Bankruptcy Taxation Committee Meeting Minutes
2007 Annual Spring Meeting
Bankruptcy Taxation Committee met on
Saturday, April 14, 2007 at the J.W. Marriott Hotel in Washington, D.C. during the
ABI Annual Spring
Meeting. David H. Stein of Duane Morris,
LLP, opened the meeting with brief remarks concerning the Committee and
introduced the new Co-Chair of the Committee, John Tittle, Jr., CPA,
CIRA, most recently a Director with LECG, LLC and currently
self-employed. Mr. Stein then introduced the
panelists for the presentation: Stephen M. Brecher of
Weiser LLP, T.
Keith Fogg from the Internal Revenue Service and Matthew Schwartz of Bederson
& Company. The presentation topics for
the panel discussion included Chapter 11
Plans and Preservation of
NOLs, Tax Implications of Liquidating Trusts and other Current
Issues. Mr. Stein served as the moderator of
the panel. At the conclusion of the
panel’s presentation, Mr. Stein made some closing remarks and then
asked audience members to consider becoming more involved in the work of
the Committee including writing for the newsletter and speaking at
future Committee meetings. It was announced that the next meeting of the Bankruptcy Taxation Committee is
scheduled to occur during the ABI Winter Leadership Conference, December
6 - 8, 2007, in Rancho Mirage, CA. There being no other business, the meeting was
2006 Winter Leadership Conference
Bankruptcy Taxation Committee met on Friday, Dec. 1, 2006 in
Scottsdale, Arizona at
ABI’s Winter Leadership Conference. Eric L. Pruitt opened the
meeting with brief remarks concerning the committee's online newsletter,
upcoming events and opportunities for members to participate by writing
newsletter articles or providing topics for future meetings. Mr. Pruitt
then introduced the panelists for the presentation: Rachael Zepeda, senior attorney with the office of chief counsel for the
Internal Revenue Service; Bill
Unger, insolvency group manager and revenue officer for the
IRS; Dennis Bean, Certified
Public Accountant and Certified Reorganization Advisor with Dennis Bean
& Co.; and Christopher Bayley, a partner in
the Phoenix office of Snell & Wilmer LLP.
provided an overview presentation of various tax aspects of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which
covered 10 highlighted areas of the law.
Conceding that the
IRS is cumbersome, Mr. Unger discussed the topic of "How to Deal with
the IRS" and focused on various aspects and changes in the centralized
presentation included a thorough analysis of the IRS offer-in-compromise
program. Mr. Bean noted his impression that the IRS is getting tougher
on offers in compromise.
topics" and recent cases, Mr. Bayley provided an overview of several
significant cases in the bankruptcy taxation area of interest from the
prior six-month period.
opened the floor for general discussion and comment. Joe Peiffer discussed a recent case of first impression, In re
Knudsen, No. 05-03136, 2006 Bankr. LEXIS 3179 (Bankr. N.D. Iowa
Nov. 20, 2006), which addressed 11 U.S.C.§1222(a)(2)(A) and allows
income taxes occasioned by the sale of farm assets used in the
debtor’s farming operation to be crammed down by treating them as
unsecured claims and not priority claims.
meeting of the Bankruptcy Taxation Committee is scheduled to coincide
with ABI’s 2007 Annual Spring Meeting, April 12-15, 2007,
in Washington, D.C.
2006 Annual Spring Meeting
The Bankruptcy Taxation Committee met on Saturday, April 22, 2006, at
9:30 a.m. during the 2006, ABI Annual Spring Meeting in Washington, D.C.
Committee Chairman David H. Stein of
Duane Morris LLP in Newark, N.J., introduced the panelists for the
presentation: Miriam Howe,
assistant division counsel with the Internal Revenue Service in
Washington, D.C.; T. Keith Fogg
of the Office of the Chief Counsel of the Internal Revenue Service in
Richmond, Va.; Gregory Germain, an assistant professor
of law at Syracuse University College of Law; and Eric Pruitt, an attorney with Baker, Donelson,
Bearman Caldwell & Berkowitz, P.C. in Birmingham, Ala.
Ms. Howe discussed the IRS reorganization process and answered
questions from the audience.
Mr. Fogg delivered his presentation entitled “Tax Changes in
the 2005 Bankruptcy Code Amendments.” A copy of the materials is
Prof. Germain led a discussion on income taxes in the year of
bankruptcy. An upcoming edition of The Tax Lawyer will
include an article by Prof. Germain entitled “Income Taxes in the
Year of Bankruptcy: A Congressionally-Created Quagmire.”
