Copyright 1999
Federal News Service, Inc.
Federal News Service
MARCH 18, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH: 1128 words
HEADLINE: PREPARED STATEMENT OF
PAUL H. ASOFSKY
THE SECTION OF TAXATION
AMERICAN BAR ASSOCIATION
BEFORE THE
HOUSE JUDICIARY COMMITTEE
SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW
SUBJECT - TAX PROVISIONS OF H.R. 833,
THE
BANKRUPTCY REFORM ACT OF 1999
BODY:
Mr. Chairman and Members of the Subcommittee:
My name is Paul H. Asofsky and I am appearing before you today in my capacity
as Chair of the Task Force on the Tax Recommendations of the National
Bankruptcy Review Commission of the American Bar Association Section of Taxation. This
testimony is presented on behalf of the Section of Taxation. It has not been
approved by the House of Delegates or the Board of Governors of the American
Bar Association and, accordingly, should not be construed as representing
policy of the Association.
The Tax Section of the American Bar Association is comprised of approximately
25,000 tax lawyers located throughout the United States. It is the largest and
broadest-based professional organization of tax lawyers in the country. On
behalf of the Section, I would like to thank the Committee for inviting me to
testify this morning. The Section of Taxation has a long history of active
involvement in the development of bankruptcy tax legislation. In 1978 and 1979,
we testified and submitted written statements to various tax writing committees
of the Congress in connection with the Bankruptcy Tax Act of 1980. In 1996, the
Section created the current Special Task Force, that I am privileged to chair,
to follow the development of bankruptcy tax proposals through the National
Bankruptcy Review Commission and the Congress. The Task Force produced a report
exceeding 250 pages in length and I personally
testified before the Commission. In addition, three of our members were
appointed by the Chair of the Commission to a special tax advisory committee
consisting of representatives of the private sector, the government and the
academic community. Many of the Tax Section's recommendations became consensus
recommendations of the Advisory Committee that were unanimously approved by the
Commission. Many of our other recommendations were adopted by the Advisory
Committee and the Commission in divided votes. In short, we have been involved
in this process continuously, and we offer our assistance to the Congress as we
did to the Commission before it.
Over our many years of involvement with the bankruptcy legislative process, we
have sought balanced legislative proposals that seek to reconcile the interests
of efficient administration of the tax laws and the uniform application of
those laws to all taxpayers on the one hand, with the efficient operation of a
national bankruptcy system and rehabilitation of distressed debtors on the
other. That sense of balance pervades our reactions to the
provisions of this bill. Our positions taken as a whole tilt neither to
government tax collectors nor to taxpayers seeking relief from tax debts. We
have looked at each provision and attempted to make an independent judgment.
For example, we agree with those provisions requiring more effective notice to
governmental units of potential tax claims. We oppose attempts to repeal the
superdischarge. We agree that governmental taxing authorities should be
relieved of burdensome setoff rules that now exist. We disagree that taxpayers
should lose their right to a discharge merely by entering into an installment
payment agreement with the government. We agree that taxpayers should file some
back returns as a condition for obtaining Chapter 13 relief.
There is no reason why, with a little bit of give and take on all sides, a
consensus bill could not be crafted with widespread support. One of the
problems is that the devil is sometimes
in the details. There are many provisions in this legislation with which we
agree as a matter of principle, but the specific provisions are either
ambiguously drafted or cut against the grain of the principal proposal, causing
us to oppose what should be non-controversial proposals in their present form.
For example:
We agree that governmental taxing authorities should be entitled to detailed
notice of bankruptcy proceedings and requests for prompt audits, as Sections
802 and 803 of the Bill would provide. But we believe that those sections
should be amended to require fair notice to debtors of governmental filing
requirements.
We agree that the Bankruptcy Code should provide a fixed rate of interest on
deferred tax claims, and that debtors should not be permitted to seek a lower
rate, as Section 804 of the Bill would provide. But we believe that this
section should be amended to preclude tax authorities from claiming a higher
rate.
We agree that the debtor should not be permitted to shorten the
period before a tax loses priority status by filing successive bankruptcy
cases, as Section 805 of the Bill would provide. But we believe that this
section should be amended to prevent governmental taxing authorities from
enlarging the period before a tax loses priority by signing an installment
payment agreement.
We agree that debtors should be encouraged to seek Chapter 13, rather than
Chapter 7, relief when they can pay a portion of their debts over time, but we
believe that debtors should not be discouraged from resorting to Chapter 13 by
denying them the broad discharge that present Chapter 13 affords.
We agree that business debtors should not be permitted to backload deferred
payments of priority taxes, as Section 810 of the Bill would provide. But we
believe that this section should be amended to provide that deferral should not
be denied to the most insolvent of corporate debtors when they turn their
creditors into stockholders.
We agree that
parties filing Chapter 11 plans should be required to disclose the tax
consequences of their plans to those who must vote on it, as Section 817 of the
Bill would provide. But we believe that this section should be amended to
insure that such parties should not be put to the expense of providing tax
information that is of negligible interest in relation to the burden of
compiling it.
We agree that governmental tax authorities should be able to set off
prepetition tax refunds against uncontested prepetition tax es, as Section 818
of the Bill would provide. But we believe that this section should be amended
so as not to require the debtor to institute litigation against the government
to protect his rights.
In short, there is much in Article Eight of this Bill that represents a step
forward. But there are backward steps that should be corrected.
Finally, the Bill fails to cover many areas that were the subject of Commission
action. It would be a shame if the Congress missed
a golden opportunity to make the bankruptcy and tax laws work in harmony.
Thank you once again for the opportunity to appear before you. Members of the
Tax Section stand ready to assist you and your staff with this legislation in
any way. I would be pleased to answer any questions you may have.
END
LOAD-DATE: March 23, 1999
