CLLA NEWSWIRE | FROM THE CLLA NEWSWIRE

PMTA Addresses Chapter 13 Discharge of Tax Liabilities When IRS Not Timely Notified

David Goch, Washington Legislative Counsel | September 06, 2012

In the recently released PMTA 2012-19 (a program manager technical advice memorandum), the IRS’ Office of Chief Counsel examined the results of the IRS receiving late/no notice of the commencement of a Chapter 13 bankruptcy proceeding on the dischargeability of the debtor's prepetition tax liabilities.

For Chapter 13 cases filed on or after Oct. 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes the debtor's prepetition tax liabilities nondischargeable to the extent IRS either was not provided with notice of the bankruptcy or did not have actual knowledge of the bankruptcy “in time to permit” filing of a timely proof of claim. 

The office said while it is clear, post BAPCPA, if IRS was not notified of the filing of the bankruptcy petition the debts are nondischargeable, “the statutes do not define any minimum notice period required to be given to a creditor to avoid triggering this exception to discharge.”

The exception to discharge “would undoubtedly be triggered in Chapter 13 cases where the Service receives no notice of the bankruptcy at all until after the expiration of the proof of claim bar date,” the office said.

If the IRS is not initially listed as a creditor but subsequently receives notice prior to the claims bar date, the office said the determination as to whether the Service had sufficient opportunity to file a timely claim would be made on a case-by-case basis.

Where the IRS determines that the exception to discharge does apply, the office said no action is required by the Service in order to properly treat the liabilities as nondischargeable.

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