11 U.S.C. § 1146 — Special tax provisions

Page 279 TITLE 11—BANKRUPTCY § 1146 § 1146. Special tax provisions (a) The issuance, transfer, or exchange of a se- curity, or the making or delivery of an instru- ment of transfer under a plan confirmed under section 1129 or 1191 of this title, may not be taxed under any law imposing a stamp tax or similar tax. (b) The court may authorize the proponent of a plan to request a determination, limited to questions of law, by a State or local govern- mental unit charged with responsibility for col- lection or determination of a tax on or measured by income, of the tax effects, under section 346 of this title and under the law imposing such tax, of the plan. In the event of an actual con- troversy, the court may declare such effects after the earlier of— (1) the date on which such governmental unit responds to the request under this sub- section; or (2) 270 days after such request. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 98–353, title III, § 517, July 10, 1984, 98 Stat. 388; Pub. L. 109–8, title VII, § 719(b)(3), Apr. 20, 2005, 119 Stat. 133; Pub. L. 116–54, § 4(a)(12), Aug. 23, 2019, 133 Stat. 1086.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1146 of the House amendment represents a compromise between the House bill and Senate amend- ment. Special tax provisions: reorganization: The House bill provided rules on the effect of bankruptcy on the tax- able year of the debtor and on tax return filing require- ments for State and local taxes only. The House bill also exempted from State or local stamp taxes the issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan. The House bill also authorized the bankruptcy court to declare the tax effects of a reorganization plan after the proponent of the plan had requested a ruling from State or local tax authority and either had re- ceived an unfavorable ruling or the tax authority had not issued a ruling within 270 days. The Senate amendment deleted the rules concerning the taxable years of the debtor and tax return filing re- quirements since the Federal rules were to be consid- ered in the next Congress. It broadened the rule ex- empting transfers of securities to include Federal stamp or similar taxes, if any. In addition, the Senate amendment deleted the provision which permitted the bankruptcy court to determine the tax effects of a plan. The House amendment retains the State and local rules in the House bill with one modification. Under the House amendment, the power of the bankruptcy court to declare the tax effects of the plan is limited to issues of law and not to questions of fact such as the al- lowance of specific deductions. Thus, the bankruptcy court could declare whether the reorganization quali- fied for taxfree status under State or local tax rules, but it could not declare the dollar amount of any tax attributes that survive the reorganization. SENATE REPORT NO. 95–989 Section 1146 provides special tax rules applicable to Title 11 reorganizations. Subsection (a) provides that the taxable period of an individual debtor terminates on the date of the order for relief, unless the case has been converted into a reorganization from a liquidation proceeding. Subsection (b) requires the trustee of the estate of an individual debtor in a reorganization to file a tax re- turn for each taxable period while the case is pending after the order for relief. For corporations in chapter 11, the trustee is required to file the tax returns due while the case is pending (sec. 346(c)(2)). Subsection (c) exempts from Federal, State, or local stamp taxes the issuance, transfer, or exchange of a se- curity, or the making or delivery of an instrument of transfer under a plan. This subsection is derived from section 267 of the present Bankruptcy Act [section 667 of former title 11]. Subsection (d) permits the court to authorize the pro- ponent of a reorganization plan to request from the In- ternal Revenue Service (or State or local tax author- ity) an advance ruling on the tax effects of the pro- posed plan. If a ruling is not obtained within 270 days after the request was made, or if a ruling is obtained but the proponent of the plan disagrees with the ruling, the bankruptcy court may resolve the dispute and de- termine the tax effects of the proposed plan. Subsection (e) provides that prepetition taxes which are nondischargeable in a reorganization, and all taxes arising during the administration period of the case, may be assessed and collected from the debtor or the debtor’s successor in a reorganization (see sec. 505(c) of the bill). HOUSE REPORT NO. 95–595 Section 1146 of title 11 specifies five subsections which embody special tax provisions that apply in a case under chapter 11 of title 11. Subsection (a) indi- cates that the tax year of an individual debtor termi- nates on the date of the order for relief under chapter 11. Termination of the taxable year of the debtor com- mences the tax period of the estate. If the case was con- verted from chapter 7 of title 11 then the estate is cre- ated as a separate taxable entity dating from the order for relief under chapter 7. If multiple conversion of the case occurs, then the estate is treated as a separate taxable entity on the date of the order for relief under the first chapter under which the estate is a separate taxable entity. Subsection (d) permits the court to authorize the pro- ponent of a plan to request a taxing authority to de- clare the tax effects of such plan. In the event of an ac- tual controversy, the court may declare the tax effects of the plan of reorganization at any time after the ear- lier of action by such taxing authority or 270 days after the request. Such a declaration, unless appealed, be- comes a final judgment and binds any tax authority that was requested by the proponent to determine the tax effects of the plan. Editorial Notes AMENDMENTS 2019—Subsec. (a). Pub. L. 116–54 inserted ‘‘or 1191’’ after ‘‘1129’’. 