United States Court of Appeals

For the First Circuit

No. 03-1527

IN RE BOSTON REGIONAL MEDICAL CENTER, INC.

Debtor, Appellant,

v.

COMMONWEALTH OF MASSACHUSETTS 

DIVISION OF HEALTH CARE FINANCE AND POLICY,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Mark L. Wolf, U.S. District Judge]

Before

 Howard, Circuit Judge,

Campbell and Stahl, Senior Circuit Judges.

Harold B. Murphy with whom D. Ethan Jeffery and Hanify & King

were on brief for appellant.

James J. Arguin, Assistant Attorney General, Office of the

Attorney General, with whom Thomas F. Reilly, Attorney General, was

on brief for appellee. 

April 14, 2004
1Mass. Gen. Laws ch. 118G, § 18 was added by 1996 Mass. Acts

ch. 151, § 275, which repealed and replaced an earlier and

substantially identical version of the same law, Mass. Gen. Laws

ch. 118F, § 15. The debt at issue relates to the years 1996

through 1999, so the earlier version of the statute is not

pertinent. Likewise, the numerous amendments to section 18 in the

year 1996 and after do not affect our analysis. 1996 Mass. Acts

ch. 203, § 18; 1997 Mass. Acts ch. 47, § 14; 1997 Mass. Acts ch.

170, § 27; 1998 Mass. Acts ch. 319, § 9; 1998 Mass. Acts ch. 463,

§ 100; 2001 Mass. Acts ch. 177, § 29; 2003 Mass. Acts ch. 26, §§

353 to 359. As the parties have stipulated to the facts pertinent

to the operation of the statute, we need refer only to the

stipulation, not to the particular statutes themselves.

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CAMPBELL, Senior Circuit Judge. At issue in this appeal

is whether amounts owing by a debtor hospital under Massachusetts

general law, chapter 118G, section 18, to a state fund known as the

Commonwealth's Uncompensated Care Pool are properly considered to

be "excise taxes" enjoying priority in bankruptcy under 11 U.S.C.

§ 507(a)(8)(e). 

Appellant, Boston Regional Medical Center, ("BRMC or

debtor") filed a voluntary petition for reorganization under

Chapter 11 of the Bankruptcy Code in the United States Bankruptcy

Court for the District of Massachusetts. Appellee, the

Commonwealth of Massachusetts, by its Division of Health Care

Finance and Policy ("HCFP"), filed a proof of claim. After

resolving a disagreement over the dollar amount, appellee finally

asserted a priority of claim for $1,702,714, a sum representing

appellant's unpaid prepetition obligations as an acute hospital

under Mass. Gen. Laws ch. 118G, § 18 to the Commonwealth's

Uncompensated Care Pool (the "Pool").1 While the debtor agreed to
2"Acute hospital" is defined as "the teaching hospital of the

University of Massachusetts Medical School and any hospital

licensed under section fifty-one of chapter one hundred and eleven

and which contains a majority of medical-surgical, pediatric,

obstetric, and maternity beds, as defined by the department of

public health." Mass. Gen. Laws ch. 118G, § 1.

3To maintain their licenses, every Massachusetts acute

hospital must pay or credit to the Pool such as the law requires.

See In re Ludlow Hosp. Soc'y, Inc., 216 B.R. 312, 315 (Bankr. D.

Mass. 1997).

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the dollar amount of the claim, it disputed appellee's contention

that the claim was entitled to priority as an "excise tax" under

section 507(a)(8)(E) of the Bankruptcy Code. Determining the claim

was for an excise tax, the bankruptcy court overruled appellant's

objection and granted priority to the claim. In re Boston Reg'l

Med. Ctr., 264 B.R. 222, 229-30 (Bankr. D. Mass. 2001) ("BRMC II").

Appellant appealed, and the district court affirmed the bankruptcy

court's judgment, stating its reasons in the course of an

unpublished bench ruling. We affirm the district court. 

Facts

The case was submitted on stipulated facts, the substance

of which are as follows. 

Prior to filing its Chapter 11 bankruptcy petition,

appellant, BRMC, owned and operated a 195-bed private, acute

hospital in Stoneham, Massachusetts. As an acute hospital2 within

Massachusetts, BRMC was required by Massachusetts law to

participate in the Pool (Pool).3 The Pool, administered by the

State's Division of Health Care Finance and Policy, is a fund from
4This quoted language appears in the version of § 18 as

amended by 1997 Mass. Acts ch. 47, § 14, an emergency act, approved

July 11, 1997, and by 1997 Mass. Acts ch. 47, § 37, made effective

Oct. 1, 1997. This portion of § 18 was again amended by 2003 Mass.

Acts ch. 26, § 353, an emergency act, approved June 30, 2003, and

by 2003 Mass. Acts ch. 26, § 715 made effective July 1, 2003, in

subsec. (a), which substituted "is to reimburse hospitals and

community health centers for care provided to low-income, uninsured

and underinsured residents of the commonwealth" for "shall be to

provide access to health care for low income uninsured and

underinsured residents of the commonwealth". 