Mr. Pruitt briefly reviewed IRS Revenue Ruling 2006-16 and several
recent cases involving the bankruptcy and taxation areas. Revenue Ruling
2006-16 provides that a bankruptcy filing by a husband and wife does not
necessarily prevent one spouse from later filing for innocent spouse
relief under the Internal Revenue Code. A copy of Revenue Ruling 2006-16
The next meeting of the Bankruptcy Taxation Committee is tentatively
scheduled to be held at the 2006 ABI Annual Winter Leadership
Conference, Nov. 30–Dec. 2, 2006, in Scottsdale, Ariz. Please
email David Stein or call
(973)424-2022 if you have any suggestions for meeting topics or if you
are interested in writing a brief article for the Bankruptcy Taxation
Committee’s electronic newsletter.
2004 Annual Spring
The committee meeting consisted of a presentation by, and a Q&A
with, Joan Peterson, the IRS Territory Manager from St. Paul, Minn. She
provided a PowerPoint presentation of the new IRS automated proof of
claim program that is to be activated early in 2005. The IRS will be
centralizing in four locations the preparation of proofs of claim for
all bankruptcy cases. While such a program cannot respond to the myriad
variations that can occur with respect to proofs of claim, the program
will enable the IRS to file the vast majority of claims within days of a
bankruptcy petitition having been filed. The program will also alert IRS
local office Insolvency Unit Bankruptcy Specialists and Technicians to
the need to semi-manually prepare those claims that cannot be automated
It is believed that significant time will be saved by this new
program so that local IRS personnel will be better able to review
schedules and statements of affairs, identify bankruptcy issues, and
resolve more quickly inquiries that are received from debtor's counsel.
The one weakness that was identified by those in attendance concerned
unfiled tax returns. While the IRS will make a good-faith estimate of
the amount of tax due on unfiled tax returns, and while a notice of the
unfiled returns will be mailed to the debtors asking that they file the
returns so that more precise amended claims may be filed, no notice of
the unfiled returns is to be sent to debtors' counsel even though they
can readily be identified from PACER.
2003 Annual Spring
The committee met to discuss several substantive topics concerning
bankruptcy and tax issues and engaged in a lively discussion over the
recent 11th Amendment case, several interesting property of the estate
issues, and tax claims and lien situations. After the presentations, the
committee focused on several potential projects that may benefit the
broader ABI audience. These projects included:
- Annotated consumer tax checklist that could be used by consumer
bankruptcy attorneys to highlight potential tax issues.
- Articles for the ABI Journal.
- Articles for the E-newsletter.
Those interested in participating in any of these projects should
contact Jack Williams at email@example.com.
2002 Winter Leadership
The meeting was called to order by Chuck Rosen, vice-chair. An
attendance roster was circulated. The following topics were
I. Status of the 2002 bankruptcy amendments bill.
While the bill is now moot but will likely be resurrected next year
and as the 25+ tax related provisions are not in dispute by any parties,
these are likely to be included in next year's bankruptcy bill. A list
of the proposed tax-related provisions was distributed to those in
attendance. Several of the proposed amendments were discussed
II. Addition of §1519 to Title 18 U.S. Code as contained in the
recently enacted Corporate Fraud Accountability Act of 2002 (aka the
Sarbanes-Oxley Act of 2002).
This change to the U.S. Criminal Code, specifically made applicable
to bankruptcy cases as well as to almost any communication with any
federal agent or employee, (a) substantially increases from 5 years to
20 years, the maximum sentence for lying and/or falsifying documents,
and increases the maximum fine to an infinite amount, and (b) seems to
lower the standard of proof required to establish criminal
III. California Franchise Tax Board/State Board of Equalization
Penalty & Interest Waiver Program
A brief discussion followed concerning the recently enacted amnesty
program established by California. The program, designed to enhance
state revenue collect during a tight budget year, enables many
taxpayers/debtors to resolve their older tax debts by paying just the
tax—with the penalties and interest both to be waived. Further,
while the program is technically open only to those taxpayers who
receive letters from either the FTB or SBE, the state has indicated a
willingness to include other taxpayers who have not received the
letters, if their accounts are old, there is no known levy source and,
in many cases, where the taxpayer is out of state and collection would
be difficult. A current financial statement is required from the
taxpayer, but the state will conduct no due diligence to determine the
accuracy of the statement. For more information,contact the FTB at
IV. IRS Chief Counsel's interpretation of IRC 6103(e)(6) and (h)(4)
concerning the limitations on the disclosure of tax return information
to the debtors' attorneys, chapter 7/11 trustees and/or chapter 13
On Feb. 25, 2002, IRS Chief Counsel's office (Chief, Disclosure,
Branch 1) issued a legal memorandum interpreting when and to whom tax
return information may be disseminated to bankrupt debtors attorneys,
trustees and chapter 13 trustees. The memo was released for public
consumption on April 12, 2002, and may be found at 2002 TNT 72-76 and
CCH IRS Letter Rulings Report No. 1311; IRS reference is ILM
Written in a question-and-answer format, the memorandum restricts the
release of tax return information (including amounts due, liens filed,
status of collectibility and the negotiation of resolution of matters
related to unpaid and/or unfiled tax returns) basically up to the time
that the case is closed by the court. Thus, if there is no objection to
claim, contested matter, adversary or other litigation is pending, the
IRS may not disclose to a trustee the amounts remaining unpaid, whether
a tax return was filed, etc. Further, with respect to a discharged tax
liability, IRS personnel may not discuss with debtor's counsel
administrative abatement of the tax liability or release of recorded tax
liens, nor negotiate a payoff of the tax lien on exempt and/or abandoned
property. IRS personnel also may not discuss with a chapter 13 trustee
whether post-petition tax returns have been filed even if required by
the confirmed plan, nor disposition of post-petition refunds unless the
plan specifically provides that the trustee is to receive those refunds
in partial ayment of the chapter 13 plan. Service personnel may not
disclosure information of the current balances due to a trustee or
chapter 13 trustee. Further, attorneys and/or other employees of a
trustee or chapter 13 trustee may not be given taxpayer information
absent specific written authorization in each individual case.