2005—Pub. L. 109–8 redesignated subsecs. (c) and (d) as (a) and (b), respectively, and struck out former subsecs. (a) and (b) which read as follows: ‘‘(a) For the purposes of any State or local law impos- ing a tax on or measured by income, the taxable period of a debtor that is an individual shall terminate on the date of the order for relief under this chapter, unless the case was converted under section 706 of this title. ‘‘(b) The trustee shall make a State or local tax re- turn of income for the estate of an individual debtor in a case under this chapter for each taxable period after the order for relief under this chapter during which the case is pending.’’ 1984—Subsec. (c). Pub. L. 98–353, § 517(a), struck out ‘‘State or local’’ before ‘‘law imposing a stamp tax’’. Subsec. (d)(1). Pub. L. 98–353, § 517(b), substituted ‘‘or’’ for ‘‘and’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2019 AMENDMENT Amendment by Pub. L. 116–54 effective 180 days after Aug. 23, 2019, see section 5 of Pub. L. 116–54, set out as a note under section 101 of this title. Page 280 TITLE 11—BANKRUPTCY § 1161 EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. SUBCHAPTER IV—RAILROAD REORGANIZATION § 1161. Inapplicability of other sections Sections 341, 343, 1102(a)(1), 1104, 1105, 1107, 1129(a)(7), and 1129(c) of this title do not apply in a case concerning a railroad. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2641.) HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95–989 This section makes inapplicable sections of the bill which are either inappropriate in railroad reorganiza- tions, or relate to matters which are otherwise dealt with in subchapter IV. § 1162. Definition In this subchapter, ‘‘Board’’ means the ‘‘Sur- face Transportation Board’’. (Added Pub. L. 104–88, title III, § 302(1), Dec. 29, 1995, 109 Stat. 943.) Editorial Notes PRIOR PROVISIONS A prior section 1162, Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2641, defined ‘‘Commission’’, prior to repeal by Pub. L. 104–88, title III, § 302(1), Dec. 29, 1995, 109 Stat. 943. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective Jan. 1, 1996, see section 2 of Pub. L. 104–88, set out as a note under section 1301 of Title 49, Transportation. § 1163. Appointment of trustee As soon as practicable after the order for relief the Secretary of Transportation shall submit a list of five disinterested persons that are quali- fied and willing to serve as trustees in the case. The United States trustee shall appoint one of such persons to serve as trustee in the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 99–554, title II, § 226, Oct. 27, 1986, 100 Stat. 3102.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1163 of the House amendment represents a compromise between the House bill and Senate amend- ment with respect to the appointment of a trustee in a railroad reorganization. As soon as practicable after the order for relief, the Secretary of Transportation is required to submit a list of five disinterested persons who are qualified to serve as trustee and the court will than appoint one trustee from the list to serve as trust- ee in the case. The House amendment deletes section 1163 of the Senate amendment in order to cover intrastate rail- roads in a case under subchapter IV of chapter 11. The bill does not confer jurisdiction on the Interstate Com- merce Commission with respect to intrastate railroads. SENATE REPORT NO. 95–989 [Section 1166 (enacted as section 1163)] Requires the court to appoint a trustee in every case. Since the trustee may employ whatever help he needs, multiple trusteeships are unnecessary and add to the cost of ad- ministration. The present requirement of section 77(c)(1) [section 205(c)(1) of former title 11] that the trustee be approved by the Interstate Commerce Com- mission is unnecessary, since the trustee will be se- lected either from the panel established under section 606(f) of title 28, or someone certified by the Director of the Administrative Office of the United States Courts as qualified to become a member of that panel. HOUSE REPORT NO. 95–595 [Section 1162] This section [enacted as section 1163] requires the appointment of an independent trustee in a railroad reorganization case. The court may appoint one or more disinterested persons to serve as trustee in the case. Editorial Notes AMENDMENTS 1986—Pub. L. 99–554 amended section generally, sub- stituting ‘‘relief the Secretary’’ for ‘‘relief, the Sec- retary’’ and ‘‘The United States trustee shall appoint’’ for ‘‘The court shall appoint’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99–554 dependent upon the judicial district in- volved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. § 1164. Right to be heard The Board, the Department of Transportation, and any State or local commission having regu- latory jurisdiction over the debtor may raise and may appear and be heard on any issue in a case under this chapter, but may not appeal from any judgment, order, or decree entered in the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 104–88, title III, § 302(2), Dec. 29, 1995, 109 Stat. 943.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1164 of the Senate amendment is deleted as a matter to be left to the Rules of Bankruptcy Proce- dure. It is anticipated that the rules will require a peti- tion in a railroad reorganization to be filed with the Interstate Commerce Commission and the Secretary of Transportation in a case concerning an interstate rail- road. Section 1164 of the House amendment is derived from section 1163 of the House bill. The section makes clear that the Interstate Commerce Commission, the Depart- ment of Transportation, and any State or local com- mission having regulatory jurisdiction over the debtor may raise and appear and be heard on any issue in a case under subchapter IV of chapter 11, but may not ap- peal from any judgment, order, or decree in the case. As under section 1109 of title 11, such intervening par- ties are not parties in interest.