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which Massachusetts hospitals are paid or credited for the free

health care they furnish to patients who do not have health

insurance or cannot otherwise pay for hospital care. Mass. Gen.

Laws. ch. 118G, §§ 18(h) and (k). The Pool's stated statutory

purpose is "to provide access to health care for low income

uninsured and underinsured residents of the Commonwealth."4 Id.

The Massachusetts Supreme Judicial Court has stated, in respect to

an earlier version of the Pool law, that the Pool's purpose is "'to

more equitably distribute the burden of uncompensated acute

hospital services across all acute hospitals.'" Gen. Hosp. Corp.,

v. Rate Setting Comm'n, 552 N.E.2d 113, 114 (Mass. 1990) (quoting

Mass. Gen. Laws ch. 6A, § 75).

Pool funding comes both from the mandatory assessments

made against each acute hospital based on its "private sector

charges," infra, and from other governmental funds and assessments.

The amounts collected by the Pool are segregated for its own

purposes and are not used to fund other governmental programs or

otherwise to defray the costs of state government. 
5This quoted language appears in the version of § 18 as

amended by 1997 Mass. Acts ch. 47, § 14, an emergency act, approved

July 11, 1997, and by 1997 Mass. Acts ch. 47, § 37, which went into

effect on July 11, 1997 and Oct. 1, 1997, respectively. Prior to

these amendments, the language was as follows, "A hospital's

liability to the pool shall equal the product of: (a) the ratio of

its private sector charges; and (b) the private sector liability to

the uncompensated care pool as determined by the general court."

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Section 18 provides for the collection and distribution

of Pool funds among the hospitals. According to section 18(e), a

hospital's liability to the Pool is proportional to the amount of

otherwise uncompensated care each hospital provides. Liability to

the Pool (i.e., the assessment based on its private sector charges)

"shall equal the product of (1) the ratio of its private sector

charges to all acute hospitals' private sector charges; and (2) the

private sector liability to the uncompensated care Pool as

determined by law . . . ."5 In order to determine the debtor

hospital's individual liability to the Pool, the HCFP must,

therefore, first determine the amount of private sector charges for

all hospitals in Massachusetts. "Private sector charges" is

defined as a hospital's gross patient service revenue, less the

amount of gross patient service revenue that is attributable to

Medicare, Medicaid and other "publicly aided patients, free care

and bad debt." Mass. Gen. Laws ch. 118G, § 1. 

In calculating a hospital's liability to the Pool,

certain credits are provided. A hospital's assessed liability to

the Pool is offset against the amount owed by the Pool to the
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hospital for uncompensated care during the same period, thus

resulting in either a net liability to the Pool or a net

distribution from the Pool. Mass. Gen. Laws ch. 118G, § 18(d).

The Pool, therefore, charges the hospitals' collective private

sector revenue to pay for the hospitals' collective burden of

uncompensated care, resulting, at bottom, in a net transfer of

revenue from those hospitals that provide less uncompensated care

(as a proportion of the hospital's total patient service charges)

to those that provide more. Mass. Gen. Laws ch. 118G, §§ 18(d) and

18(h). To the extent a hospital receives reimbursement for free

care directly from Medicare, Medicaid or another source other than

the Pool, the amount owed by all other hospitals is reduced because

the amount of funding required from the Pool is reduced. 

Furthermore, "disproportionate share hospitals" -- which

are hospitals that have "a payer mix where a minimum of sixty-three

percent of the acute hospital's gross patient service revenue is

attributable to [certain government payments] and free care" -- and

"non-disproportionate share hospitals" -- which do not have that

payer mix -- receive different treatment under section 18. Mass.

Gen. Laws ch. 118, § 1. In the event that the Pool does not have

sufficient funds to reimburse all hospitals for all of the free

care provided, the amount paid from the Pool is weighted towards

disproportionate share hospitals. 
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Pursuant to section 18, BRMC owes appellee a total of

$1,702,714, representing the total amount due to the Pool for the

following fiscal years:

a. 1996 - $1,580,506

b. 1997 - $ 60,639

c. 1998 - $ (77,744) credit

d. 1999 - $ 139,313

The bankruptcy court concluded that the foregoing total

Pool claim was entitled to priority as an excise tax, thus giving

rise to the single issue presented in the current appeal. BRMC II,

264 B.R. at 229-30. 

Present Contentions and the Opinions Below

As it did below, the appellant now argues that the claim

for the Pool assessment owed by BRMC is not for an "excise tax,"

thus not entitled to priority, under § 507(a)(8)(E) of the

Bankruptcy Code. In BRMC's view, the bankruptcy and district

courts failed to engage in an adequate "functional analysis" of the

nature of the statutory assessment underlying the Pool claim. BRMC

contends that the Pool statute is in form and function merely a

risk sharing plan imposed on acute hospitals -- a plan, that,

instead of being a tax, is really only a regulatory fee imposed for

the privilege of operating an acute hospital in Massachusetts. 