The Tax Committee voted to seek the approval of ABI for authorization
to request the tax committees of congress to consider amending the IRC
6103 subsections to allow for the freer flow of information between the
IRS and debtors' attorneys, trustees and chapter 13 trustees. This does
not appear to be a controversial matter, nor is it one that is
substantive in nature and thus would not violate the ABI's policy of
taking sides on bankruptcy related matters. To that end, the committee
will also seek to enlist the support of IRS Chief Counsel, the
congressional liaison fficer of the Tax Division of the Department of
Justice, as well as the National Association of Bankruptcy Trustees and
the National Association of Chapter 13 Trustees, and possibly the
National Association of Consumer Bankruptcy Attorneys.
2001 Winter Leadership
Ron Maroko (Office of US Trustee, Los Angeles) gave an interesting
presentation on "Equivalent Individual Tax Returns and Bankruptcy
Discharge Issues," which sparked much interest and response from the
committee members. What might have appeared to be a bland subject
turned out to be very interesting.
Vernon Calder (Neilson Elggren LLP, Salt Lake City) gave an
interesting presentation on "Issues Affecting Individual Debtors In
Chapter 11 and Chapter 7." Vernon did an excellent job moderating
a group discussion of the issues impacting individuals.
Jim Jenkins (Lain, Faulkner & Co., PC, Dallas) did an outstanding
job chairing the committee meeting.
1999 Winter Leadership Conference
The Bankruptcy Taxation Committee held a general discussion of tax
articles for "Cracking the Code," including obtaining several
volunteers. Jim Jenkins of BDO Seidman LLP, Dallas, presented a detailed
discussion of the new regulations dealing with the adjustment of the
basis of property due to income from the cancellation of indebtedness
under §1017 of the Internal Revenue Code. Mr. Jenkins described the
need for the regulations and the problems that were encountered in
applying the regulations. A copy of his outline can be obtained by
contacting Prof. Newton at (541) 858-9187. In addition, the committee
held a general discussion regarding the status of the tax provisions in
both the Senate and House Bills. Members were asked to send suggested
topics for the next meeting to Prof. Newton.
1998 Winter Leadership Conference
Co-chair Prof. Jack F. Williams (Georgia State University College of
Law) directed a discussion of the current status of tax law changes that
may be part of bankruptcy bills introduced in the 106th Congress. The
comments made during the discussion are as follows:
- Both the House and Senate Judiciary Committees are expected to have
tax proposals in any bill introduced.
- It is expected that more of the recommendations of both the
Bankruptcy Review Commission and Tax Advisory Committee to the
commission will be included in any proposed legislation. There appears
to be willingness among the staff to consider a larger number of tax
issues and to carefully look at both sides of the issues.
- Staffs of the committees are currently considering tax provisions to
include in the bankruptcy bills.
- The Judiciary Committees will consider only those tax issues that
involve changes in the Bankruptcy Code. The proposed changes to the
Internal Revenue Code will most likely originate in the House Ways and
Means Committee. The extent and timing of the consideration of the
bankruptcy tax issues that impact the I.R.C. is less certain.
- Members of the committee who have any tax issues they would like to
be considered are encouraged to send them to Prof. Williams or Prof.
The committee also discussed future topics for ABI programs, and
several favorable comments were made about the Dischargeability of Taxes
Program developed by the Association of Insolvency Accountants and the
committee. It was suggested that the dischargeable taxes topic should be
brought up in 1999's Winter Leadership Conference. In addition, the
committee discussed the development of a list of people to prepare tax
articles for "Cracking the
Code." Those interested should contact Prof. Newton.