REGULATION AND TAXATION ROUNDTABLE DISCUSSION
Commissioners and staff in attendance at this session were Commissioners Jay Alix, John A.
Gose, Jeffery J. Hartley, James I. Shepard, and Jay Alix; Stephen H. Case, Senior Advisor; and
Jennifer Frasier, Staff Attorney. The roundtable discussants included Donald Harris of the
NewMexico Taxation and Revenue Department; Joyce Bauchner, Assistant Chief Counsel for
General Litigation at the Internal Revenue Service; John Akin, Supervising Attorney with the
California Franchise Tax Board; Ronald Del Vento, an Assistant Attorney General with the Texas
Attorney General's Office and Chief of the Collections Division; A. Lavar Taylor, an attorney in
private practice who specialized in bankruptcy tax issues; Michael St. James, an attorney whose
practice specialized in business debtor bankruptcy work; Robin Phelan, Haynes & Boone;
Mark Segal, a bankruptcy tax practitioner from Las Vegas; Stephen Csontos, Senior Legislative
Counsel with the United States Department of Justice Tax Division; and Kenneth Weil, a
bankruptcy tax practitioner from Seattle.
Mr. Case, noting that the discussion was focused on his September 7, 1996 memorandum
entitled, "Questions for Discussion at Roundtable," posed the first philosophical
question, namely, should governmental claimants be treated just like any other creditor in a
Mr. Harris said that governmental creditors were different because they did not choose their
debtors, they could not vary their interest rates depending on the quality of the collateral or risk of
default, and they could not cut off services to entities that do not pay.
Mr. St. James reminded the discussants that bankruptcy was a collective proceeding and that
while the government should probably receive some benefits such as immunity from a preference
challenge, it was important to let the collective environment work. He asked why the government
should not be treated just like any other creditor and whether a taxpayer who filed for bankruptcy
relief should get "some extra benefit." He expressed concern that the Commission
focused on the fraudulent debtor who was trying to evade taxes rather than focusing on more
Mr. Harris concurred that the government should participate in the collective process, but
noted that debtors sometimes provide ambiguous notice to their government creditors and
engaged in tactical maneuvering. He mentioned the problem of unfiled tax returns and other
instances where the government had no knowledge that its liabilities were being discharged. Mr.
St. James said that these problems could be readily fixed and that the number of fraudulent
taxpayers was "very, very small."
Mr. Del Vento said that it was the taxpayer who was not participating in the collective
process as this process imposed a responsibility to file returns. He expressed concern about a
value system that allowed a taxpayer who did not file returns to get a discharge.
Recalling that this was discussed at the prior roundtable discussion in Santa Fe, Mr. St.
James said that this was determined to be the least controversial issue and that there was
unanimity that people should be required to file their returns. Where, however, a taxpayer failed
to file a return from eight years ago and then be "gnawed" by the Internal Revenue
Service for five years, policy concerns were presented.
Suggesting that the discussion should move from the abstract level to specific areas, Mr.
Case asked the panelists to focus on the issue of whether the requirement that tax returns be
broughtcurrent should be a condition precedent for confirmation of a chapter 13 plan.
While generally agreeing with this proposition, Mr. Phelan said there may be some point in
time where it would become "ridiculous" such as where someone failed to file tax
returns for 15 years. He suggested that some cutoff point should be fixed. He also noted that the
problem concerned several types of debtors: those who pay their taxes, those who were
"Machiavellian tax cheats" and others in the middle. He said that the point was to
bring these debtors back into the system.
Ms. Bauchner stated that she and Mr. Csontos informally discussed possible reach back
periods and indicated that six years may be a possible time frame. When asked by Mr. Phelan
whether the court should exercise some discretion with this time frame, Ms. Bauchner said no as
it was unlikely that someone would be unable to reconstruct their records for this period of time.
Mr. St. James did not view the six-year reach back period as that "