would you agree that the funds that you client had the funds disputed funds were in the bankruptcy as they were being held in trust rather when his hands yes absolutely i would agree that the funds that were supposed to be turned over to the state are to the state rather for the sales and he says checks were held in trust so he had no he had no legal right to those funds absolutely not ok now so that even though he had no legal right to us funds and they were held in trust for someone else somehow he can have the benefit of them and then you are to his bankruptcy estate when he files for bankruptcy help how many i can't get across that bridge maybe you client that if you hold funds in trust it's not your money all of that is true you're correct with the exception that the statements made by the senator were not the view of one that there was a review of a but again going back to the issue that you are raised it really centers around the legislative history yes the trap and boy case really discussed the house's version of the section was created that later became the excise tax but the reason for that is because the house version wish to broaden the scope of a fresh start to small business owners and and debtors if you will that once a file for bankruptcy they will receive this just charge in committee reports for the house they indicate that it was unfair that a corporate and she could file for bankruptcy dissolve and any tax liabilities are made outstanding or made outstanding but first of all business owner if he were to personate off a bankruptcy that baggage or fall him through the bankruptcy there would be no just charge there would be no fresh start therefore in order for us to give him the benefit of a fresh start let us looking craft a exception from this withholding provision that was part of the  these excise taxes that if they were to be withheld there's a time limit for the taxing authority to basically assert its rights and collect upon it because in continuing in this report the house is very concerned that the taxing a and in this house version if we look at the history a five o seven a eight and the excise tax what the house is attempting to use also not only limit the excise  one year actually when it was in its original form but also the other withholding taxes such as wages and income tax and so security tax to two years the senate on the other hand when it was cracking its version crafted it based upon what was already in existence that is all of the state he would be a part of this now because there were differences between the senate's version and the house's version there had to be a joint committee and really have to look at this in the context of how this was created the bankruptcy act of ninety seven it was created differences but time ran out so they couldn't formulate regular joint committees so what they decided to do was basically create an ad hoc committee that would hash out the differences term and what would basically be the resolution relying on in that report is the omission of language that appeared in the senate report not only that also yes fundamentally you're right your honor the omission of the language but also going to if we look at it from a whole each side really got what they wanted the senate got the withholding tax extended to don to start ability regardless of time where as the house conceded ok fine we wanted it to extinguish within two years but we'll give you the destructibility to withholdings for income so security tax and what have you not to start we will put a time limit on it but the house got something to the house got there excise portion there excise portion not from one year but it's three years so looking at it in the context of the resolution we can see that both chambers got something from this bill but that doesn't answer our question why shouldn't why shouldn't we just say the statutory language doesn't answer the question the legislative history doesn't answer the question this is one of these very few cases in this in this very code driven world in which we live where this court just ought to pick the more equitable rule absolutely not because judge if you look at the supreme court's case and howard basically outlines the parameters of which a court is to construe priorities if there's any hesitation or any doubt as to whether or not to grant a claim a priority the doubt should go in favor of the debtor but i know this is a priority claim because it's either priority under the excise tax provision or priority under the trust fund absolutely because of priorities off the table because both of them are involved ortiz yes you're right priorities off table t question is amount because if we grant priority for the full sales and usage taxes for all years then the amount to be paid is large of course then if we were finding it under an excise tax if it's not the bankruptcy money why only has it because they didn't comply with a legal obligation to give it to somebody else why should the same rule apply because it would apply because again the legislative history of the house of what it was trying to achieve in granting small business debtors out fresh start that is why should apply the house under started or with someone else's money absolutely the house understood that they fundamentally felt that giving of basically a corporate entity the benefit of bankruptcy in dissolving tax liabilities or may not standing by another corporate  all from the house's perspective to give them an enlarged that fresh start by saying ok we understand this money isn't yours but we're going to impose upon the the state obligation to you know say you know what you need to come for and you need assert your rights you can't just sit there and wait forever to assert your rights in what if they hadn't fought for bankruptcy what if the state they just waited five or six years or so the debtor did not go for bankruptcy instead of that he started investing in cars so he bought a few bankruptcy therefore the state as a remedy supported under state law if the state wishes to go after him for the monies that are owed it is free to do so without the burdens of the bankruptcy under your hypothetical because he's not under bankruptcy the moment he asserts itself in bankruptcy and that time limitation what apply money then becomes his i'm sorry the money then becomes his moment files for bankruptcy it's not necessarily the money becomes his it's at the state loses its opportunity to recoup the money it had an opportunity before to recoup sounds to me like it's have a few years from the date of filing bankruptcy i'm sorry or the state will still have a few years to chase him from the day he filed bankruptcy absolutely so there is still opportunity their work starts ticking when he files bankruptcy yes but never the less don't you have to concede that the