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Proof of Claim |
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Proof of Claim |
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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 |
|
|
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.
Multiple Persons Assessed the TFRP. Problems
may arise with proofs of claim involving TFRPs that
have been assessed against more than one party. See
(a) below. Counsel should be consulted as needed.
The Service may need to enter into consent orders,
or the proofs of claim may need to be clarified, as
follows:
A.
Duplicate Spousal Trust Fund Assessments. A
proof of claim may list two identical TFRPs when a
married couple files a joint bankruptcy, and each
has been assessed a TFRP for the same trust fund
taxes. When this occurs Insolvency should provide a
clarifying statement on the proof of claim:
Example:
"A Trust
Fund Penalty Recovery assessment has been made
against both debtors for the same trust fund taxes,
and both assessments are listed in the body of this
proof of claim. However, as the
Note:
In the above example, the proof of claim
total, as
stated, would include the amount of only one of the
TFRP assessments, not both.
3.
Collection of Proper Amount. The
Note:
Even though the Trust Fund Recovery
Penalty may be thought of as a penalty,
it is not treated like one. Rather, the
TFRP is treated as a tax and is never
listed as an unsecured general claim, regardless of
the date of the TFRP assessment. The Service lists
it as priority on a proof of claim (unless secured
by a lien). 11 U.S.C. § 507(a)(8)(C) & (G).
25.17.6.5.2.3 (09-01-2004)
Limited Liability Corporations (LLC)
1.
LLC Proofs of Claim. When the Service receives notice an LLC has
filed bankruptcy, Insolvency must determine if the
LLC is a disregarded entity for tax purposes before
a proof of claim can be prepared.
A.
Unless the
LLC has elected otherwise, a domestic single member
LLC (i.e., an LLC with one owner) is a disregarded
entity whose items of income or expense pass through
the owner as if the business were a sole
proprietorship.
B.
A foreign
LLC must elect to become a disregarded entity.
C.
If a
debtor's bankruptcy schedules do not state if the
LLC is a disregarded entity, an OI should be sent to
an RO field group to make this determination prior
to the government bar date.
Note:
An option to issuing an OI is contacting
Counsel to obtain this information from the debtor
through a Bankruptcy Rule 2004 examination.
D.
If the LLC
is a multi-member LLC or a single member LLC
electing to be classified as an association taxable
as a corporation, the LLC is not a disregarded
entity for tax purposes, and Insolvency should file
a proof of claim if LEM criteria are met.
E.
If the LLC
is a disregarded entity for tax purposes, generally
no proof of claim should be filed. However, even if
an LLC is presently a disregarded entity, it may
still be liable for taxes that arose out of periods
when it was not a disregarded entity or when an
entity of which the LLC is the successor was not
disregarded. In a case in which a disregarded LLC is
liable for taxes that arose out of periods when it
was not a disregarded entity or when an entity of
which the LLC is the successor was not disregarded,
a proof of claim should be filed.
F.
If the tax
status of the LLC cannot be determined prior to the
bar date, Insolvency should file a protective proof
of claim with an annotation explaining the
G.
Similar
issues arise with regard to certain subsidiaries of
LLCs. Specific case issues should be referred to
Counsel.
2.
Single Member Owner. When a single member owner is the bankruptcy
petitioner, Insolvency may not be aware of a
liability arising from the activities of a
disregarded LLC. IDRS and CFOL do not identify if
LLCs are disregarded, nor do they cross reference
LLC's EINs to the single member's
25.17.6.5.2.4 (05-01-2004)
Consolidated Chapter 11 Filings
1.
Listing Group Liabilities on Proofs of Claim. Because
every member of a consolidated group is severally
liable for the group's income tax liabilities, the
Service should generally file separate claims in
each member's bankruptcy case and should list the
entire group's liability, even in a jointly
administered case. Local rules or standing orders
may specify filing of one proof of claim listing
both separate and group liabilities for a jointly
administered consolidated group.
A.
In all
cases, local Counsel and LMSB should be consulted
before filing a claim for the entire group
liability.
B.
Counsel is
available to assist Insolvency with the preparation
of the proofs of claim for the group's liabilities.
C.
Language on
the claim must clarify, while each member of the
group is severally liable for the group liability,
the Service seeks to collect the liability only
once.