In response, appellee argues that the mandatory exaction

placed by Massachusetts law upon the state's acute hospitals is a
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tax, having been legislatively established to raise monies to

advance the public purpose of promoting continued access to acute

hospital services by low-income uninsured and underinsured

residents of Massachusetts. 

In ruling that the Pool assessment is a tax, not a fee,

the bankruptcy court similarly laid particular emphasis upon the

exaction's public purpose -- the promotion of hospital access to

low-income uninsured and underinsured residents of Massachusetts.

BRMC II, 264 B.R. at 225. That, coupled with its involuntary

character and its other functional attributes, was found to

differentiate it from a regulatory fee. Id. at 225-30.

In affirming the bankruptcy court's opinion, the district

court stated from the bench that the bankruptcy court's reasoning

was persuasive with "one possible exception." The court said the

mere fact that the Pool exaction was paid in order to serve the

public welfare would not necessarily demonstrate it was an excise

tax. Almost everything paid to the government, the court

suggested, is intended for a public purpose. Here, however, the

court found the exaction to be targeted specifically at paying for

medical care for members of the public unable to pay for

themselves. Unlike the case of a driver's license or other fee,

the money is not collected by the government simply to confer a

benefit on the payer or to pay itself for a government service

rendered to the payer. "Functionally and under the so-called
6The district court stated: 

Black's Law Dictionary, the 7th edition, page 585,

defines an excise tax as a tax imposed on the

manufacture, sale, or use of goods, or on an occupation

or activity. Since the tax here is a tax that is levied

as a result of operating the hospital and measured by a

hospital's share of industry's revenues, it is an excise

tax, I find, as opposed to a tax of some other sort.

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Suburban factors, this is a tax," the district court said.

Further, the tax is an excise, the court continued, citing a

definition found in Black's Law Dictionary.6

Discussion

At issue is whether the assessments for the Uncompensated

Care Pool imposed upon appellant under state law constitute "excise

taxes" and, therefore, are entitled to priority under section

507(a) of the Bankruptcy Code. This is a federal question. City

of New York v. Feiring, 313 U.S. 283, 285 (1941); State of New

Jersey v. Anderson, 203 U.S. 483, 491 (1906). The parties have

stipulated to the facts, leaving only the application of the

statute, a matter we examine on appeal de novo. Commonwealth of

Mass. Div. of Employment and Training v. Boston Regional Med. Ctr.,

Inc. (In re Boston Reg'l Med. Ctr., Inc.), 291 F.3d 111, 119 (2002)

("BRMC I").

Provisions that grant priority in bankruptcy are to be

narrowly construed. See Cramer v. Mammoth Mart, Inc. (In re

Mammoth Mart, Inc.), 536 F.2d 950, 953 (1st Cir. 1976) (stating,

"We begin with the premise that the theme of the Bankruptcy Act is
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'equality of distribution.' 'If one is to be preferred over

others, the purpose should be clear from the statute.'") (quoting

Nathanson v. NLRB, 344 U.S. 25, 29 (1952)); see also Northwest Fin.

Express, Inc. v. JWD, Inc. (In re Northwest Fin. Express, Inc.),

950 F.2d 561, 563 (8th Cir. 1991).

Section 507(a) sets forth in descending order nine

categories of priority claims. Appellee's claim for priority

status is stipulated to be based solely upon its being an "excise

tax" under § 507(a)(8)(E), the eighth category. The relevant

language reads as follows:

§ 507. Priorities.

(a) The following expenses and claims have

priority in the following order: 

. . .

(8) Eighth, allowed unsecured claims of

governmental units, only to the extent that

such claims are for --

. . .

(E) an excise tax on --

(i) a transaction occurring before the date of

the filing of the petition for which a return,

if required, is last due, under applicable law

or under any extension, after three years

before the date of the filing of the petition;

or

(ii) if a return is not required, a

transaction occurring during the three years

immediately preceding the date of the filing

of the petition;

The parties do not question that appellee is a governmental unit,

that it holds an unsecured claim, that the claim relates only to

transactions occurring before the date of the filing of the

petition, and that the three-year limitation does not bar the
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claim. In dispute is only whether the claim is for an "excise

tax." Unless so, the claim is without priority. 

The Bankruptcy Code does not define "excise tax," nor is

the legislative history informative on what the term means. BRMC

I, 291 F.3d at 120. We turn, therefore, to the relevant

interpretive case law. See BRMC I, 291 F.3d at 120 (citing United

States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S.

213, 224 (1996)). The discussion in the cases has mostly concerned

the meaning of the term "tax," with little attention paid to the

term "excise." See, e.g., CF & I, 518 U.S. at 224-26 (relying on

precedent concerning definition of "tax" and concluding that the

obligation at issue was a "penalty" rather than a "tax" and,

therefore, that the obligation was not entitled to priority as an

"excise tax"); Workers' Comp. Trust Fund v. Saunders, 234 B.R. 555,

560 n.8 (D. Mass. 1999); In re Park, 212 B.R. 430, 434 (D. Mass.

1997) (noting that courts do not often engage in analysis of the

"excise" portion of the phrase "excise tax" once an exaction has

been determined to be a "tax"). 

