan.); In re Van Beckum, No. 07-28650, 2009 WL 122754, at *2 (Bankr. E.D. Wis. Jan. 15, 2009) (Kelley) (Objection to real property tax claim is sustained under § 502(b)(3) when tax claims exceeded value of estate’s interest in property.); In re Robinson, 301 B.R. 461, 464 (Bankr. E.D. Va. 2003) (“[A] debtors’ interest in an ERISA qualified pension plan is not property of the bankruptcy estate for the purpose of establishing a secured claim by the IRS. This determination is buttressed by . . . [IRS v. Snyder, 343 F.3d 1171 (9th Cir. 2003)].”); In re Grant, 301 B.R. 464 (Bankr. E.D. Va. 2003) (Reaching same conclusion as In re Robinson, 301 B.R. 461 (Bankr. E.D. Va. 2003), IRS lien on ERISA-qualified pension plan is not a secured claim.); Basher v. United States (In re Basher), Nos. 02-12328DWS, 02-0346, 2002 WL 31856712 (Bankr. E.D. Pa. Dec. 3, 2002) (unpublished) (Citing United States v. Craft, 535 U.S. 274, 122 S. Ct. 1414, 152 L. Ed. 2d. 437 (2002), IRS has a secured claim based on its lien on debtor’s tenancy in common in rental property; lien on the debtor’s tenancy by the entirety in a residence is worth less than the 50% value asserted by the IRS but more than the $0 asserted by the debtors.); In re Murphy, 279 B.R. 163, 165 (Bankr. M.D. Pa. 2002) (Prepetition tax penalties became liens on the debtors’ real estate and are allowable under § 506(b) notwithstanding the absence of an agreement. Distinguishing United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989), “[P]re-petition penalty amounts included in nonconsensual, secured claims are not prohibited by § 506(b).”); In re Eschenbach, 267 B.R. 921 (Bankr. N.D. Tex. 2001) (IRS’s claim is secured (and not priority) based on lien filed in Florida to the extent of all personal property whether acquired by the debtors before or after moving from Florida to Texas.); McCord v. Petland, Inc. (In re McCord), 264 B.R. 814 (Bankr. N.D. W. Va. 2001) (Applying IRS v. McDermott, 507 U.S. 447, 113 S. Ct. 1526, 123 L. Ed. 2d 128 (1993), secured lender has priority over the IRS liens on accounts, leasehold items and inventory acquired by the Chapter 13 debtor prior to recording of the IRS liens, but IRS has priority with respect to property acquired by the debtors after the recording of the IRS liens.); In re Keyes, 255 B.R. 819 (Bankr. E.D. Va. 2000) (Although IRS has lien on ERISA-qualified stock plan, IRS does not have a secured claim in the Chapter 13 case because the ERISA-qualified plan is excluded from the bankruptcy estate by § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753 (1992).); In re O’Gorman-Sykes, 245 B.R. 815 (Bankr. E.D. Va. 1999) (IRS has a secured claim in real property owned as tenants by the entirety and in other items of personal property notwithstanding the debtor’s claims of exemption.).

 

