CHAPTER 11 REORGANIZATION
Sub Chapter III Postconfirmation Matters
Sec. 1146. Special tax provisions
(a) For the purposes of any State or local law imposing a tax on or
measured by income, the taxable period of a debtor that is an individual
shall terminate on the date of the order for relief under this chapter,
unless the case was converted under section 706 of this title.
(b) The trustee shall make a State or local tax return of income for
the estate of an individual debtor in a case under this chapter for each
taxable period after the order for relief under this chapter during
which the case is pending.
(c) The issuance, transfer, or exchange of a security, or the making
or delivery of an instrument of transfer under a plan confirmed under
section 1129 of this title, may not be taxed under any law imposing a
stamp tax or similar tax.
(d) The court may authorize the proponent of a plan to request a
determination, limited to questions of law, by a State or local
governmental unit charged with responsibility for collection or
determination of a tax on or measured by income, of the tax effects,
under section 346 of this title and under the law imposing such tax, of
the plan. In the event of an actual controversy, the court may declare
such effects after the earlier of--
(1) the date on which such governmental unit responds to the
request under this subsection; or
(2) 270 days after such request.
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 98-353, title III,
Sec. 517, July 10, 1984, 98 Stat. 388.)
Historical and Revision Notes
Section 1146 of the House amendment represents a compromise between
the House bill and Senate amendment.
Special tax provisions: reorganization: The House bill provided
rules on the effect of bankruptcy on the taxable year of the debtor and
on tax return filing requirements for State and local taxes only. The
House bill also exempted from State or local stamp taxes the issuance,
transfer, or exchange of a security, or the making or delivery of an
instrument of transfer under a plan. The House bill also authorized the
bankruptcy court to declare the tax effects of a reorganization plan
after the proponent of the plan had requested a ruling from State or
local tax authority and either had received an unfavorable ruling or the
tax authority had not issued a ruling within 270 days.
The Senate amendment deleted the rules concerning the taxable years
of the debtor and tax return filing requirements since the Federal rules
were to be considered in the next Congress. It broadened the rule
exempting transfers of securities to include Federal stamp or similar
taxes, if any. In addition, the Senate amendment deleted the provision
which permitted the bankruptcy court to determine the tax effects of a
The House amendment retains the State and local rules in the House
bill with one modification. Under the House amendment, the power of the
bankruptcy court to declare the tax effects of the plan is limited to
issues of law and not to questions of fact such as the allowance of
specific deductions. Thus, the bankruptcy court could declare whether
the reorganization qualified for taxfree status under State or local tax
rules, but it could not declare the dollar amount of any tax attributes
that survive the reorganization.
senate report no. 95-989
Section 1146 provides special tax rules applicable to Title 11
reorganizations. Subsection (a) provides that the taxable period of an
individual debtor terminates on the date of the order for relief, unless
the case has been converted into a reorganization from a liquidation
Subsection (b) requires the trustee of the estate of an individual
debtor in a reorganization to file a tax return for each taxable period
while the case is pending after the order for relief. For corporations
in chapter 11, the trustee is required to file the tax returns due while
the case is pending (sec. 346(c)(2)).
Subsection (c) exempts from Federal, State, or local stamp taxes the
issuance, transfer, or exchange of a security, or the making or delivery
of an instrument of transfer under a plan. This subsection is derived
from section 267 of the present Bankruptcy Act [section 667 of former
Subsection (d) permits the court to authorize the proponent of a
reorganization plan to request from the Internal Revenue Service (or
State or local tax authority) an advance ruling on the tax effects of
the proposed plan. If a ruling is not obtained within 270 days after the
request was made, or if a ruling is obtained but the proponent of the
plan disagrees with the ruling, the bankruptcy court may resolve the
dispute and determine the tax effects of the proposed plan.
Subsection (e) provides that prepetition taxes which are
nondischargeable in a reorganization, and all taxes arising during the
administration period of the case, may be assessed and collected from
the debtor or the debtor's successor in a reorganization (see sec.
505(c) of the bill).
house report no. 95-595
Section 1146 of title 11 specifies five subsections which embody
special tax provisions that apply in a case under chapter 11 of title
11. Subsection (a) indicates that the tax year of an individual debtor
terminates on the date of the order for relief under chapter 11.
Termination of the taxable year of the debtor commences the tax period
of the estate. If the case was converted from chapter 7 of title 11 then
the estate is created as a separate taxable entity dating from the order
for relief under chapter 7. If multiple conversion of the case occurs,
then the estate is treated as a separate taxable entity on the date of
the order for relief under the first chapter under which the estate is a
separate taxable entity.
Subsection (d) permits the court to authorize the proponent of a
plan to request a taxing authority to declare the tax effects of such
plan. In the event of an actual controversy, the court may declare the
tax effects of the plan of reorganization at any time after the earlier
of action by such taxing authority or 270 days after the request. Such a
declaration, unless appealed, becomes a final judgment and binds any tax
authority that was requested by the proponent to determine the tax
effects of the plan.
1984--Subsec. (c). Pub. L. 98-353, Sec. 517(a), struck out ``State
or local'' before ``law imposing a stamp tax''.
Subsec. (d)(1). Pub. L. 98-353, Sec. 517(b), substituted ``or'' for
Effective Date of 1984 Amendment
Amendment by Pub. L. 98-353 effective with respect to cases filed 90
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out
as a note under section 101 of this title.
Section Referred to in Other Sections
This section is referred to in sections 106, 346, 348 of this title;
title 28 section 2201.