The Supreme Court has defined taxes as "pecuniary burdens

laid upon individuals or their property, regardless of their

consent, for the purpose of defraying the expenses of government or

of undertakings authorized by it." Feiring, 313 U.S. at 285-88;

see also Anderson, 203 U.S. at 492; BRMC I, 291 F.3d at 120. This

definition is sometimes called the "Feiring-Anderson" standard. CF
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& I, 518 U.S. at 222 n.6. The Court has added that courts should

look beyond the statutory label of an exaction and evaluate its

"actual effects" to determine whether it functions as either a tax

or else as some different kind of obligation, like a debt, fee, or

penalty. CF & I, 518 U.S. at 221, 224-25; see also BRMC I, 291

F.3d at 120. 

The lower courts have often struggled in applying the

Feiring-Anderson analysis to debts in a bankruptcy setting. Some

courts have asked whether the tax characteristics of a stateimposed exaction outweigh its non-tax characteristics. In re

Chateaugay Corp., 153 B.R. 632, 641 (Bankr. S.D.N.Y. 1993); Bell v.

Brown (In re Payne), 27 B.R. 809, 817 (Bankr. D. Kan. 1983).

Others have asked whether, regardless of non-tax characteristics,

there are sufficient tax attributes to call the exaction a tax.

See, e.g., Waldo v. State of Montana Dept. of Labor and Industry

Uninsured Employers Fund (In re Waldo), 186 B.R. 118, 125 (Bankr.

D. Montana) (1995) (stating, "[t]herefore since all elements of the

[list of tax characteristics] are fully satisfied by the UEF's

claim against Debtor, Debtor's obligation is in the nature of a tax

for purposes of the Bankruptcy Code, specifically 11 U.S.C. §

507(a)(7)(E)."). Some courts have also sought to give particular

and separate weight to the Bankruptcy Code's principle of equal

distribution of the debtor's estate. See, e.g., Workers' Comp.

Trust Fund v. Saunders, 234 B.R. 555, 565-67 (D. Mass. 1999); see
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also Begier v. Internal Revenue Service, 496 U.S. 53, 58 (1990)

(stating "Equality of distribution among creditors is a central

policy of the Bankruptcy Code."). 

Given the difficulty of applying Feiring-Anderson's

general definition of a tax to the unusual state exactions

sometimes encountered in a bankruptcy context, "courts have

formulated additional criteria for determining when a governmental

claim is entitled to priority treatment." In re United Healthcare

Sys., Inc., 282 B.R. 330, 335 (Bankr. D. N.J. 2002). Foremost

among these has been the multi-factored test developed in the Ninth

and Sixth Circuits known as the Lorber/Suburban II analysis.

County Sanitation v. Lorber Indus. of California, Inc. (In re

Lorber Indus. of California, Inc.), 675 F.2d 1062, 1066 (9th Cir.

1982); Ohio Bureau of Workers' Comp. v. Yoder (In re Suburban Motor

Freight, Inc.), 36 F.3d 484, 488 (6th Cir. 1994) ("Suburban II").

The bankruptcy court below relied heavily upon a Massachusetts

bankruptcy decision that applied Lorber/Suburban II to the Pool

exaction here. BRMC II, 264 B.R. at 226 (citing In re Ludlow Hosp.

Soc'y, Inc., 216 B.R. at 318-20). The district court seemed

largely content with that approach.

In Lorber, the Ninth Circuit held that, to qualify as a

tax, an exaction must be: (1) an involuntary pecuniary burden,

regardless of name, laid upon individuals or property; (2) imposed

by, or under authority of the legislature; (3) for public purposes,
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including the purposes of defraying expenses of government or

undertakings authorized by it; and (4) under the police or taxing

power of the state. Lorber, 675 F.2d at 1066. In Suburban II, the

Sixth Circuit expressed concern over the adequacy and possible onesidedness of Lorber's "public purpose" prong, and it added two

additional factors of its own, namely (5) whether the exaction is

universally applied to all similarly situated entities and (6)

whether the granting of priority status to a governmental claimant

would prejudice private creditors with like claims. Suburban II,

36 F.3d at 488-89; see also BRMC I, 291 F.3d at 121 n.10 (sharing

Suburban II court's concern that Lorber, by itself, was "incomplete

and one-sided, and may lead to incorrect results.") (citing

Suburban II, 36 F.3d at 488-89; Indus. Comm'n v. Camilli (In re

Camilli), 94 F.3d 1330, 1333-34 (9th Cir. 1996) (holding the

Suburban cases consistent with Lorber and following the Sixth

Circuit's reasoning)). 