25.17.6.5.3 (09-01-2004)
Unsecured General Claims
1.
Unsecured General Claims. Anunsecured general
claim includes any liability not falling
into secured or priority classifications. This
includes a penalty where the
2.
Disadvantages. Some disadvantages associated with unsecured
general claims are:
A.
they are
generally dischargeable in all bankruptcies (see the
exceptions to discharge listed in 11 U.S.C. § 523);
B.
the
Bankruptcy Code does not require full payment of all
unsecured general claims; and
C.
unsecured
general claims of the
25.17.6.6 (09-01-2004)
Administrative Claims
1.
" Admin" Claims. Administrative tax claims (often referred to
as "admin" claims)
are filed for tax liabilities incurred post-petition
by the bankruptcy estate or by the
debtor-in-possession (DIP). The date a tax liability
is incurred, the date of the bankruptcy filing, and
the entity incurring the tax are the primary factors
determining if a tax is a prepetition claim against
the estate, a postpetition administrative expense of
the estate or DIP, or a post-petition liability of
the debtor.
Note:
Excessive "quickie"
tax refunds received by the estate after
the petition date may also be entitled to
administrative claim priority status, pursuant to 11
U.S.C. § 503(b)(1)(B)(ii), whether or not the
"quickie" tax refund relates to a year
ending before or after the petition date. This type
of tax refund frequently relates to a business
filing an application for a net operating loss (NOL)
or a business credit carryback from any pre- or
post- petition taxable year. See I.R.C. § 6411.
2.
Highest Priority. Administrative
expenses enjoy the highest priority of payment under
11 U.S.C. § 507.
3.
Characteristics. Administrative
expenses have the following unique characteristics:
A.
they accrue
penalties and interest to the date of payment;
B.
in Chapter
11 cases, administrative claims are required to be
paid in full on the effective date of the plan (see
C.
upon
conversion to Chapter 7, administrative claims of
the previous chapter retain their administrative
status but are paid after the administrative claims
of the Chapter 7 estate. See 11 U.S.C. § 726 (b).
25.17.6.6.1 (09-01-2004)
Gap Period Expenses in an Involuntary Bankruptcy
1.
The Gap Period. In
the "gap period"
between the filing of an involuntary
bankruptcy petition and the earlier
of (1) the appointment of a trustee, or (2) the
court’s order for relief, the taxes incurred
during this period are classified as
if the claim had arisen before the petition date.
2.
Priority Status. Such
a claim is entitled to priority status after payment
of administrative expenses under 11 U.S.C. § 507
(a)(2). Also see 11 U.S.C. § 303.
3.
Form.
Form 6338A can be used to file this type of claim.
25.17.6.7 (09-01-2004)
Time for Filing Claims/Acknowledgment
1.
Timely Claims. To share in distribution or to receive
payments under a plan, a creditor must generally
file a timely proof of claim.
2.
Bar Dates.
Proofs of claim must be filed by bar dates,
the dates set by the court for timely filings of
proofs of claim. See
A.
Generally,
Insolvency files a proof of claim as soon as
possible after a bankruptcy is filed and at least
30–calendar days prior to the bar date in all
asset cases where the unpaid tax liability exceeds
the amount in Collection Law Enforcement Manual (LEM)
5.5.3. But see (3), Chapter
13, below.
3.
Chapter 13.
In Chapter 13 cases, the last day (the bar date) for the Service to file a
proof of claim in some jurisdictions is often after
the confirmation date of the Chapter
13 plan. Whenever possible, in these jurisdictions,
Insolvency should file Chapter 13 proofs of claim prior
to confirmation. This allows the trustee access to
as many claims as possible by the confirmation
hearing date (including the
4.
Court Acknowledgment of the
A.
Proof of Timeliness. If
the timeliness of the filing of the claim in
bankruptcy court becomes an issue, or if
establishing evidentiary proof of its receipt by the
proper party is warranted, the proof of claim should
be delivered personally, by express mail or
certified mail, return receipt requested.
B.
Monitoring for Acknowledged Copy. If
the acknowledged copy of the proof of claim is not
received from the court within a reasonable time, as
determined by local management, after the claim was
forwarded, Insolvency should initiate action(s) to
secure an acknowledged copy of the proof of claim.
