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Proof of Claim | |||||||||||||||||||||
Part 25. Special
Topics
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Chapter 17. Bankruptcy
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Section 6. Proof
of Claim
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25.17.6 Proof of Claim
- 25.17.6.1
Introduction
- 25.17.6.2
A
Proof of Claim
- 25.17.6.3
Claim
Allowance
- 25.17.6.4
Below
Tolerance — Non-Filing of a Proof of Claim
- 25.17.6.5
Types
of Claims
- 25.17.6.6
Administrative
Claims
- 25.17.6.7
Time
for Filing Claims/Acknowledgment
- 25.17.6.8
Unassessed
Claims
- 25.17.6.9
Amended
Claims
- 25.17.6.10
Section
1305 Claims
- 25.17.6.11
Criminal
Investigation (CI) Involvement
25.17.6.1 (09-01-2004)
Introduction
1.
Section Information .
This section provides information on proofs of
claim. It defines a "proof of claim" (POC),
explains what forms to file, discusses eligible
entities, timeframes (bar dates), types of claims,
and the criteria for filing amended claims. This
section provides additional guidance to Insolvency
on the proof of claim process, including tolling,
claim classification, cursory reviews, late filed
claims, refiling of liens, Section 1305 claims, and
trust fund considerations.
25.17.6.2 (09-01-2004)
A Proof of Claim
1.
Proof of Claim. A
proof of claim is the primary method creditors have
of receiving funds in a bankruptcy proceeding. A
proof of claim is a statement filed with the
bankruptcy court listing debts owed by the debtor to
a particular creditor.
2.
Early Filing Stressed. Proofs
of claim should be prepared by Insolvency and filed
with the court as early in the bankruptcy proceeding
as possible. See
25.17.6.2.1 (09-01-2004)
Filing Entities
1.
Who May File. 11 U.S.C. § 501 provides any of the following
may file a proof of claim for taxable periods
considered to be prepetition (accrued prior to the
bankruptcy filing date):
·
creditor
·
debtor
·
co-debtor
·
trustee
·
indenture
trustee (trustee representing creditors)
·
equity
security holder
2.
Claims Filed on Behalf of
Note:
If a third party's claim filed on behalf
of the Service does not meet the requirements of Law
Enforcement Manual (LEM) 5.5.3, Insolvency's
following up with an amended or corrected claim is
optional.
25.17.6.2.2 (09-01-2004)
Cursory Review
1.
Preliminary Review. 341
meetings of creditors and confirmation hearings may
occur soon after the commencement of the bankruptcy.
To allow Insolvency sufficient time to evaluate
debtors' plans and to prepare the Service's proofs
of claim, bankruptcy cases must be reviewed as soon
as possible. A cursory
review should,
at a minimum, ensure freeze codes are input on all
entities and stay violations are identified.
Staffing, workload, and local practices may affect
timeframes for plan reviews.
Reminder:
Stay violations may include liens filed
after the bankruptcy petition date, payment(s)
received and deposited by the Service postpetition
due to a prepetition levy still outstanding, notice
and demand letters being generated, refund offsets,
etc.
25.17.6.2.2.1 (09-01-2004)
Lien Refiling
1.
Lien Refile Determination. During
the cursory case review, Insolvency must verify the
timely refile of existing Notices of Federal Tax
Liens (NFTL) when the liens are due to expire during
the pendency of the bankruptcy. The timely refile of
liens in the correct location(s) maintains the
Service's priority status outside of bankruptcy.
A.
Insolvency Responsibility. While
bankruptcy cases are assigned to Insolvency,
Insolvency is responsible for making the
determination to refile liens. Normally refiling a
lien, by itself, is not a violation of the stay.
Refiling creates no new priorities, but merely
maintains the prepetition status of the lien.
B.
Protection of the Government's Interests. Insolvency
must ensure the federal tax lien priority is
protected through a lien refile, allowing the lien
to continue to attach to prepetition property after
the bankruptcy case ends.
2.
Documentation. Insolvency must timely and accurately document
on AIS all pertinent actions taken on a lien
refiling. See
25.17.6.2.2.2 (09-01-2004)
Lien Filed in Violation of the Automatic Stay
1.