Debtor contends the Supreme Court implicitly rejected the

Lorber/Suburban II standard in United States v. Reorganized CF & I

Fabricators of Utah, Inc., a case decided after the Ninth and Sixth

Circuits' decisions in Lorber and Suburban II. In CF & I, the

Court made no mention of Lorber or Suburban II. Rather, it

emphasized the "continuing vitality of the cases in the Feiring

line." CF & I, 518 U.S. at 222. But Lorber and Suburban II

undertook to apply the principles stated in the Feiring line, and
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we see nothing in CF & I that renders those circuit precedents no

longer useful constructs. We faced this issue recently in BRMC I,

holding that Lorber and the Suburban cases remained persuasive

after CF & I. We said in BRMC I:

The BAP treated Anderson and [Feiring] on the

one hand, and Lorber and the two Suburban

cases on the other, as developing different

and apparently mutually exclusive tests. It

then concluded that the Supreme Court had

chosen the former test rather than the latter

in CF & I. We consider Lorber and the

Suburban cases to be refinements of the law

generated in Anderson and Feiring, which

remain persuasive to although not binding on

this court after CF & I.

BRMC I, 291 F.3d at 121 n.10 (citations omitted). The

Lorber/Suburban II approach therefore remains an available tool of

analysis, although, of course, subject at all times to the

overarching authority of Feiring and Anderson. See, e.g., San Juan

Cellular v. Public Serv. Comm'n of Puerto Rico, 967 F.2d 683, 684-

687 (1st Cir. 1992) (utilizing an approach that approximated the

first three prongs of Lorber); In re Ludlow Hosp. Soc'y, Inc., 216

B.R. at 319 (stating, "This Court disagrees with the Trustee's

assertion that [San Juan Cellular] represents an approach different

from what appears to be a well-settled line of cases commencing

with Feiring. Notwithstanding the fact that San Juan Cellular was

decided under the Tax Injunction Act, we find the thoughts

expressed by the panel in San Juan Cellular virtually

indistinguishable from those expressed by the Ninth and Sixth
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Circuits in Lorber and Suburban II, both decided under the

Bankruptcy Code."). Many other courts have found Lorber/Suburban

II to be consistent with, and useful in applying, the controlling

Feiring-Anderson rationale. See In re Cassidy, 983 F.2d 161, 163

(10th Cir. 1992); Indus. Comm'n of Ariz. v. Camilli (In re

Camilli), 94 F.3d 1330, 1331-32 (9th Cir. 1996), cert. denied, 519

U.S. 1113 (1997); In re Park, 212 B.R. 430, 433-34 (Bankr. D. Mass.

1997); Sacred Heart Hosp. v. Penn. Dep't of Labor and Indus. (In re

Sacred Heart Hosp.), 209 B.R. 650, 654-58 (E.D. Pa. 1997); In re

Chateaugay Corp., 177 B.R. at 637-38; In re S.N.A. Nut Co., 188

B.R. 392, 393-94 (Bankr. N.D. Ill. 1995).

Accordingly, in considering the term "tax" here, we avail

ourselves of the analytical approach set out in Lorber/Suburban II.

In doing so, we find ourselves in essential agreement with the

similar application of Lorber/Suburban II in In re Ludlow Hosp.

Soc'y, Inc., as adopted by the bankruptcy court below. BRMC II,

264 B.R. at 226 (citing In re Ludlow Hosp. Soc'y, Inc., 216 B.R. at

318-20).

1. Involuntary Burden

We ask first whether the Pool exaction was an involuntary

pecuniary burden. Lorber, 675 F.2d at 1066. The Lorber court

explained that an "involuntary pecuniary burden" was a "noncontractual obligation imposed by state statute upon taxpayers who

had not consented to its imposition." Id. (citing Dungan v. Dept.
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of Agric., State of Calif., 332 F.2d 793 (9th Cir. 1964), aff'g In

re Farmers Frozen Food Co., 221 F. Supp. 385 (N.D. Cal. 1963)).

The exaction here was imposed by statute; it was neither consented

to, nor part of a contract. It was thus an involuntary pecuniary

burden. 

Appellant argues that the assessment was nonetheless

voluntary because each acute hospital could to some degree regulate

its obligation to the Pool by choosing to provide more or less free

care. However, acute hospitals within the ambit of Mass. Gen. Laws

ch. 118G, § 18 have no legal option but to pay or credit such

assessments as are due. And even if appellant enlarged the quantum

of free care it provided, it could not be certain to avoid

liability. An acute hospital's liability is based, in part, upon

the amount of free care that all other acute hospitals in the state

have provided for that same year -- an unpredictable amount. The

only way appellant could be certain to avoid sharing in the burdens

of the Pool would be to cease all acute care operations. See In re

Suburban Motor Freight, 156 B.R. 790, 792 (S.D. Ohio 1992)

(concluding that the statute insurance scheme in favor of private

insurance was involuntary since employers were not permitted to opt

out and rejecting argument that scheme was voluntary because

employers could choose not to be under it by refusing to conduct

business in the state). By appellant's rationale, the federal

income tax would not qualify as a "tax" because the taxpayer may
7While the Pool benefits disproportionate share hospitals by

assisting with their reasonable financial requirements relative to

caring for indigent patients, the statutory formula does not allow

hospitals to profit from Pool funds. Mass. Gen. Laws ch. 118G, §§

1 & 18A.