132  See §§ 72.1 [ Setoffs and Recoupments ] § 58.12  Setoffs and Recoupments and 236.1 [ Tax Refunds ] § 122.1  Tax Refunds. See, e.g., United States v. Gould (In re Gould), 401 B.R. 415 (B.A.P. 9th Cir. Feb. 11, 2009) (Jury, Markell, Dunn) (Disagreeing with IRS v. Ealy (In re Ealy), 396 B.R. 20 (B.A.P. 8th Cir. Dec. 3, 2008) (Kressel, Schermer, McDonald), appeal of denial of stay relief to set off prepetition tax refund against prepetition tax debt was not constitutionally or equitably moot notwithstanding that IRS mistakenly paid refund to debtor; IRS right of setoff under § 553 trumps exemption claim, and it was an abuse of discretion to refuse setoff by denying stay relief.); Jones v. IRS (In re Jones), 359 B.R. 837, 841 (Bankr. M.D. Ga. Nov. 21, 2006) (Walker) (IRS right to set off prepetition tax liability against tax refunds for prepetition tax years trumps exemption claim by debtor. Acknowledging three views—a majority view that setoff is not permissible; a minority view that the right to setoff is not affected by a claim of exemption; and an emerging view that the right to setoff is not affected because the tax refund is not property of the estate—“[t]his Court agrees with the emerging view that a debtor has a right to a tax refund only to the extent his overpayment exceeds any pre-existing tax liability. Consequently, the refund does not become estate property subject to exemption until after the IRS has effected any offset.”); In re Martinez, 258 B.R. 364 (Bankr. W.D. Tex. 2000) (Debtors’ claim of exemption does not upset IRS’s right to set off prepetition tax refund against prepetition tax liability.); In re Pace, 257 B.R. 918, 920–21 (Bankr. W.D. Mo. 2000) (Distinguishing United States v. Energy Resources Co., Inc., 495 U.S. 545, 110 S. Ct. 2139, 109 L. Ed. 2d 580 (1990), IRS’s § 553 right to set off prepetition tax claims against prepetition tax refund is limited by debtors’ exemption in the refund under § 522(c): IRS can set off refund for prepetition tax year against priority portion of prepetition tax claim but cannot set off the refund against its general unsecured tax claim; IRS cannot have a secured claim under § 506(a) because its setoff right is trumped by the debtors’ exemption under § 522(c). Debtors scheduled prepetition claims to the IRS, some entitled to priority and some as general unsecured claims. Debtors exempted a prepetition tax refund. Debtors did not dispute that the refund could be used as a setoff by the IRS, but the debtor resisted the IRS’s effort to apply the prepetition tax refund to the general unsecured portion of its prepetition claim. “Section 522(c) provides that property exempted under that section is not liable for any prepetition debt, except certain listed debts, including taxes excepted from discharge under § 523(a)(1). . . . This includes . . . the priority tax claims in this case. . . . [T]he IRS’s right to setoff under § 553 must yield to the Debtor’s right to exempt and protect assets under § 522. . . . Otherwise, § 522(c) would have no meaning . . . . Energy Resources . . . [is] distinguishable from the case at bar because [it did not] involve[ ] a claimed exemption in the overpayments. . . . [A]lthough the IRS can set off the overpayments against the priority tax claim pursuant to § 522(c), it cannot use the overpayments in which the Debtors have claimed an exemption to offset general unsecured tax claims. . . . [B]ecause the Court has already determined that the setoff rights in § 553 yield to the exemption rights in § 522, the ‘security’ provided in § 506, which is based on the setoff rights under § 553, must likewise yield. In other words, the IRS is only ‘secured’ to the extent that the setoff is not limited by the Debtors’ exemptions.”); In re O’Gorman-Sykes, 245 B.R. 815 (Bankr. E.D. Va. 1999) (IRS has a secured claim in real property owned as tenants by the entirety and in other items of personal property notwithstanding the debtor’s claims of exemption.).

 

133  See, e.g., In re MacMillan, No. 02-11808-JMD, 2003 WL 22454871, at *2–*3 (Bankr. D.N.H. Oct. 20, 2003) (unpublished) (“The United States Supreme Court has ruled that . . . the burden of proof on the tax claim remains where the substantive law puts it even in a bankruptcy proceeding. Raleigh v. Illinois Dep’t of Revenue, 530 U.S. 15, 26 (2000). . . . [I]n cases where the debtor is challenging a claim by the IRS based on its assessment of a tax deficiency, the burden is on the debtor to establish that the IRS’s assessment and thus its proof of claim is not valid. . . . Debtors have failed to produce sufficient evidence to rebut the IRS’s prima facie case.”); Berardi v. United States (In re Berardi), 276 B.R. 388 (Bankr. E.D. Pa. 2002) (Debtor did not overcome IRS evidence of failure to report income including more than $30,000 of cash transactions reported to the IRS by casinos.), aff’d, No. 02-1641, 2002 WL 31687247 (E.D. Pa. Oct. 17, 2002) (unpublished); In re DiDaniele, No. 01-55091 (MS), 2002 WL 535320 (Bankr. D.N.J. Feb. 28, 2002) (unpublished) (Debtor failed to prove equitable estoppel based on statements by unnamed IRS employees that the debtor did not owe any taxes.). But see In re Kogut, 325 B.R. 400, 403 (Bankr. W.D. Ark. June 1, 2005) (Mixon) (Tax creditor bears burden of proof that tax claim was a priority claim which must be paid in full under Chapter 13 plan. Chapter 13 petition listed obligation to Monroeville, Alabama, as an unsecured nonpriority claim to receive no distribution. The tax had been owed more than three years prior to filing of petition. If the tax was an excise tax—that is, “an indirect tax, one not directly imposed upon persons or property but imposed on performance of an act, the engaging in an occupation, or the enjoyment of a privilege”—it would be entitled to priority unless the claim was stale. “In contrast, trust fund taxes are entitled to priority no matter when they became due. A trust fund tax . . . is ‘a tax required to be collected or withheld and for which the debtor is liable in whatever capacity.’” Here, creditor failed to establish that its debt was a trust fund tax and, accordingly, creditor failed to establish that its claim was entitled to priority.); In re Greenspan, No. 01-24731-DK, 2002 WL 31934321 (Bankr. D. Md. Nov. 27, 2002) (unpublished) (Debtor’s testimony that he earned no income in 1988 overcame IRS’s evidence that a Form 1099 was submitted by an unknown employer.).