rule that you're you're proposing to us is a temptation to unscrupulous businesses to to pocket that money and do the kinds of things that you judge suggested with it i mean and just hope you know hope that the state doesn't get you catch me if you can within three years i sometimes often answer question yes but again the house makes very clear that that is a possibility but here again we're flipping over and we're giving the bird now in the state it necessarily means that they've taken in mali from some sources and they're not paying out which owed to other sources but that's the nature of bankers so we're getting in the right your honor that is not the nature of bankruptcy in this case i understand the concept of fresh start but it's not fresh start but somebody else's money it is this was money he's he was a trustee for the state only the incense the court is designed to forgive a debt that the company accrued for itself not you can't use type party funds you can't use consumer's money that you're holding in trust that was not his to begin with and for him to get a discharge of this nature that the palin seeks in this case would be an incentive for every failing retailer to default on their obligations are it let's assume that's a good policy argument before you get to the policy argument you've got to make an argument under the language of the statute right and i don't see anything in the trust for priority provision to show that this falls within the i think the language is the plain meaning of the stand to be collected and withheld by the debtor and whatever capacity it has a word required it has the word collected and withheld and every quarter on an i should say every court but the majority of the court and our three circuit said one of the it is respectfully an articulate it does not distinguish between the two kinds of sales taxes that are it that we have the kind what there are two kinds of sales taxes on emits directly to the state and the second one is the one that we have here your honor which is the one that taxes that he is holding in trust for the state and your honor for for the appellant to make an the port of the taxes and he did not pay it he paid a dollar or he paid zero so he knew it the audit was very very fair and even at the audit the taxpayer conceded he saying yes this is what my treated the third party sales taxes as trust from taxes and that's how i could retire on that's what the senate report said but that's not what the legislation says and that's not what the joint statements are so why should we infer as judge wash and which said no we go to the prior bankruptcy act and we say in line with the predecessor of five or seven was seventeen a one easy with said that sales tax is the taxes that had to be collected and and the employer withholding taxes both were trust fund with the majority and shake in the moral majority in the center shake agreed that the language is unclear and you're annoying us the language is clear i mean even the retailer and one that he holds in trust and all the circuit courts of appeals all three of them said this is not the one that is held in trust is clearly not the sales tax that is destructible and that is not subject to temporal limitation dischargeable what about the joint statements definition of trust for axis your honor i would say that provides an example of the trust fund which is the employer withholding but we have the second way to look at the joint statement your honor of the joint statement had any impact the code as would have been changed the court still provides there is no amendment to the act the way seventeen the act of seventy ninety eight adopted the senate said has reviewed pre registration law along with the house senate and the joint statements to determine and as you as your own actually correctly stated that one joint one statement is not equal to legislat correctly pointed out right now that the courts did say that there is an overlap and there is a little ambiguity because of that was led by the joint statement but we can't see it in in in an on by itself we have to see view is as to whether the proper result in this case is to just sort of humbly acknowledge that the text is is unclear doesn't answer the question the legislative history is going in different  the second the other circuits and based on the public policy considerations that we just said that this is not his money he cannot be funding his bankruptcy with money that he's holding in trust for the state so  a huge and he got a big deduction for every quarter and he the taxpayer himself has reported taxable portion for every quarter for instance for one quarter i can say it was thirty eight hundred unjust to promote through online reported taxes were next to zero one dollar reported taxes for a lot they were like to the point of thirty eight thirty nine hundred dollars i can actually i have a few returns with me but the say that this is the money that is that that money in bankruptcy becomes his money is not not correct that's not the what bankruptcy is that  you are focused on the issue of policy and while the issue of policy is of great concern for the court it is not the rule of law to be applied in determining how to afford a claim group or not but to the center the policy would come are a rule of law would come out of your argument that would create a policy that would seem to suggest congress could not have intended that to that extent it may be helpful if there's an from the northern district of new york and in an interview monaco it breaks down wonderfully the how the bankruptcy after nine hundred seventy came about the differences between the house and the senate version and ultimately it reviews the holding in reza no income student while that argument that is theft is a valid argument and concern ultimately what came out of the resolution was to attempt to give the small business debtor a fresh start so while we understand the policy policy concern it seems the congressional intent behind this was to get a for that fresh start to that small business debt or you concede that your argument is  not that you went on the plain text of the statute it's the that we have to drill down a legislative history and that's where you win the battle absolutely your argument absolutely as you point out every circuit that's looked at this issue has to had to have delved into the legislative history because text doesn't offer the court's really meaningful understanding of what congress intended and your best answer to the legislative history winning the day for your client is that the language in the senate that which would dictate a result for the state here was omitted from the joint statement that is correct that and what came about from the joint resolution is not supported by the senate report committee because again it's it wasn't that