- Ag Docket
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is the most far-reaching revision of bankruptcy law since 1978. With respect to agriculture, the changes are principally in two areas – (1) amendments to the eligibility requirements for Chapter 12 filing; and (2) modification of the income tax treatment of gains on property liquidated in connection with a Chapter 12 bankruptcy reorganization. Also, effective July 1, 2005, BAPCPA makes Chapter 12 a permanent part of the bankruptcy code.
BAPCPA created several income tax-related issues with respect to Chapter 12 cases. Those issues have been addressed by the courts since enactment, with one of those issues, whether taxes arising post-petition are subject to the BAPCPA provision that downgrades certain governmental claims (taxes among them) to general, unsecured claims that are dischargeable after less than full payment in accordance with the debtor’s reorganization plan. In other words, such claims lose their priority status.
The issue breaks down into taxes arising pre-petition and those arising post-petition, with the circuit courts of appeal splitting on whether post-petition taxes are entitled to non-priority treatment. That issue has gone all the way to the U.S. Supreme Court with the Court deciding on May 14, 2012, that the Ninth Circuit correctly determined that post-petition taxes are not within the language of the BAPCPA provision and are, therefore, not entitled to non-priority treatment.
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