 

134  See, e.g., In re Pavlosky, No. 06-20896, 2007 WL 4245422 (5th Cir. Dec. 4, 2007) (unpublished) (King, Barksdale, Dennis) (Debtors’ adversary proceeding against IRS seeking abatement and refund is dismissed, based on Merlo v. Commissioner of Internal Revenue, 492 F.3d 618 (5th Cir. July 17, 2007) (King, Davis, Barksdale), which rejected loss carryback incurred when incentive stock option became worthless.); Crowell v. United States (In re Crowell), 305 F.3d 474 (6th Cir. 2002) (Chapter 13 debtors are bound by prebankruptcy settlements with IRS based on “Form 906 Closing Agreements”; IRS officials had authority to sign agreements.); Klingshirn v. United States (In re Klingshirn), 147 F.3d 526, 528 (6th Cir. 1998) (“We agree with the [Bankruptcy Appellate Panel for the Sixth Circuit]. There is no reason to assume that the reference in 26 U.S.C. § 6503(h) to ‘section 6501 or 6502’ was intended to exclude § 6502(a)(2). We therefore conclude that the running of the limitations period established by the parties through execution of the written agreements pursuant to 28 U.S.C. § 6502(a)(2) was suspended during the pendency of the automatic stay in Klingshirn’s previous bankruptcy proceeding. The United States’ proof of claim is timely.”); Lilly v. IRS (In re Lilly), 76 F.3d 568 (4th Cir. 1996) (Chapter 13 debtor qualified as innocent spouse because her husband’s overstatement of the cost of goods sold constituted an item omitted from gross income under I.R.C. § 6013(e)(2)(A), and thus the debtors’ joint return was grossly erroneous as a matter of law. Debtor was prevailing party but was not entitled to recover litigation costs under I.R.C. § 7430(a) because she had not exhausted administrative remedies.); Baker v. IRS (In re Baker), 74 F.3d 906 (9th Cir. 1996) (Chapter 13 debtors cannot use an objection to the claim of the IRS to collaterally attack a stipulated tax court judgment. The tax court judgment establishes the amount of tax owed and precludes claims litigation in the subsequent Chapter 13 case.); Tracey v. United States (In re Tracey), 394 B.R. 635 (B.A.P. 1st Cir. Oct. 2, 2008) (Votolato, Haines, Tester) (Applying 26 U.S.C. § 6323, filing of notice of federal tax lien in proper location gives rise to valid tax lien on personal property even when local filing office does not properly manage the notice after filing; different rule applies to federal tax lien on real property.); Vidalier v. United States Dep’t of Treasury, No. 07-545, 2008 WL 4003671 (W.D. La. Aug. 29, 2008) (unpublished) (Haik) (IRS incorrectly denied “married filed jointly” status under 26 U.S.C. § 6013; debtor entitled to file federal tax returns for all years in which he was married, including year of spouse’s death.); Carlisle v. United States Dep’t of Justice (In re Carlisle), 320 B.R. 796 (M.D. Pa. Dec. 15, 2004) (Caldwell) (Venue to challenge method used by IRS in assessing tax liability is appropriately in the Tax Court under 26 U.S.C. § 6213(a) and not in bankruptcy court; debtor could but did not challenge amount claimed by IRS. Because IRS claim is based on a statute, not on a writing, IRS is not required to provide documentation in support of its claim under Bankruptcy Rule 3001(c). Debtor’s claim that he has no taxable income because he has no income from a foreign source is without merit. That IRS agent signed proof of claim but failed to include a “printed name” does not render claim invalid.); Richards v. United States (In re Richards), 231 B.R. 571 (E.D. Pa. 1999) (On debtors’ objection to IRS’s proof of claim, debtors put their home into a legitimate trust for their son but treated the home as their own, and thus the trust was holding the residence as the debtors’ nominee.); California Franchise Tax Bd. v. Jackson (In re Jackson), 220 B.R. 683 (C.D. Cal. 1998) (Chapter 13 debtors’ failure