C.
Validation of Claim Filed by Bar Date. Insolvency
should have an efficient, working system in place to
determine if a proof of claim is filed timely with
the bankruptcy court. The date the bankruptcy court
stamps on the receipted copy of the claim returned
to Insolvency must be compared with the true bar
date (i.e., governmental bar date). Missed bar dates
require immediate managerial involvement.
D.
Documentation Critical. Accurate
documentation must be entered timely on AIS
reflecting all actions and safeguards taken to
protect the government's interests. Pertinent proof
of claim filing discrepancies, issues, or concerns
must be documented promptly, factually, and
concisely.
5.
Establishing Validity of the Service's Claim in Court. Upon
filing of a proof of claim, the government becomes a
party thereto, and officers and employees of the
Service may appear as witnesses or to produce
evidence in court to establish the validity of the
Note:
For this type of an appearance and for
the production of evidence of this nature, no
express authority need be obtained from the
Commissioner of Internal Revenue so long as the
appearance made, or the evidence produced, is
intended to establish the rights of the government.
Note
25.17.6.7.1 (09-01-2004)
Bar Date – Governmental Creditors
1.
Governmental Entities. Governmental
entities have 180 days
from the date of the order for relief, or
such later time as the Bankruptcy Rules may provide,
to file timely proofs of claim. 11 U.S.C. §
502(b)(9).
2.
AIS and Bar Dates. To
encourage early filing of proofs of claim within
Insolvency, the Automated Insolvency System displays
the general bar date on the entity screen rather
than the governmental bar date.
Note:
AIS processing automatically sets the
bar date 90 days
from the date of the first meeting of
creditors unless
the case data input operator overrides the automatic
date.
25.17.6.7.1.1 (09-01-2004)
Bar Date Extension
1.
Authority.
Bankruptcy Rule 3002(c)(1) allows the government to file a request for an
extension before the expiration of the governmental
bar date (180–day period) for cause.
The bankruptcy court has the discretion to grant or
deny the extension.
2.
Motion to Extend Bar Date. If additional time is needed to prepare and
file a proof of claim, Insolvency should consult
with Counsel to determine if a motion to extend the
bar date is necessary.
25.17.6.7.1.2 (09-01-2004)
Bar Date – Non-Governmental Creditors
1.
Time Limits for Non-Governmental Creditors. Bankruptcy
Rules 3002(c) and 3003(c) define the time limits for
filing claims by non-governmental creditors. They
are:
A.
under BR
3002 — for Chapters 7, 12 and 13, the time limits
are within 90 days
of the first date set for the first
meeting of creditors; and
B.
under BR
3003 — for Chapters 9 and 11, the court sets the
time limits.
25.17.6.7.1.3 (09-01-2004)
Bar Date and Conversions
1.
New Bar Date. In the event of conversion, the court will
often state the new bar date on the conversion
notice or provide a special notice to indicate a bar
date. If the bar date is not stated, Insolvency may
establish the new bar date by adding
90 days to
the new date of the first meeting of creditors.
2.
Administrative Taxes. In
cases of conversion, where administrative taxes of
the original proceeding remain unpaid, interest and
failure to pay penalty are claimed and allowed only
to the date of conversion.
25.17.6.7.2 (09-01-2004)
Late Filed Claims
1.
Late Claim May Not Be Allowed or Paid. Except
in Chapter 7 cases, a late claim is generally
allowed only in unusual or exigent circumstances,
and even if allowed, a late claim may not be paid.
A.
If a
liability is discovered after the bar date for
filing claims has passed, and if that liability was
not listed on a timely filed original or amended
claim, an amendment may be warranted within certain
constraints. See (4), Considerations
for Late Filing, below.
B.
An untimely
tax claim may be disallowed solely on the basis that
it was filed late. 11 U.S.C. § 502.
2.
Chapter 7 and Late Filed Priority Claims. Late
claims are treated somewhat differently in Chapter
7. Under 11 U.S.C.§ 726:
A.
a late
filed priority claim in a Chapter 7 proceeding is
entitled to share in distribution with timely filed
priority claims as long as the claim is filed before
the trustee makes distribution; thus,
B.
in a
Chapter 7 case, untimely claims should generally be
filed because the
3.
