LEXIS-NEXIS® Congressional Universe-Document

LEXIS-NEXIS® Congressional

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