Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
170.0000 COLLECTION OF TAX BY BOARD
(a) IN GENERAL
170.0007.050 Discharge in Chapter 11 Bankruptcy. A Notice of Determination was issued to the taxpayer for the period October 1, 1986 to December 31, 1989 on April 24, 1991. The taxpayer filed a timely petition for redetermination. On August 27, 1993, the taxpayer filed a Chapter 11 bankruptcy. The matter was referred to the Attorney General's office when the taxpayer objected to the claim that the Board filed in bankruptcy. A plan of reorganization was confirmed by the bankruptcy court on April 5, 1994.
The Board had filed proofs of claim in the taxpayer's bankruptcy action for audit liabilities for the period October 1, 1986 to December 31, 1989 and for January 1, 1990 to September 30, 1992. The taxpayer objected to these claims on the grounds that certain portions of the claim were barred by the statute of limitations and a substantial portion of the claim did not constitute a priority claim under bankruptcy law. An agreement was reached between the Board and the taxpayer in which 50 percent of the taxes due for the period October 1, 1986 to December 31, 1989 were to be considered a priority claim in bankruptcy action (along with 50 percent of the interest due to the petition date) plus 100 percent of taxes due for the period January 1, 1990 to September 30, 1992 (plus interest on those taxes through the petition date). All other amounts, including post-petition interest through May 31, 1995, were allowed as a general (non-priority) unsecured claim. The Board was paid the full amount of the allowed priority claim plus interest in the bankruptcy distribution.
In the Order Confirming Amended Plan of Reorganization entered into on August 8, 1994, it stated:
"The entry of this Order shall constitute a finding that the Debtor is entitled to a discharge under section 1141 of the Bankruptcy Code and further, that no debts which exist are excepted from discharge."
Accordingly, the petitioned liability has been discharged in the taxpayer's bankruptcy and the Board should take no further action on the taxpayer's petition for redetermination. 1/9/97.