Chapter 13 Caution. When
a liability is discovered after the government's bar
date in a Chapter 13 proceeding and Insolvency
cannot cite special circumstances for its tardiness
(for example, the
Reminder:
In a Chapter 13, the debtor can receive
a superdischarge
allowing all debts provided for in the plan to be
discharged.
4.
Considerations for Late Filing. If
a proof of claim is not filed prior to the bar date,
Insolvency must decide if a late filed claim is
warranted. Perhaps the
·
reasons the
claim was not filed prior to the government's bar
date
·
amount of
the claim
·
type of
taxes
·
chances of
the claim being paid by the trustee in a specific
court jurisdiction
·
the
collection potential from the non-debtor spouse in a
case where a joint income tax return was filed but
only one spouse has filed bankruptcy
·
favorable
legal rulings on late filed claims in a specific
jurisdiction
·
the support
of local Counsel to file a late claim
·
the
likelihood the court will allow the tax to be
discharged
·
the
likelihood of future collection (either through or
outside of the proceeding)
·
if the
claim meets the criteria of the Collection Law
Enforcement Manual (LEM) 5.5.3.
·
other local
considerations
5.
Counsel Review. Generally,
Counsel should be consulted after Insolvency
determines a late claim should be filed to add a tax
debt. Bankruptcy courts are more likely to consider
late filed claims in some bankruptcy chapters and in
some jurisdictions than in others. See
Caution:
If
the Service does not attempt to add a liability
under the above circumstances, and a discharge is
subsequently granted, the liability may be
discharged.
25.17.6.8 (09-01-2004)
Unassessed Claims
1.
Protecting the Government's Interests. An
"unassessed"
proof of claim (previously identified as
"estimated" ) protects the government’s
interests before the exact liability is determined.
The claim generally serves to meet the bar date
timeframe.
A.
An
unassessed claim must be followed as soon as
possible by an amended or a supplemental proof of
claim setting forth the correct tax liability once a
debtor files his return or Examination determines
the amount of a tax liability or tax deficiency.
B.
If
Examination determines no return is due, the return
for the period in question will result in a refund,
or no tax deficiency exists, the claim should be
withdrawn.
C.
An
unassessed claim may also be filed when the tax
amount has been determined, but an assessment is
prohibited because the debtor's time for filing a
Tax Court petition has not expired due to the
automatic stay, or Tax Court proceedings are
pending.
2.
Combining Assessed and Unassessed Amounts. Proofs
of claim can include assessed (exact amount owing
has been determined) and unassessed amounts on the same
proof of claim.
3.
Factual Basis. The Service's unassessed claim must have a
factual basis and cannot be inflated. The unassessed
tax liability must be based on as much information
as possible.
Caution:
Insolvency
employees should not expend unnecessary resources if
evidence indicates the probability a refund or no
tax due situation exists.
4.
Base on Resources Available. The resources Insolvency may use to obtain a
factual basis include, but are not limited to:
·
information
available from IDRS (tax return data from prior
year(s) filings, including RTVUE)
·
income or
expense schedules
·
statement
of financial affairs
·
information
available from revenue officers (from RO's files
and/or oral communication)
·
examination
( "admin" ) files or information from
examination functions
·
underreporter
information
·
information
from debtor or debtor's attorney
Note:
Recent bankruptcy filings (e.g.,
dismissals) may also provide information Insolvency
can use in the current case, especially if prior RO
field involvement and/or prior litigation have taken
place. Insolvency should review both AIS and paper
files as available.
5.
Penalties and Interest.
·
for filed returns –
all applicable prepetition penalties and interest
for filed returns with pending assessments should be
computed and claimed
·
for unfiled returns –
if estimated liabilities are listed for unfiled
returns, penalties and/or interest do not have to be
computed unless required by local guidelines (note
(9), Unfiled Returns,below)
6.
6020(b) Returns. Caution.
Periods for which tax returns are prepared by the Service under authority of
I.R.C. 6020(b) should be considered to be unassessed
(estimated) liabilities only
if the assessment remains within the 30–day
appeal
time period (appeal timeframe has not yet
expired).
7.
AIS Statements. The
proof of claim should include a statement
identifying the reason for the unassessed liability.
A support file in the Automated Insolvency System
contains allowable standardized statements.
8.
