Gregory D. Whall

1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
____________________________________
IN RE:
GREGORY D. WHALL, Chapter 13
DEBTOR Case No. 06-10832-WCH
____________________________________
MEMORANDUM OF DECISION
I. INTRODUCTION
The matter before the Court is the Massachusetts Department of Revenue’s (the “MDOR”)
Objection to Post-Confirmation Fourth Amended Chapter 13 Plan (the “Objection”) and Gregory
D. Whall’s (the “Debtor”) Memorandum of Law in Opposition to the Objection (the
“Memorandum”). The MDOR objects to the Debtor’s proposed payment of post-petition income
taxes through the Debtor’s Post-Confirmation Fourth Amended Chapter 13 Plan (the “Fourth
Amended Plan”) where the MDOR did not file a proof of claim for post-petition tax liabilities. The
Debtor contends that the post-petition taxes accrued against the bankruptcy estate and therefore may
be paid as an administrative claim through the Fourth Amended Plan pursuant to 11 U.S.C. §
503(b)(1)(B)(i). For the reasons set forth below, I will enter an order sustaining the Objection.
II. BACKGROUND
The facts of this case are not in dispute. The Debtor filed a Chapter 13 petition on April 3,
2006. On May 12, 2006, the Debtor filed his first Chapter 13 plan which provided for payment of
the MDOR's pre-petition priority tax claim in the amount of $1,100. An order confirming that plan,
consistent with the Massachusetts Official Local Form 4, entered on July 31, 2006.
On September 13, 2006, the MDOR filed a timely proof of claim setting forth a priority tax
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 1 of 10

See Mass. Gen. Laws ch. 62C, §§ 32-33.1
The Debtor’s first two amended plans were apparently electronically filed incorrectly.2
The Debtor successfully filed two Third Amended Plans, to which the Chapter 13 trustee
objected on the basis that, inter alia, they were improperly calculated, unfeasible, and that the
treatment of the MDOR’s priority claim was inconsistent with its proof of claim.
Through the Fourth Amended Plan, the Debtor similarly proposes to pay the Internal3
Revenue Service (the “IRS”) $3,754 for unpaid post-petition taxes as an administrative expense.
The IRS has not filed a proof of claim for unpaid post-petition taxes or an objection to the Fourth
Amended Plan.
2
claim for unpaid pre-petition income taxes for the years 2003, 2004, and 2005 in the amount of
$1,988.98. On April 15, 2007, the Debtor filed his Massachusetts personal income tax return for the
2006. The return reflected an unpaid income tax liability for 2006 in the amount of $1,468. In June,
2007, the MDOR issued to the Debtor a bill for the unpaid 2006 income tax, showing a balance due
of $1,516, inclusive of interest and penalties. It did not, however, file a proof of claim for unpaid1
post-petition taxes.
After numerous failed attempts to amend his plan to provide for the updated tax claim, the
Debtor filed the Fourth Amended Plan on March 27, 2008. The Fourth Amended Plan reflects an2
increase in the amount of the pre-petition priority unsecured claim of the MDOR from $1,100 to
$1,989. Additionally, the Fourth Amended Plan proposes to pay the MDOR’s claim for unpaid post-
petition taxes as an administrative claim in the amount of $1,516.3
On April 16, 2008, the MDOR filed the Objection, asserting that the Debtor’s proposed
treatment of the MDOR’s claim for unpaid post-petition taxes through the Fourth Amended Plan is
prohibited by its election not to file a proof of claim for post-petition taxes. The Debtor subsequently
filed the Memorandum in which he contends that the unpaid post-petition tax claims may be allowed
and paid as an administrative expense of the estate pursuant to 11 U.S.C. § 503(b)(1)(B)(i). On April
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 2 of 10

