Pension Premiums, Termination Tax and Bankruptcy Filing Fees to Rise in 2006
Late today, the U.S. Senate is scheduled to pass the conference report on S. 1932, the Deficit Reduction Act of 2005, which passed the House of Representatives yesterday. This bill contains several provisions related to bankruptcy, including the pension termination provision described below. As Congress attempts to finish up legislative business before recessing for the holidays, very little time remains to compromise major reform legislation such as the Pension Protection Act of 2005. Consequently, the reconciliation law is likely to be the last major law affecting bankruptcy in this legislative session.
With respect to pension premiums, the Reconciliation Conference Report establishes an employer-paid termination premium of $1,250 per plan participant for three consecutive years for companies that terminate their pension plans while in bankruptcy (§8201). The termination premium provision will sunset after five years. A Statement of Managers accompanying the bill also requests a study by the Government Accountability Office (GA0) regarding the effect of the premium tax on plan sponsors and members. GAO is expected to report back to the committee in 2007.
Bankruptcy filing fees would also be increased within two months of enactment of the reconciliation law (§10002). Chapter 7 fees would be increased to $245, chapter 13 fees would be increased to $235 and chapter 11 fees would increase to $2,750. Click here for a pdf of the Conference Report. Click here for a pdf of a summary of the relevant provisions.
IRS COMMISSIONER OUTLINES GOALS CURBING ABUSES BY CREDIT COUNSELING PROVIDERS
In a speech last week, IRS Commissioner Mark W. Everson reported on how the IRS has moved to curb abuses of exempt organizations (EOs), CCH reported Friday. In particular, Everson said that misuse and abuse by the credit counseling industry is of great concern to the IRS, and will continue to be into 2006. “In recent years, too many organizations got into this business not to help others, but to enrich insiders,” he said. He explained that to curb this abuse, the IRS has “a lot of examinations underway” and may be revoking the exempt status of up to half of the industry. He said that getting a handle on the credit counseling business is “now all the more important, because the new bankruptcy law...will channel debtors into credit counseling before they can file.”
Everson said that generally with EOs, the IRS approach has been “to work things out and not to penalize,” although the IRS may be “reassessing that to a certain degree” in the future. He added that the IRS’s plan for solving the problems plaguing EO enforcement will be a three-pronged approach. Primarily, the IRS intends to pursue intermediate sanctions, he said, noting that until recently, the IRS had to choose between penalties with little or no impact, or revocation of exempt status. The IRS is also moving toward greater transparency in EOs, including mandatory e-filing, as “it has always been the linchpin” to effective monitoring. Finally, Everson said that the IRS is looking toward greater information-sharing with other government entities that regulate charities.
NINTH CIRCUIT SPLIT DROPPED IN CONGRESS
Opponents of a congressional move to split the Ninth U.S. Circuit Court of Appeals were feeling good Monday after Republicans dropped a rider from a budget cuts bill that would have broken the circuit into two, The Recorder reported today. "I think it's very good news, and I'm very relieved because this was a matter of great concern to our judges," Ninth Circuit Chief Judge Mary Schroeder said Monday.
The decision to drop the rider came over a busy weekend when congressional staffers worked overnight to get a bill authorizing $41.6 billion in budget cuts approved. A spokesman for House Judiciary Committee Chairman F. James Sensenbrenner Jr., the Republican who has been pushing the split, said Monday he did not know why the rider was dropped. But in the past two months, several key senators have come out in opposition to the split provision and have threatened to invoke a procedural rule that would have required 60 Senate votes to keep the provision in the bill. That prospect -- and the reservations of Arlen Specter, the Senate Judiciary Committee chairman -- made it increasingly clear that the split would be temporarily shelved. Click here for the full story (free registration required).
CONGRESSIONAL BUDGET OFFICE REAFFIRMS UNCERTAINTY OVER ADEQUACY OF ASBESTOS TRUST FUND
In a new analysis of the proposed $140 billion asbestos trust fund scheme included in S. 852, which was reported out of the Senate Judiciary Committee, the Congressional Budget Office (CBO) continues to raise serious doubts over whether the trust fund created by the measure will have sufficient funds to pay expected claims. According to the CBO, “there is a significant likelihood that the fund’s revenues would fall short of the amount needed to pay valid claims, debt service and administrative costs.”
In addition, the CBO assumes that “the revenues collected under the bill would be, at most, about $140 billion, but could be significantly less. If the value of valid claims was significantly more than $130 billion, the fund's revenues would probably be inadequate to pay all claims.” To date, neither CBO nor any other analyst has publicly documented where the money would come from to sustain the trust fund or if there would be enough. Click here for the full story.
SETTLEMENT NEAR IN BROBECK BANKRUPTCY CASE
A snore from the back of U.S. Bankruptcy Judge Dennis Montali's courtroom Friday punctuated the closing minutes of the latest hearing in the long-running Brobeck, Phleger & Harrison bankruptcy case, The Recorder reported today. Still, no one's pretending that the quagmire created by Brobeck's 2003 collapse is anything other than frustratingly complex. After settling dozens of suits accusing former Brobeck partners of improperly taking money out of firm coffers, bankruptcy trustee Ronald Greenspan (FTI Consulting) aims to settle the claims of the firm's 1,000-plus former employees with a plan that would pay a maximum of about $10 million.
Greenspan's lawyer, Bennett Murphy (Hennigan, Bennett & Dorman), explained to Montali on Friday that his proposed settlement plan for former employees was intended to move the case forward and to keep it simple. Montali said he will probably approve some version of the proposed settlement scheme, which would let employees receive cash payouts within 90 days of court approval -- but only if they give up the right to make further claims. Click here for the full story (free registration required).