Violation of the Automatic Stay – NFTL. If,
during the cursory review conducted by Insolvency
early on in the bankruptcy process, or at any time
during the pendency of a bankruptcy, a Notice of
Federal Tax Lien is discovered to have been filed in
violation of the automatic stay, corrective actions
must be initiated within two
workdays from
the date the violation is identified.
2.
Documentation. All information concerning the details of the
lien filing and subsequent actions to resolve the
stay violation must be entered on the AIS history
screen.
25.17.6.2.3 (09-01-2004)
Claim Forms and Lien Attachment
1.
Form B10 - Bankruptcy Court-Approved Form. Insolvency
completes the AIS–generated Form
B10, Proof of
Claim with an attachment (Form
B10 Attachment) to provide detailed
information on the tax liabilities claimed by the
Service. The Insolvency Technician training guides
explain the manual computations needed to prepare
the required data for Form B10 and the attachment.
2.
Lien Attachment. Depending
on local requirements, a copy of the
Note:
Although attaching a copy of the NFTL is
not required under the Bankruptcy Rules, Form B10
directs creditors to attach copies of supporting
documents to the proof of claim. Because the Service
may ultimately have to prove its secured status,
unless otherwise directed by the court, good
business practice supports attaching the NFTL to the
Service's claim.
3.
" Admin" Claim/Gap Period Claims. Form
6338A should be used for filing claims for
administrative ( "admin" ) and involuntary
gap period taxes.
4.
Section 1305 Claims.
25.17.6.2.4 (09-01-2004)
Authorization
1.
Delegation Order No. 51/Authorization. Bankruptcy
Rule 3001(b) provides the proof of claim must be
executed by the creditor or the creditor's
authorized agent. This requirement is satisfied by
obtaining signatory approval as authorized in
Delegation Order No. 51. Bankruptcy proofs of claim
are not required to be notarized or executed under
oath.
25.17.6.3 (09-01-2004)
Claim Allowance
1.
Claim Validity. A
properly filed proof of claim is deemed allowed
unless objected to by a party in interest. 11 U.S.C.
§ 502(a). If a party in interest objects to a
claim, the court will determine its validity.
25.17.6.3.1 (09-01-2004)
Basis for the Proof of Claim
1.
Proof of Claim Data. Case
files must be sufficiently documented to establish
the basis for the proof of claim entries. When
25.17.6.3.2 (09-01-2004)
Payment of Pre- and Post- Petition Claims
1.
Treatment of Claims. The
Bankruptcy Code's treatment of claims differs
depending on the claim classification and whether
the tax liabilities arose pre- or post- petition.
Information on payment allocations is found in the
sections of
25.17.6.4 (09-01-2004)
Below Tolerance — Non-Filing of a Proof of Claim
1.
Tolerance for Filing a Proof of Claim. The
tolerances listed in Law Enforcement Manual (LEM)
5.5.3 allow for the non-filing of proofs of claim
when criteria listed in the LEM are met.
2.
Claim Considerations. In cases where the outstanding balance is less
than stated in LEM 5.5.3 (below
tolerance), Insolvency's determination to
file a claim should be based on various factors,
including:
·
the cost of
filing a claim in relation to what is owed
·
the
potential for collection
·
consideration
of the potential for collection from exempt or
abandoned assets or other sources, such as a
non-debtor spouse
3.
Filing of Claim Optional. The established tolerance amount does not
preclude or prohibit Insolvency units from filing a
proof of claim in any case, or in every case, if
local practice allows.
4.
Abatement of Below Tolerance Cases. If
a debt has not been scheduled for payment by the
trustee, and a claim has not been submitted by the
debtor on behalf of the
Caution:
Exceptions to the abatement of below
tolerance cases exist when pending litigation or
criminal investigation are involved. See
25.17.6.5 (09-01-2004)
Types of Claims
1.
Determination of Categories/Liabilities. When
preparing a proof of claim, Insolvency determines
the category of each liability listed on the claim.
All tax liabilities accrued as of the petition date
must be included on the claim.
2.
Pre- vs. Post- Petition Income Taxes. During
the proof of claim preparation, Insolvency must
distinguish if a tax account is a pre- or a post-
petition tax liability.
A.
When Income Tax Liabilities Arise. The Service contends income tax liabilities
arise at
the end of the taxable period. However, note (c) below.