The MDOR also contends that it is not a “creditor” with respect to the unpaid post-4
petition taxes as that term is defined in 11 U.S.C. § 101(10) because the post-petition tax liability
arose nine months after the order for relief, the Debtor filed a voluntary Chapter 13 petition and
has not converted to Chapter 7, and the claim does not arise from the rejection of an executory
contract or the recovery of property. See 11 U.S.C. §§ 101(10), 348(d), 502(f)-(i). As such, the
Debtor cannot rely on 11 U.S.C. § 501(c) to file a proof of claim on the MDOR’s behalf.
In re Brown, No. 05-41071, 2006 WL 3370867 (Bankr. D. Mass. Nov. 20, 2006).5
In re Dawes, 382 B.R. 509, 517 (Bankr. D. Kan. 2008)6
3
24, 2008, I held a hearing on the Objection, and thereafter, took the matter under advisement.
III. POSITIONS OF THE PARTIES
The MDOR
The MDOR argues that pursuant to 11 U.S.C. § 1305(a), only the governmental unit holding
a claim for post-petition taxes is authorized to file a proof of claim for those taxes. The MDOR,
however, has intentionally elected not to file such a claim because 11 U.S.C. § 1305(b) would
require it to relinquish its claim for interest and penalties that would otherwise accrue under
applicable state law. This election, the MDOR asserts, is reserved to it by the express provisions of
the Bankruptcy Code. Due to its election, the MDOR argues that it does not hold an allowed claim4
under 11 U.S.C. § 1305(a) with respect to the unpaid post-petition taxes and therefore the Debtor
may not provide for payment of the claim in a Chapter 13 plan pursuant to 11 U.S.C. § 1322(b)(6).
The MDOR relies on In re Brown for the proposition that 11 U.S.C. § 1305(a), and not 115
U.S.C. § 503(b), controls post-petition tax claims in Chapter 13. In so doing, it urges me to reject
In re Dawes, a Chapter 12 case relied on by the Debtor, which held that the phrase “incurred by the6
estate” merely refers to the time when the liability is incurred. In any event, the MDOR argues, the
Debtor’s Chapter 13 estate has not been assessed a tax, nor has the MDOR attempted to collect one,
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 3 of 10

See Massachusetts Official Local Form 4.7
Memorandum, Docket No. 94 at 3.8
Dawes, 382 B.R. at 517.9
See e.g., United Mine Workers of Amer.1992 Benefit Plan v. Rushton (In re Sunnyside10
Coal Co.), 146 F.3d 1273 (10th Cir.1998); In re Scott Cable Communications, Inc., 227 B.R.
596, 600 (Bankr. D. Conn.1998); In re Pacific-Atlantic Trading Co., 64 F.3d 1292, 1301 (9th
Cir. 1995); In re Hillsborough Holdings Corp., 156 B.R. 318 (Bankr.M.D.Fla.1993).
4
as it is prohibited from doing so under 11 U.S.C. § 346(b).
The Debtor
The Debtor contends that the provisions of 11 U.S.C. § 503(b)(1)(B)(i) provide that any taxes
incurred or deemed to have accrued against a bankruptcy estate on a post-petition basis may be
allowed and paid as an administrative expense. The Debtor relies on the form of Order of
Confirmation in this district which provides for the continuation of the estate during the term of the
plan and the vesting of property in the debtor only upon discharge. The Debtor argues that because7
post-petition earnings continue to be property of the estate, “it stands to simple reason that any
income tax, state or federal, that is ‘incurred’ with the accrual of such post-petition earnings during
the course of a Chapter 13 case would necessarily be treated and must be paid as an administrative
expense of the bankruptcy estate . . . .” The Debtor relies on In re Dawes for the proposition that8
the “incurred by the estate” language of 11 U.S.C. § 503(b)(1)(B)(I) simply means “incurred during
the existence of the estate,” rather than “taxable to the estate. Although the Brown court rejected9
this view and instead found that the Chapter 13 estate is not a taxable entity, the Debtor argues that
there are numerous Chapter 7 and 11 cases in which corporate debtors have treated post-petition
taxes as administrative claims despite the absence of a separate taxable entity.10
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 4 of 10

11 U.S.C. § 503(b)(1)(B)(i) (emphasis added).11
See 11 U.S.C. § 346.12
5
The Debtor asserts that the Objection mischaracterizes the issue as being whether the Debtor
may file a proof of claim for post-petition tax liabilities on behalf of the MDOR, which the Debtor
notes, and the MDOR concedes, he has not attempted to do. Rather, the Debtor contends, the issue
is whether the Debtor may amend his Chapter 13 plan to pay a post-petition administrative expense
of the estate. As such, 11 U.S.C. § 1305(a) is not applicable because there is generally no
requirement that a proof of claim be filed to allow an administrative expense under 11 U.S.C. §
501(c). The Debtor concedes, however, that if the Debtor’s income was not property of the estate,
11 U.S.C. § 1305(a) would preclude payment of the unpaid post-petition taxes through a plan.
IV. DISCUSSION
Section 503 of the Bankruptcy Code provides in relevant part:
(b) After notice and a hearing, there shall be allowed administrative expenses, other
than claims allowed under section 502(f) of this title, including--
(1)(B) any tax--
(i) incurred by the estate, whether secured or
unsecured, including property taxes for which liability
is in rem, in personam, or both, except a tax of a kind
specified in section 507(a)(8) of this title; or . . .11
Section 346 of the Bankruptcy Code contains special provisions related to the treatment of state and
local taxes. Like many other sections of the Bankruptcy Code, it was substantially amended by the12
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) which is
applicable to this case. Section 346(b) now provides in relevant part:
Whenever the Internal Revenue Code of 1986 provides that no separate taxable estate
shall be created in a case concerning a debtor under this title, and the income, gain,
loss, deductions, and credits of an estate shall be taxed to or claimed by the debtor,
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 5 of 10