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voluntarily minimize his or her tax liability by earning less

income or by taking advantage of deductions. See, e.g., In re

Sacred Heart Hosp., 212 B.R. at 474 (stating, "All taxes may be

avoided by a 'choice' of the taxpayer").

2. Exaction Imposed Under State's Authority

Secondly, there is no dispute the Pool exaction is

imposed under the authority of the Massachusetts legislature.

Lorber, 675 F.2d at 1066.

3. Exaction Was For A Public Purpose

Thirdly, the Pool exaction is for a public purpose, i.e.

for the defraying of expenses or undertakings of a type commonly

assumed by the government -- namely, those providing free health

care to persons without the resources to pay for it. Lorber, 675

F.2d at 1066. There is no correlation between what a hospital pays

and the receipt in return of some particular service. Rather, the

hospital is obliged, based on an equitable formula, to help fund

hospitals around the state that serve indigent members of the

public, thus enabling Massachusetts to provide free care to

residents. Disproportionate share hospitals rely on Pool funds to

remain in business.7 While acute hospitals are the exclusive

recipients of these funds, the amount each receives relates to the
8It is true that "all money collected by the Government goes

towards defraying its expenses, and is used for public purposes."

Yoder v. Ohio Bureau of Workers' Comp. (In re Suburban Motor

Freight, Inc.), 998 F.2d 338, 341 (6th Cir. 1993). We need not be

concerned here, however, because the connection between the Pool

payments and the recipient of free care is not tenuous -- the funds

are given in direct relation to the amount of free care provided.

Mass. Gen. Laws. ch. 118G, §§ 1 &18A.

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amount of free public services each provides. Under the statutory

scheme, individual hospitals serve as conduits through which the

Pool channels funds to pay for the free care rendered to uninsured

or underinsured patients. This court stated in San Juan Cellular,

967 F.2d at 685, that "[c]ourts facing cases that lie in the middle

of this spectrum have tended (sometimes with minor differences

reflecting the different statutes at issue) to emphasize the

revenue's ultimate use, . . . ."8 The "ultimate use" here is a

valid governmental purpose -- one specifically identified in the

relevant Massachusetts statute. See Mass. Gen. Laws Ch. 118G, §

18.

 Appellant argues that the exaction does not defray costs

of the Commonwealth because the Pool merely spreads the cost of

care among the acute hospitals. It further notes that the funds of

the Pool are segregated from other state revenues and not used to

fund other governmental operations of the Commonwealth of

Massachusetts. According to appellant, the exaction is merely to

defray costs and provide benefits to hospitals participating in the

program rather than to the Commonwealth and the general public. In
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support of this argument, appellant analogizes the Pool to the

Unemployment Compensation Fund in BRMC I. We disagree. In BRMC I,

we concluded that the fund scheme was not a tax because, among

other reasons, "The distinction between the payments required to

sustain a government undertaking as a whole and those required

merely to compensate for the costs imposed by a particular

participant is significant." 291 F.3d at 122. Here the payments

to the Pool are geared to sustain, as a whole, the stated

governmental undertaking of providing access to health care for

low-income uninsured and underinsured residents of the

Commonwealth. Accordingly, these costs are distinguishable from

the costs in BRMC I. 

Nor is the Pool analogous to the Unemployment

Compensation Fund. To be sure, the Pool operates as a sort of risk

sharing plan, but that does not preclude it from satisfying the

public purpose requirement. See Williams v. Motley, 925 F.2d 741,

745 (4th Cir. 1991) (pool of funds to be distributed among all of

the state's automobile insurers to compensate for uninsured drivers

was a tax, not a regulatory fee, because the pool's purpose was to

benefit the general public by reducing the overall costs of

uninsured motorist insurance coverage). We have expressed a

willingness to declare such fund-type mechanisms "taxes." See San

Juan Cellular Tel. Co., 967 F.2d at 685 (stating, "Or, [a tax] may

serve such purposes indirectly by, for example, raising money
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placed in a special fund to help defray the agency's regulationrelated expenses."). 

4. Pool Assessment Imposed Under Police Or Taxing Power

Fourthly, there is no dispute that the Pool assessment

was imposed pursuant to the Commonwealth's police or taxing power.

Lorber, 675 F.2d at 1066.

5. Assessment Uniformly Applied To All

Fifthly, the Pool assessment is uniformly applied to all

similarly situated entities. Suburban II, 36 F.3d at 489. The

debtor argues that since the Pool statute favors disproportionate

share hospitals, it is not uniformly applied. It points out that

hospitals providing a disproportionate amount of free care receive

the most benefit from the Pool. For example, after years where

there is a deficiency in the Pool, those disproportionate share

hospitals with the greatest proportional requirement for Pool

income have to pay less of a share into the Pool than do the other

hospitals. Also, in the event that the Pool does not have

sufficient funds to reimburse all hospitals for all of the free

care provided, the amount paid from the Pool is weighted towards

disproportionate share hospitals. However, all acute hospitals are

subject to the same rules; all similarly situated hospitals are

treated alike. See, e.g., Ludlow Hosp. Soc'y, Inc., 216 B.R. at

320 (finding that Pool satisfied requirement that the assessment be

universally applied to similarly situated entities because the
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obligation to participate in the Pool is "universally imposed on

all acute hospitals in the Commonwealth"). Under the Pool

assessment scheme, acute hospitals with the same financial profiles

in any given year will have the same liability in the Pool. Boston

Reg'l Med. Ctr., 264 B.R. at 227. Under debtor's reasoning, the

federal personal income tax, which treats people with different

incomes differently, would not constitute a tax. We conclude the

exaction here is applied uniformly to similarly situated entities.