to notify state taxing authority of a reassessment of federal income taxes did not constitute a failure to file a return within the meaning of § 523(a)(1)(B)(i); therefore, debtors’ state income tax liability was discharged in a prior Chapter 7 case.); In re Vidalier, No. 06-50205, 2006 WL 3873268 (Bankr. W.D. La. Dec. 22, 2006) (unpublished) (Summerhays) (Chapter 13 debtor whose spouse died at end of previous tax year can file joint tax return for tax year during which spouse passed away but cannot take advantage of more favorable joint return tax rate with respect to prior years.); In re Stokes, 320 B.R. 821 (Bankr. D. Md. Oct. 29, 2004) (Keir) (Although Anti-Injunction Act does not prohibit bankruptcy court from considering debtor’s objection to IRS’s claim, IRS has discretion to refuse to accept amended returns filed years late and after IRS assessed penalties and interest based on original returns.); In re Booker, 301 B.R. 207 (Bankr. N.D. Ohio 2003) (Income debtor received for foster care services was not “qualified foster care payments” under § 131(b) of the Internal Revenue Code and was includable in gross income for each of the years in which the debtor did not file tax returns.); In re Frontone, 296 B.R. 184 (Bankr. C.D. Ill. 2003) (Under § 507(c), claim for an erroneous tax refund overpayment has same priority as underlying tax but is dischargeable in a Chapter 7 case; IRS claim for erroneous tax refund was discharged in debtor’s prior Chapter 7 case and is not allowable in subsequent Chapter 13 case.), aff’d in part, rev’d in part, 301 B.R. 290 (C.D. Ill. 2003) (Claim for erroneous refund is not a priority tax.); Pontes v. Lapatin (In re Pontes), 280 B.R. 20 (Bankr. D.R.I. 2002) (11 U.S.C. § 505 gives the bankruptcy court jurisdiction to determine the constitutionality of the Rhode Island Tax Sale statute notwithstanding the Tax Injunction Act of 1937; the Rhode Island Tax Sale statute is unconstitutional because it fails to require notice of a landowner’s right of redemption.); In re Nadybol, 254 B.R. 352 (Bankr. D. Md. 2000) (Income debtor earned in Germany working for Army Recreation Machine Fund was subject to federal income taxes and was not foreign earned income.); In re Coultrap, 248 B.R. 123 (Bankr. S.D. Ohio 2000) (Sustains objection to claim by Ohio Department of Taxation based on evidence that the debtor sold pizza business before the period during which the business did not pay taxes.); In re Shaver, 247 B.R. 436, 439–40 (Bankr. E.D. Tenn. 1999) (Rejects debtor’s objection to tax claim on ground that IRS failed to attach documentation. Applying Spiers v. Ohio Department of Natural Resources (In re Jenny Lynn Mining Co.), 780 F.2d 585 (6th Cir. 1986), “Fed. R. Bankr. P. 3001(c) is inapplicable to claims that are based on a statutory obligation such as federal income tax, as opposed to claims that are based on a writing.”); In re Whitus, 240 B.R. 705 (Bankr. W.D. Tex. 1999) (100% penalty tax assessment against nonfiling spouse is a community claim in the debtor’s Chapter 13 case, but the plan can separately classify that claim for no payment because in a Chapter 7 case applying § 726(c), that community claim would not be collectible from the debtor’s postpetition earnings.); In re Bechtelheimer, 239 B.R. 616 (Bankr. M.D. Fla. 1999) (On objection to claim of the IRS, motor home was debtors’ home for purposes of 26 U.S.C. § 162(a)(2), not the mobile home on property in Florida that the debtors used as a craft-making shop.); In re Haines, 233 B.R. 480 (Bankr. D. Mont. 1999) (Because Crow Indian tribe does not have authority to impose a resort tax on non-Indians conducting business on fee land within the boundaries of the tribe, court sustains debtor’s objections to claim filed by tribe.), aff’d, 245 B.R. 401 (D. Mont. 2000); Emerson v. United States (In re Emerson), 