11 U.S.C. § 346(b).13
See 26 U.S.C. § 1398.14
See 26 U.S.C. § 1399.15
Brown, 2006 WL 3370867 *3.16
Id. at *2.17
Dawes, 382 B.R. at 512.18
6
such income, gain, loss, deductions, and credits shall be taxed to or claimed by the
debtor under a State or local law imposing a tax on or measured by income and may
not be taxed to or claimed by the estate. . . .”13
Section 1398 of the Internal Revenue Code contains specific provisions only with respect to cases
commenced under Chapter 7 and Chapter 11 of the Bankruptcy Code in which the debtor is an
individual. The following section, however, expressly states that “[e]xcept in any case to which14
section 1398 applies, no separate taxable entity shall result from the commencement of a case under
title 11 of the United States Code.” Accordingly, a Chapter 13 estate is not a “taxable entity” under15
the Internal Revenue Code.
Despite the language of this district’s form of Order of Confirmation, there is simply no
separate taxable estate to incur taxes under 11 U.S.C. § 503(b)(1)(B)(i) in a Chapter 13 case. “To
hold the Chapter 13 estate liable for [a] tax when it does not exist as a taxable entity defies common
sense as well as Congress’ intent.” In In re Brown, Judge Rosenthal observed in dicta that he16
would have reached this same result had that case been filed post-BAPCPA.17
The Debtor urges me to follow In re Dawes. In that case, the Chapter 12 debtors proposed
a plan which provided that capital gains taxes arising from a post-petition forced sale of farm
equipment would be treated as general unsecured claims pursuant to 11 U.S.C. § 1222(a)(2)(A).18
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 6 of 10

11 U.S.C. § 1222(a)(2)(A)19
Id. at 515.20
Id. at 516 (quoting S. Rep. No. 95-989, 95th Cong., 2d Sess. 66 (1978), U.S. Code21
Cong. & Admin. News 1978, p. 5787) (emphasis in original).
See In re Sunnyside Coal Co., 146 F.3d at 1273; In re Scott Cable Communications,22
Inc., 227 B.R. at 600; In re Pacific-Atlantic Trading Co., 64 F.3d at 1301; In re Hillsborough
7
Section 1222(a)(2)(A), as amended by BAPCPA, provides that a Chapter 12 plan shall provide for
the full payment of all claims entitled to priority unless “the claim is a claim owed to a governmental
unit that arises as a result of the sale . . . of any farm asset used in the debtor's farming operation, in
which case the claim shall be treated as an unsecured claim that is not entitled to priority under
section 507.” The IRS objected to the plan on the basis that 11 U.S.C. § 1222(a)(2)(A) was19
inapplicable as the post-petition capital gains taxes were a personal obligation of the debtors and not
an administrative expense of the estate entitled to priority under 11 U.S.C. § 507. Observing that
taxes are treated as an administrative expense if they are “incurred by the estate,” the court found that
phrase ambiguous. It reasoned that “incurred by the estate” could reference either the time the
liability for the tax accrues, or the entity liable for the tax. Looking to the legislative history quoted20
below, the court concluded that the phrase “incurred by the estate” must refer to when the tax
liability is incurred:
In general, administrative expenses include taxes which the trustee incurs in
administering the debtor's estate, including taxes on capital gains from sales of
property by the trustee and taxes on income earned by the estate during the case.
Interest on tax liabilities and certain tax penalties incurred by the trustee are also
included in this first priority.21
The court found support for this conclusion in Chapter 7 and 11 cases involving corporate debtors
where capital gains taxes were treated as an administrative expense of the estate. Moreover, this22
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 7 of 10