6. No Prejudice To Private Creditors

Lastly, under the final Lorber/Suburban II factor, we

consider if granting priority to the Pool assessment would

prejudice private creditors with like claims. Suburban II, 36 F.3d

at 489. The Suburban II court framed this sixth requirement

because it was concerned that private actors who might, in some

cases, perform the same function as the government would be given

inferior priority. Suburban II, 36 F.3d at 488 (stating "If the

State had an optional participation program, or allowed employers

to purchase private liability insurance, it would be unfair and

without statutory justification to call state-collected premiums

'taxes' and put the Bureau ahead in line while leaving unpaid

private insurers to languish along with the rest of the unsecured

creditors.") (quoting Suburban I, 998 F.2d at 342) (emphasis

supplied) (citations omitted).
-23-

The bankruptcy court determined there were "no private

creditors with claims sufficiently similar to [appellee's] who

would suffer any disadvantage by conferring priority treatment to

a Pool claim." We agree. Appellant points to no private creditor

with a role comparable to appellee's. No private entity with

power to require hospitals to contribute to a fund for the sake of

preserving free care for the indigent has been identified. See

Camilli, 94, F.3d at 1334. Instead, appellant seeks to switch the

argument to the purported lack of injury to appellee if it does not

receive priority as a creditor. According to appellant, appellee

state agency (rather than the hospitals themselves) will suffer no

loss in any event. Supposedly this indicates the exaction is a

regulatory fee. This argument, however, ignores the loss to the

government's program, aimed at furnishing free hospital services to

the public, if the assessment is unpaid. The argument, moreover,

is beside the point; as it focuses on the purported lack of harm to

the government creditor rather than on whether granting priority to

the Pool assessment will prejudice a private creditor. As

appellant's argument has nothing to do with the government's

position in relation to similarly situated private entities, it is

not germane. 

We conclude that the Pool assessment satisfies all of the

Lorber/Suburban II criteria for a tax. Appellant, however, argues

that a court must additionally inquire whether the non-tax
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characteristics, particularly the regulatory fee characteristics,

of the exaction outweigh the tax characteristics. Since the

Lorber/Suburban II criteria were developed to subsume that inquiry,

we arguably need not entertain it. But because the exercise is

illuminating, we take it on, finding that it leads to the same

result as was reached under Lorber/Suburban II. 

Regulatory fees have been defined as "monies paid to the

government incident to a voluntary act that bestows a benefit on

the applicant, not shared by other members of society." N. Dakota

Workers Comp. Bureau v. Voightman (In re Voightman), 239 B.R. 380,

383 (8th Cir. 1999); see also Nat'l Cable Television Ass'n, Inc. v.

United States, 415 U.S. 336, 340-41 (1974) (defining regulatory

fees same way in non-bankruptcy context). Similarly, in San Juan

Cellular, we approved of the approach utilized by other courts,

which -- in distinguishing a tax from a regulatory fee -- focused

on the "revenue's ultimate use, asking whether it provides a

general benefit to the public, of a sort often financed by a

general tax, or whether it provides a more narrow benefit[] to

regulated companies or defray[s] the agency's cost of regulation."

967 F.2d at 685. The ultimate design and use of the exaction here

are to help finance the provision of hospital care to people unable

to pay for it themselves. While specialized and somewhat

intricate, it finances a general benefit to the public of a kind

that could properly have been financed from more ordinary tax
9If we are to understand appellant's argument as a claim that

appellee is not a creditor, let alone an involuntary creditor, it

nevertheless fails. Appellant has stipulated that it owes appellee

$1,702,714. Accordingly, appellee is a creditor. 11 U.S.C. § 101

(defining "creditor," inter alia, as "entity that has a claim

against the debtor that arose at the time of or before the order

for relief concerning the debtor," and defining "claim," inter

alia, as a "right to payment, whether or not such right is reduced

to judgment, liquidated, unliquidated, fixed, contingent, matured,

unmatured, disputed, undisputed, legal, equitable, secured, or

unsecured."). 

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revenues. Per contra, the Pool scheme is not aimed at bestowing a

narrow benefit upon the payer hospital, nor defraying the cost of

regulation. We conclude the exaction is a tax. 

Appellant makes various other arguments not so far

addressed. We briefly discuss some of them, finding none to have

merit. 