Example:
The income tax liability for the
calendar (tax) year 2003 arose on
B.
Chapters 7 and 11 — Individuals. Pursuant
to I.R.C. § 1398, individuals in Chapters 7 and 11
cases can elect to treat the taxable year in which
the bankruptcy case was filed as two taxable years.
The first year ends on the day before the
commencement of the bankruptcy case. The liability
for this year, therefore, becomes prepetition.
The second year ends on the day the bankruptcy
petition is filed. The liability for this year is postpetition.
C.
Corporate Income Tax –
"Split "
Liability .
Contrary to the Service's position that income tax
liabilities arise at the end of the taxable period,
three circuit courts of appeal have held in
corporate Chapters 7 and 11 cases, petition year
liabilities should be apportioned into pre- and
post- petition claims, usually a proration based on
the number of days preceding and following the
petition date. These authorities should be followed
in their respective jurisdictions, but only with
respect to income tax liabilities in corporate
Chapters 7 and 11 cases. Counsel should be consulted
to determine the rule for a particular jurisdiction.
3.
Claim Classification.
A.
Classifications. In addition to determining if a claim is pre-
or post- petition, Insolvency must determine its
classification. Claims can be either secured or
unsecured, priority or general.
B.
Prepetition Claims . The three primary types of prepetition claims
are secured, unsecured
priority, or unsecured general.
Note:
Periods (other
than income tax) beginning before and
ending after the petition date generally have to be
split into pre- and post- petition claims. See
4.
Postpetition Claims. Administrative
claims (see
25.17.6.5.1 (09-01-2004)
Secured Claim
1.
Authority.
The Service may assert a secured claim
for taxes, penalties, and interest under I.R.C. §
6321.
2.
Secured Claims. For
the Service to have a secured claim, either:
A.
the
B.
the
3.
Secured Claim/Equity in Property. The
secured claim represents the debtor’s equity in
all real and personal property, which is property of
the estate, including any
exempt property listed in the debtor's
schedules filed with the court. A debtor's schedules
will list the property claimed as exempt separate
from other property.The federal tax lien attaches to
any equity in the property.
A.
The
B.
Property
excluded from the bankruptcy estate under §
541(c)(2), such as a pension plan that contains an
anti-alienation clause that is enforceable under
nonbankruptcy law, should not be included in
determining the amount of the Service's secured
claim. Questions regarding particular plans should
be addressed to Counsel.
C.
The Supreme
Court ruled in United
States v. Craft, 535 U.S. 274 (2002),
state law cannot preclude the attachment of a
federal tax lien to property held as tenancy by
entireties in states permitting this form of
ownership. A lien filed against a debtor attaches to
property held as tenants of the entirety. When
determining the value of the Service's secured
interest on a proof of claim when only one spouse
has filed bankruptcy, 50% of the equity in property
held as tenancy by entireties generally can be used.
4.
Advantages.
The advantages of a secured claim include:
A.
under
Chapters 11,12, and 13, the Bankruptcy Code provides
for full payment of secured claims, or the surrender
of the collateral;
B.
in addition
to tax, the secured claim includes all penalties and
interest due and owing as of the petition date;
C.
adequate
protection may be available; see
D.
the
5.
Oversecured — Postpetition Interest Payable. When
the equity in the debtor’s property exceeds
the amount of the
6.
Undersecured. If the
Note:
25.17.6.5.1.1 (09-01-2004)
Language for Setoff
1.
Identification of Right of Setoff. Insolvency
must identify claims secured by the right of setoff
by the input of " RT
OF SETOFF "
in the County field on the Proof of Claim Lien
Detail screen on AIS.
2.
Language for Insertion on Claim. When
claiming a setoff amount on the Service's proof of
claim, the following language should be included on
the claim:
"The United States has
the right of setoff or counterclaim(s), in the
amount of $____________. The identification of any
sums subject to setoff is based on available data
and is not intended to waive any other right to set
off, against this claim, debts owed to this debtor
by this or any other Federal agency that have not
been identified. All rights of setoff are preserved
and will be asserted to the extent lawful."