224 B.R. 577, 579–80 (Bankr. W.D. La. 1998) (Personal income taxes for years 1984, 1985 and 1986 were discharged in the debtors’ 1994 Chapter 7 case. “[A] qualifying offer in compromise was pending under § 507(a)(8) from October 31, 1991 to August 23, 1993. The offer was pending for 663 days, as 1992 was a leap year. Using the [Callahan v. United States (In re Callahan), 168 B.R. 272, 273 (Bankr. D. Mass. 1993),] formula, 240 plus 30 plus 663, the taxes would have to be assessed within 933 days prior to filing. As the Chapter 7 case was filed on April 20, 1994, the taxes assessed prior to September 30, 1991 are dischargeable. The taxes in this case were assessed from May to July of 1991. Therefore, the taxes were discharged.”); In re Farrell, 211 B.R. 79, 81 (Bankr. M.D. Fla. 1997) (Debtor not entitled to tax refunds for 1991 and 1992 in a Chapter 13 case filed in 1996 because “the claim for refund is barred by the Statute of Limitations.”); In re Pond, 200 B.R. 267, 270 (Bankr. S.D. Fla. 1996) (Debtor was a “responsible person” liable for unpaid employment taxes with respect to debtor’s wife’s business because debtor was a “co-venturer and investor with his wife” and functioned as an “executive manager” of his wife’s business.); Brady v. United States Dep’t of Treasury (In re Brady), 200 B.R. 178 (Bankr. S.D. Ohio 1996) (Bankruptcy court order resolving debtors’ objection in favor of the claim of the IRS is res judicata in debtors’ adversary proceeding for damages, injunctive relief and a determination of the validity of the debt underlying the IRS’s claim.); Jones v. United States (In re Jones), 196 B.R. 542 (Bankr. D. Idaho 1996) (On Chapter 13 debtors’ objection to $411,318.98 claim filed by the IRS, government appropriately reopened and revoked offer in compromise based on debtors’ guilty plea to submitting false documents and concealing assets in connection with the offer in compromise. IRS no longer bound by the compromise under 26 C.F.R. § 301.7122-1(a), (c).); In re Bewley, 191 B.R. 459 (Bankr. N.D. Okla. 1996) (Debtor not liable for “responsible person” trust fund taxes because business was owned and operated by the debtor’s son at the time it failed to pay. After son died and debtor assumed control of the business, debtor paid all trust fund taxes when due and made substantial payments toward deceased son’s liability.); In re Serino, 190 B.R. 778 (Bankr. M.D. Pa. 1995) (Nurses who worked for debtor were independent contractors, thus debtor was not liable for trust fund taxes.); Evans v. United States (In re Evans), 188 B.R. 598 (Bankr. D. Neb. 1995) (IRS’s assertion that debtor was “responsible person” for purposes of unpaid withholding tax liability was substantially unjustified. Debtor entitled to fees as prevailing party under 26 U.S.C. § 7430.); In re Thomas, 187 B.R. 471 (Bankr. E.D. Pa. 1995) (Debtor is “responsible person” for withholding and employment taxes not remitted by a company for which the debtor was accountant and sometimes “treasurer.”); In re Wilhelm, 173 B.R. 398 (Bankr. E.D. Wis. 1994) (On debtor’s objection to claim of IRS, farming and horse breeding were operated for a profit and expenses incurred were deductible.).

 

135  See, e.g., In re Malin, 356 B.R. 535 (Bankr. D. Kan. July 18, 2006) (Nugent) (Preconfirmation adversary proceeding to determine whether federal income taxes were dischargeable under § 507(a)(8)(A) was ripe, applying Rule 4007(b) provision that complaint could be filed “at any time.” Moreover, § 1322(a) requires plan to provide for payment of § 507 priority claims in full, and determination whether taxes fall into that category is essential.).

 

136  See §§ 344.1 [ Broadest Discharge Available ] § 157.1  Broadest Discharge Available, 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims and 548.1 [ Taxes ] § 159.1  Taxes.