Relying on BRMC I, appellant argues that since appellee,

itself, does not have to pay any shortfall in the Pool, it is not

an involuntary creditor.9 In BRMC I, we stated that "[o]ne of the

important reasons for giving special priority in bankruptcy to

taxes is that state and federal governments do not generally choose

their tax debtors." 291 F.3d at 123. Taxing authorities receive

priority treatment because, inter alia, they are "involuntary

creditor[s] of the debtor," who are unable to "take security in

advance of the time that taxes become due." Id. In concluding

that the exaction in BRMC I was not a tax, we noted the law would

have allowed the Commonwealth to have required BRMC to post a

surety to secure its anticipated future liability to the fund at
-26-

issue. Here, however, appellee has no authority to require

security in advance. Its remedies are ex post facto. Upon nonpayment by an acute hospital, appellee can only then either recalibrate the Pool in accordance with the statutory formula for the

next year or choose, for example, to refuse to renew the expired

licenses of a defaulting acute hospital. The appellee cannot be

said, therefore, to choose its debtors, nor is appellee other than

an involuntary creditor. Id. 

On a different tack, appellant contends that for an

exaction to be a tax, the statute must provide the government with

an automatic lien to secure payment. The existence of an automatic

lien provision was one of several attributes of a tax listed by the

bankruptcy court in Park and Columbia Packing. However, the

absence of such a lien was not said to prevent an exaction from

being a tax. Here, appellee has different remedies at its

disposal, including the ability to offset payments due to the

defaulting hospital's Medicaid claims. BRMC II, 264 B.R. at 225,

228 (citing Mass. Gen. Laws ch. 118G, § 18(g)). Appellant's

argument in this regard seems inconsistent with our statement in

BRMC I that the absence of pre-default security for payment would

militate in favor of finding a priority claim. BRMC I, 291 F.3d at

123.

Appellant also argues that the amount of an exaction must

be fixed by statute in order to qualify as a tax and that, since
-27-

the amount of the assessment here varies depending on the amount of

free care given by all acute hospitals, the exaction is not

sufficiently fixed by statute. In support of this claim, appellant

relies solely on In re Freymiller Trucking, Inc.. There, the

Bankruptcy Court for the Western District of Oklahoma stated, "I am

unable to think of a 'tax' . . . that is not based on a percentage

of something, be it income, sales, corporate capital, or the value

of property, a gift or inheritance." 194 B.R. 914, 915 (Bankr.

W.D. Okla. 1996). In concluding that a tax assesses at a "fixed

rate," the Freymiller court principally relied on Anderson, in

which the Supreme Court required that the amount of tax be fixed by

statute. Id.

However, the Anderson court did not state that a tax must

be based on a percentage, as the Freymiller court and appellant

suggest. Rather, the Anderson court sought to determine whether

the debt had arisen from a contract with the government as opposed

to being a tax. 203 U.S. at 492-93. Since the government had

fixed the amount of tax in a statute, the debtor was unable to

negotiate the amount of the tax, and the Court determined that the

exaction was a tax rather than a contract with the government.

Anderson, 203 U.S. at 493 (stating, "But this imposition is in no

just sense a contract. The amount to be paid, fixed by the

statute, is subject to control and change at the will of the

state . . . . The corporation is not consulted in fixing the
-28-

amount of the tax, and under the laws of New Jersey the charter of

such corporations as this may be amended or repealed. The form of

the collection of taxes is left to the discretion of the taxing

power . . . ."). Thus, the Court's use of the term "fixed by

statute" seems to have meant merely that the exaction is based on

an amount determined by the government through statute. Id. Here,

the amount of the exaction has been determined by a statutory

formula, so the exaction satisfies the requirement.

Appellant also appeals to equity, arguing that granting

priority treatment to appellee would contravene the "fundamental

bankruptcy principal of equality of distribution among creditors."

See Boston Reg'l Med. Ctr., 256 B.R. 212, 218 (Bankr. D. Mass.

2000). In support of this argument, appellant reiterates the

contention that the Commonwealth does not, itself, suffer a loss

because any loss ultimately passes only to the acute hospitals.

However, the hospitals are the instruments of the government's

intended services to indigents: losses to them impact adversely

the public program, which the legislature and state government

entrusted to appellee to administer. We can see no difference

between the equities here and those that support the granting of

priority to other taxes. 

Finally, we ask whether this tax fits within the term

"excise tax." 11 U.S.C. § 507(a)(8)(E). In another case, we have

quoted Black's Law Dictionary to the effect that, "[a]n excise tax
-29-

is '[a] tax imposed on the manufacture, sale, or use of goods . .

. or an occupation or activity . . . .'" United Parcel Serv., Inc.

v. Flores-Galarza, 318 F.3d 323, 326 n.1 (1st Cir. 2003) (quoting

Black's Law Dictionary at 585 (7th ed. 1999)). The tax here can be

said to be levied on the Massachusetts acute hospital industry,

using an overall formula to determine each hospital's share. Like

the district court, we think it fits sufficiently within the broad

definition of an excise. We hold appellee's claim is entitled to

priority treatment as an "excise tax" pursuant to 11 U.S.C. §

507(a)(8)(E).

Affirmed.