Holdings Corp., 156 B.R. at 318.
In re Hall, 376 B.R. 741 (Bankr. D. Az. 2007).23
Dawes, 382 B.R. at 520 (quoting Hall, 376 B.R. at 746).24
Id.25
See In re Brensing, 337 B.R. 376, 382 (Bankr. D. Kan. 2006); In re Gyulafia, 65 B.R.26
913 (Bankr. D. Kan. 1986).
8
construction, the court reasoned, is consistent with the legislative purpose of 11 U.S.C. §
1222(a)(2)(A) in giving Chapter 12 debtors freedom to reorganize.
The Dawes court expressly rejected In re Hall, another Chapter 12 case which relied on the23
Brown decision. In declining to follow Hall, the Dawes court questioned the Hall court’s reliance
on the “maxim that the courts are to ‘assume that Congress is aware of existing law when it passes
legislation.’” Further, it found that while Brown primarily relied upon 11 U.S.C. § 1305, Chapter24
12 has no similar provision. As such, the court could not reconcile prior Chapter 13 case law25
which held that 11 U.S.C. § 1305 eliminates a tax creditor from receiving administrative claim status
for taxes accruing post-petition and that the tax creditor has the option to not participate in a pending
Chapter 13 proceeding.26
I disagree with the Dawes court’s characterization that the phrase “incurred by the estate” is
ambiguous. On its face, it means a liability accrued against the bankruptcy estate. The statutory text
contains no temporal adjectives and it strains credibility to assume that Congress would have used
such language if it simply meant “incurred during the estate” or “incurred post-petition.” While I
find it unnecessary to turn to the legislative history, and in fact, should not under the rules of
statutory construction, I note the legislative history passage cited by the Dawes court does not
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 8 of 10

United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241 (1989).27
S. Rep. No. 95-989, 95th Cong., 2d Sess. 66 (1978), U.S. Code Cong. & Admin. News28
1978, p. 5787) (emphasis supplied).
See 11 U.S.C. § 346(b); 26 U.S.C. §§ 1398, 1399.29
Tower Loan of Mississippi, Inc. v. Maddox (In re Maddox), 15 F.3d 1347, 1355 (5th30
Cir. 1994).
See 11 U.S.C. §§ 1106, 1302.31
Dawes, 382 B.R. at 520.32
9
mandate its interpretation.27
The Dawes court makes much of the Senate Report’s use of the phrases “incurs in
administering the debtor's estate” and “during the case.” It, however, ignores the preceding words
in both cases: “taxes which the trustee incurs . . . including taxes on capital gains from sales of
property by the trustee and taxes on income earned by the estate during the case.” The passage,28
taken as a whole, indicates that Congress was focused on taxes incurred by the trustee during the
administration of the estate. This is consistent with the special treatment afforded to certain Chapter
7 and 11 cases in both the Bankruptcy and Internal Revenue Codes. In Chapter 7, unlike Chapter29
13, the trustee must collect and liquidate estate property to administer the estate. In Chapter 11,30
the trustee has broader duties in administering the estate than a Chapter 13 trustee.31
As the Dawes court indicated, Chapter 12, while modeled on Chapter 13, is a very different
animal. It is telling that the Dawes court could not reconcile its interpretation of 11 U.S.C. § 50332
with 11 U.S.C. § 1305. Section 1305(a)(1) grants a taxing authority holding a post-petition claim
the option to either file a proof of claim or elect not to participate in the bankruptcy. The Debtor
suggests that until property re-vests in the Debtor, an event delayed in this district until the discharge
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 9 of 10

Kibbe v. Sumski (In re Kibbe), 361 B.R. 302, 312 (B.A.P. 1st Cir. 2007).33
Although the IRS did not file an objection to the Fourth Amended Plan, the same34
principles apply to the Debtor’s treatment of the IRS’s claim for unpaid post-petition taxes, and I
note that it will have an opportunity to object to the confirmation of any further proposed plans.
10
by virtue of our local form Order of Confirmation, the effect of 11 U.S.C. § 1305(a) is vitiated. I am
bound to construe the Bankruptcy Code “in a way that gives meaning and effect to all of the statutory
words and phrases.” The interpretation advocated by the Debtor, however, would have the effect33
of rendering parts of 11 U.S.C. § 1305 ineffectual at least until discharge in every case.
In sum, just as the Dawes court found the analysis in Brown to be inapplicable to a Chapter
12 case, I find that it is not applicable to the Chapter 13 case here. Each chapter is unique and I need
not address how 11 U.S.C. § 503(b)(1)(B)(i) interacts with each at this time. Accordingly, the
Debtor cannot treat the MDOR’s claim for unpaid post-petition taxes as an administrative expense
of the estate in his Chapter 13 plan.34
V. CONCLUSION
In light of the foregoing, I will enter an order sustaining the Objection.
______________________________
William Hillman
United States Bankruptcy Judge
Dated: May 28, 2008
Case 06-10832 Doc 104 Filed 05/28/08 Entered 05/28/08 09:54:57 Desc Main
Document Page 10 of 10