The American Bankruptcy Institute (ABI) on Oct. 15 sent a letter to the House Judiciary and House Ways and Means Committees highlighting how H.R. 5146, the “Federal Receivership Fairness Act,” would create parity between bankruptcy estates and receivership estates in how federal tax liabilities are determined and discharged. The bipartisan legislation, sponsored by Rep. Darin LaHood (R-Ill.) and co-sponsored by Reps. Don Beyer (D-Va.) and Eugene Simon Vindman (D-Va.), aims to modernize how receiverships handle federal tax liabilities. While declining to comment specifically on the proposed legislation, ABI’s letter said that adopting a proven process already in use for more than four decades in bankruptcy proceedings could yield clear benefits for courts, receivers, the IRS and victims alike.
“Aligning receivership and bankruptcy tax procedures could help ensure faster distributions to victims of fraud and other claimants while reducing liability risks for receivers,” ABI Executive Director Amy Quackenboss writes in the letter. “It’s an approach that promotes fairness and efficiency without compromising the IRS’s ability to collect taxes owed.”
Under current law, the Bankruptcy Code (11 U.S.C. § 505) provides an expedited process for bankruptcy trustees to obtain an IRS determination of tax liability. This process enables timely distributions to creditors and victims. Receivers, however, lack a comparable mechanism, often enduring years of delay before funds can be distributed. The resulting lag not only potentially prolongs financial harm for victims, it also can delay the government’s collection of taxes owed.
“For four decades, Section 505 has ensured that tax determinations in bankruptcy cases are handled efficiently and fairly,” Quackenboss said. “Adopting a similar process in receiverships would bring consistency and speed to a system that too often leaves victims waiting.”
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. For additional information on ABI, visit www.abi.org.
“Aligning receivership and bankruptcy tax procedures could help ensure faster distributions to victims of fraud and other claimants while reducing liability risks for receivers,” ABI Executive Director Amy Quackenboss writes in the letter. “It’s an approach that promotes fairness and efficiency without compromising the IRS’s ability to collect taxes owed.”
Under current law, the Bankruptcy Code (11 U.S.C. § 505) provides an expedited process for bankruptcy trustees to obtain an IRS determination of tax liability. This process enables timely distributions to creditors and victims. Receivers, however, lack a comparable mechanism, often enduring years of delay before funds can be distributed. The resulting lag not only potentially prolongs financial harm for victims, it also can delay the government’s collection of taxes owed.
“For four decades, Section 505 has ensured that tax determinations in bankruptcy cases are handled efficiently and fairly,” Quackenboss said. “Adopting a similar process in receiverships would bring consistency and speed to a system that too often leaves victims waiting.”
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. For additional information on ABI, visit www.abi.org.
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