Reminder:
The Service cannot hold a refund
indefinitely. Within 30 calendar days of the
Service's becoming aware of a refund being retained,
a decision must be made to make a referral or issue
the refund. If the Service is allowed to exercise
its right of setoff, the claim will subsequently be
amended or withdrawn. See
25.17.6.5.2 (09-01-2004)
Unsecured Priority Claims
1.
Priority Claims. The
Bankruptcy Code defines what constitutes prepetitionpriority
taxes. See 11 U.S.C. § 507(a). These taxes are
entitled to a priority status on the Service's proof
of claim.
2.
Advantages.
The advantages of a priority claim include:
A.
plans in
Chapters 11, 12, or 13 bankruptcy cases must provide
for full payment of all priority claims (unless the
B.
in Chapter
7 cases, priority claims must be paid in full before
any distribution is made to general unsecured
claims;
C.
priority
claims are paid pro rata when the assets of the
bankruptcy estate are not sufficient to provide full
payment of all such claims; and
D.
priority
claims are non-dischargeable in individual Chapter
7, individual Chapter 11 cases, and Chapter 12
cases. However, in a Chapter 13 case, they are
non-dischargeable only
if not provided for in the plan, or if a hardship
discharge is granted under 11 U.S.C. § 1328(b).
3.
Table Outlining Priority Status for Various Federal Taxes. The
Table below outlines classification
of priority taxes as delineated in 11
U.S.C. § 507(a)(8).
|
A Priority Classification of Taxes for the |
|
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Income Tax
|
for a taxable year ending on or before the petition date for
which the last due date of the return,
including extensions, was after
three years before the petition date. Example:
A Chapter 13 debtor files a petition on April
15, 2002, and owes income tax for the 1998 tax
year and did not file an extension. Because
the 1998 return was due on
|
|
Income Tax
|
assessed within 240 days before the petition date (
plus
any time plus 30 days during which
an offer-in-compromise (OIC) was made within
the 240 days) |
|
Income Tax
|
not assessed before the petition date but assessable as of that
date by agreement or under applicable law; exceptions:
fraud, unfiled returns, or returns
filed late – within two years of the
petition date |
|
Trust Fund Tax |
all conditions |
|
Non-Trust Fund Tax |
a return is required, and the tax accrued on or before the
petition date for which the last due date of
the return, including
extensions,
was within three years of the
bankruptcy petition date; or if a return is
not required, the transaction giving rise to
the tax occurred within three years before the
petition date |
4.
Note:
5.
Accrued
prepetition interest on tax is given the same
priority status as the underlying tax.
6.
Counsel Guidance. If
the priority status of a tax cannot be easily
determined, Counsel can offer advice. Numerous
exceptions and special circumstances govern how
taxes are classified from one judicial district to
another.
25.17.6.5.2.1 (09-01-2004)
Tolling of the Priority Periods
1.
Multiple Filings/Tolling (Tacking). In
cases involving multiple bankruptcy filings by the
same entities, the 240–day and 3–year periods
referenced above (the "priority" periods)
are suspended (or " tolled" )
for any time
collection is barred by the automatic stay or by the
existence of a confirmed plan of reorganization
during a debtor's previous bankruptcy(ies).
A.
Supreme Court Ruling. In
a unanimous decision Young
v. United States, 535 U.S. 43 (2002)
, the Supreme Court concluded the
three-year lookback period of 11 U.S.C. §
507(a)(8)(A)(i) is a limitations period subject to
traditional notions of equitable tolling. In so
doing, the Court resolved a split among the circuits
by adopting the majority view the
priority period is suspended in all cases where
there was a prior bankruptcy, regardless of whether
the prior period was filed in good faith or was
filed solely to run down the priority period.
B.
No Additional Six Months Period. Because the three-year period is
automatically suspended during the pendency of a
prior bankruptcy petition, the Service no longer
claims the period is suspended for an additional six
months. In light of the rationale of Young, the
three-year look back period of 11 U.S.C. §
507(a)(8)(A)(i) should not be computed by including
an additional six months, based on I.R.C. §
6503(h).
25.17.6.5.2.2 (09-01-2004)
Trust Fund Recovery Penalty Assessments — Priority
Status
1.
Trust Fund Recovery Penalty Assessments. Trust
Fund Recovery Penalty Assessments (TFRPs) are
entitled to priority
status on the Service's claim, unless entitled to a
secured position due to a valid lien.
2.