U.S. NOVEMBER PRODUCER PRICES FALL
U.S. producer prices fell in November by the most in six months as energy prices receded, economists expect the government to report today, according to Bloomberg News. Prices paid to factories, farmers and other producers may have fallen 0.5 percent last month after a 0.7 percent increase in October, according to the median estimate of 63 economists in a Bloomberg News survey. The core measure, which excludes energy and food, probably rose 0.2 percent after a 0.3 percent decline.
Crude oil prices, which reached a record on Aug. 30 after Hurricane Katrina disrupted production, fell in November as companies imported more oil and brought production back on line. Economists said a decline in the amount of available factory capacity and the prospect of rising wages pose inflation risks that will spur the Federal Reserve to continue raising interest rates through early next year. The projected decline in producer prices “spells welcome relief from the energy price spikes that were seen in September and early October,” said Brian Bethune, an economist at Global Insight Inc. in Lexington, Mass. Click here for the full story.
COMMENTARY: GM ISN’T FACING THE REALITY OF ITS PRODUCTS
General Motors CEO Rick Wagoner's misty-eyed description of the travails of his company, asserting that, simply, "we at GM do not want a bailout. What we want -- after we take the actions we are taking, in product, technology, cost and every area we're working in our business today -- is the chance to compete on a level playing field." This statement artfully swerves around the most important issue: Americans, in ever growing numbers, are finally free to buy their cars from competitors -- whose products are perceived to be superior -- rather than from the "Big Three" of old, the Wall Street Journal reported today.
GM (and Ford) since the end of World War II were free to produce and charge, with the help of their financing units, whatever the market would bear, and thereby avoid genuine confrontation with the never-ending (now excessive) wage and benefit demands of trade unions whose strike weapon could shut them down. That economic model reeked of monopoly and, like our public education system, deserves termination either voluntarily -- based on the facts -- or eventually in bankruptcy court. If you cannot profitably sell that which you produce, expectation of success becomes illusionary. Click here for the full story.
ANALYSIS ON CONSUMER PROVISIONS OF BAPCPA
ABI Member Michael Barnett (Michael Barnett, PA; Tampa, Fla.) has prepared an analysis of the consumer provisions of BAPCPA, updating it with case law as becomes available. Click here to view the analysis.
REGISTER NOW FOR ABI’S 14th ANNUAL BANKRUPTCY BATTLEGROUND WEST
For the past 13 years, ABI has presented its Bankruptcy Battleground West program to the Los Angeles-area insolvency community. The 14th annual program, to be held March 10, 2006, at The Century Plaza in Los Angeles, is titled “Everything Old is New Again: New Rules, New Players and New Strategies for Chapter 11 Practice.” The program will also include a luncheon presentation by bankruptcy attorney Patrick Shea, the former mayoral candidate for San Diego who advocated a chapter 9 filing to help solve the city’s financial problems. This year’s program promises to be exciting and informative. Don’t miss out!
Timely topics include:
- Vanishing Pensions and Shrinking Retirement Benefits: Does Chapter 11 Allow a Company to Take Away with One Hand What It Gave with the Other?
- Code Blues–New Issues for Health Care and Hospitals: An Analysis, Discussion and Debate of Issues Involving Health Care, Hospitals under the Amended Bankruptcy Code
- Luncheon Presentation: Should San Diego File Chapter 9 to Restructure Its Debts?
- The New Face of American Reorganization and Restructuring
- The Business Bankruptcy Law 6 Months Later: Has Anything Really Changed?
Register today and earn 6.25 hours of CLE credit!
BLOG ON BAPCPA
ABI World is now home to a blog on the latest case law interpreting the bankruptcy amendments. Created by David L. Rosendorf, ABI member and a shareholder at Miami’s Kozyak Tropin & Throckmorton, P.A., the ABI BAPCPA Blog provides regular commentary, analysis and an opportunity for you to post comments. Check out the blog here, and feel free to weigh in.
UPDATED FOR THE NEW LAW: WHEN WORLDS COLLIDE: BANKRUPTCY AND ITS IMPACT ON DOMESTIC RELATIONS AND FAMILY LAW, THIRD EDITION
Divorce and bankruptcy are alike in that each attempts to provide a "fresh start," but the laws are often in conflict. This resource, now updated to include BAPCPA changes, was developed for an ABI educational program to help family court judges better identify and deal with bankruptcy issues, such as the impact of the automatic stay, the power of the courts to enjoin state courts, property of the bankruptcy estate, the impact of the bankruptcy discharge on alimony, child support, maintenance and property settlements, post-petition divorce actions and exempt property. Appendices feature relevant sections of the Bankruptcy Code, a list of cases and articles on the topic, and a directory of bankruptcy judges and bankruptcy court clerks. Softbound, 120 pages. Order today!
Member: $22 Non-member: $27
NEW ON-DEMAND CLE: BEST OF MID-ATLANTIC WORKSHOP 2005
“Anything but Bankruptcy: ABCs, Receiverships & Other Alternatives” will be held live on Jan. 18, 2006, at 2 p.m. EDT. This “Best of ABI” program covers winning strategies involving state and federal receiverships, assignments for the benefit of creditors, out-of-court workouts and more. 90 minutes, $95. Click here for more information.
From publishing opportunities to committee involvement, ABI offers many options for members to raise their professional profiles. Click here for more opportunities.
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