HR-5146-119
Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Sponsored by Darin LaHood (R-IL)
What it does
The bill would add a new section to the Internal Revenue Code stating that a court that appointed a receiver (federal, state, or D.C.) may determine the amount or legality of federal taxes, penalties, and additions to tax, whether or not assessed or paid. It would not allow this where the tax was already contested and decided before the receivership began, for refunds before the earlier of 120 days or an agency decision, or for certain expired property-tax disputes. A receiver may request a determination by filing a return, and the estate, the receiver, and the entity in receivership would be discharged from that tax upon payment if the government does not select the return for examination within 60 days or finish an examination within 180 days (unless the return is fraudulent or materially misstated). The bill would also waive sovereign immunity for these proceedings, allow money judgments against the government (but not punitive damages), let the government move the matter to federal district court, and exclude bankruptcy trustees and executors from the definition of receiver.
Who benefits
Court-appointed receivers and the receivership estates they manage, which would get a defined process and timelines to resolve tax liability and close cases. Creditors and investors in receivership estates, who may see faster distributions once tax claims are settled. Businesses and individuals in receivership and their successors, who may receive discharge from tax liability upon payment. Parties who want parity with bankruptcy, where similar tax-determination rules already exist.
Who is hurt
The IRS and state and local tax agencies, which would face fixed response deadlines of 60 and 180 days, possible loss of claims if they miss them, and added litigation workload. The federal government's fiscal position, since determinations, offsets, and money judgments could reduce collections, and the extent is uncertain. State tax authorities, whose sovereign immunity would be abrogated in these proceedings. State courts and federal district courts, which may handle added tax disputes. Other creditors of the estate, if tax determinations change the priority or amounts available to them.
Supporters argue
Supporters argue that receivers currently lack a clear way to learn and settle an estate's tax debts, which leaves estates open for years and delays payments to victims and creditors. They contend that the bill copies the tax-determination model that bankruptcy courts have long used, and that its fixed 60-day and 180-day agency deadlines, fraud exceptions, and carve-out for already-adjudicated disputes give the government fair notice and protection.
Opponents argue
Opponents argue that letting receivership courts decide federal tax liability, and discharging debts if agencies miss short deadlines, could reduce revenue and reward delay or strategic filings by those in receivership. They contend that the broad waiver of sovereign immunity, money judgments against the United States, and state court involvement would strain agency resources and move tax disputes away from specialized tax forums.
Constitutional context
Congress's taxing power under Article I, Section 8 and its power to set the terms on which the United States may be sued support the bill, since only Congress can waive federal sovereign immunity. Abrogating state sovereign immunity raises a separate question under Seminole Tribe v. Florida (1996), though Central Virginia Community College v. Katz (2006) upheld similar abrogation in bankruptcy under the Bankruptcy Clause, and receiverships lack that specific constitutional basis.
Checks and balances
The bill shifts authority over tax determinations from the executive branch's tax agencies toward federal and state courts, while Congress sets the terms, and the government keeps checks such as examination rights, fraud exceptions, and the option to move cases to federal court.
Historical precedent
Bankruptcy Code section 505 already lets bankruptcy courts determine tax liability and provides for discharge after a request-and-review process, which this bill appears to model for receiverships.