Withdrawal of Unassessed Claim. If
no liability is found after an unassessed proof of
claim is filed, the claim for that specific
liability or deficiency should be withdrawn. The
claim should not be withdrawn until:
.
a return is
filed showing a liability less than the LEM dollar
criterion or a refund is due; or
A.
Examination
determines no return is due, no tax deficiency
exists, or the return for the period in question is
a refund return.
9.
Unfiled Returns. A
claim for an unfiled return should not be withdrawn
unless determination is made a return is not due for
that specific tax period, or, it is not in the
government's best interests to pursue the return
(such as, a refund being due the debtor).
25.17.6.9 (09-01-2004)
Amended Claims
1.
Amendments.
If the proof of claim has been timely filed, an amended
claim may be filed as necessary to claim
the correct liability. An accurate amount of the
federal debt should be filed with the court.
However, Insolvency should minimize, as much as
possible, the number of amended claims filed.
Generally, Insolvency should avoid amending a claim
involving multiple unassessed (estimated)
liabilities until:
·
all returns
are filed, and/or
·
examinations
are completed, and/or
·
all
liabilities are determined (for example, TFRP)
2.
Post-Audit Increase in Claim. When the amount of a proof of claim may
substantially increase upon the completion of an
examination,
Reminder:
To protect the government's interests
(for example in a pending TFRP assessment or
audit/unfiled returns), Insolvency should promptly
file an unassessed (estimated) proof of claim.
Compliance examination, underreporter, and field
functions may not have tax information available for
Insolvency prior
to confirmation or bar date.
3.
Amendments after Bar Date. The standards vary for allowing amendments to
proofs of claim after the bar date. Generally:
A.
courts consider the similarity
between the initial claim and the
late-filed amendment;
B.
courts generally require the additional tax
be of the same type
as that on the original proof of claim;
and
C.
courts consider if the debtor
and the other creditors will be prejudiced
by the amended claim.
4.
Protective Provision for
5.
No Amendment Required for Court Payments. No
amendment or withdrawal of claim is required to
reflect decreases in the amount of the claim as a
result of payments received from the bankruptcy
proceeding.
Note:
However, if any outside payments are
received and the
25.17.6.9.1 (09-01-2004)
Divisible Assessments
1.
Divisible Assessments. Claims
containing divisible
assessments (e.g., Form 941 tax, an
annual tax divided into quarters for administrative
purposes), generally may be amended to include any
period or quarter not shown on a timely filed
original claim if at
least one period of the same tax year was on the
original proof of claim.
However, because this practice varies
from one jurisdiction to another, Insolvency groups
must be aware of the practice in the courts assigned
to their inventories.
Reminder:
Periods, other than income tax,
beginning before and ending after the petition date,
generally have to be split into pre- and post-
petition claims.
Example:
A bankruptcy was filed on
25.17.6.9.2 (09-01-2004)
Motion for Reconsideration
1.
Amendments After Confirmation. Some
courts will not permit amended claims to list larger
liabilities after confirmation. Also,
some courts will not allow the classifications
of the claim to be changed after confirmation has
passed, unless a Motion
for Reconsideration
is filed. If this is required in a given
area, Insolvency should send a request to Counsel to
have such a motion prepared to protect the
government's interests.
25.17.6.10 (09-01-2004)
Section 1305 Claims
1.
Chapter 13 Postpetition Debts. Some
areas collect post-petition liabilities in Chapter
13 cases by filing 11 U.S.C. §1305 claims .
25.17.6.11 (09-01-2004)
Criminal Investigation (CI) Involvement
1.
CI Involvement on Cases. If, at any time, research identifies Criminal
Investigation's (CI) involvement on accounts
assigned to Insolvency, even if the CI freeze code
is input to only one of several tax modules,
Insolvency must promptly contact CI to notify them
of the bankruptcy proceeding.
2.
CI and the Filing of a Proof of Claim. Insolvency
must inform CI a proof of claim may be filed in all
cases with a CI freeze code. If CI indicates the
filing of a claim may be detrimental to CI's case,
Insolvency should schedule a meeting with the
Special Agent, the Special Agent in Charge, the
Insolvency specialist and manager, and SB and
Criminal Tax Counsel to discuss the coordination of
the civil and criminal cases. Refer to