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(b) PAYMENT OF AD VALOREM TAXES REQUIRED.—
Section 503(b)(1)(B)(i) of title 11, United States Code, 
is amended by inserting ‘‘whether secured or unsecured, 
including property taxes for which liability is in rem, in 
personam, or both,’’ before ‘‘except’’. 
(c) REQUEST FOR PAYMENT OF ADMINISTRATIVE 
EXPENSE TAXES ELIMINATED.—Section 503(b)(1) of 
title 11, United States Code, is amended— 
(1) in subparagraph (B), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (C), by adding ‘‘and’’ at 
the end; and 
(3) by adding at the end the following: 
‘‘(D) notwithstanding the requirements of sub-
section (a), a governmental unit shall not be re-
quired to file a request for the payment of an ex-
pense described in subparagraph (B) or (C), as a 
condition of its being an allowed administrative ex-
pense;’’. 
(d) PAYMENT OF TAXES AND FEES AS SECURED 
CLAIMS.—Section 506 of title 11, United States Code, is 
amended—
(1) in subsection (b), by inserting ‘‘or State 
statute’’ after ‘‘agreement’’; and
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(2) in subsection (c), by inserting ‘‘, including 
the payment of all ad valorem property taxes with 
respect to the property’’ before the period at the 
end. 
SEC. 713. TARDILY FILED PRIORITY TAX CLAIMS. 
Section 726(a)(1) of title 11, United States Code, is 
amended by striking ‘‘before the date on which the trustee 
commences distribution under this section;’’ and inserting 
the following: ‘‘on or before the earlier of—
‘‘(A) the date that is 10 days after the 
mailing to creditors of the summary of the 
trustee’s final report; or 
‘‘(B) the date on which the trustee com-
mences final distribution under this section;’’. 
SEC. 714. INCOME TAX RETURNS PREPARED BY TAX AU-
THORITIES. 
Section 523(a) of title 11, United States Code, as 
amended by sections 215 and 224, is amended—
(1) in paragraph (1)(B)—
(A) in the matter preceding clause (i), by 
inserting ‘‘or equivalent report or notice,’’ after 
‘‘a return,’’; 
(B) in clause (i), by inserting ‘‘or given’’ 
after ‘‘filed’’; and 
(C) in clause (ii)—
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(i) by inserting ‘‘or given’’ after 
‘‘filed’’; and 
(ii) by inserting ‘‘, report, or notice’’ 
after ‘‘return’’; and 
(2) by adding at the end the following: 
‘‘For purposes of this subsection, the term ‘return’ means 
a return that satisfies the requirements of applicable non-
bankruptcy law (including applicable filing requirements). 
Such term includes a return prepared pursuant to section 
6020(a) of the Internal Revenue Code of 1986, or similar 
State or local law, or a written stipulation to a judgment 
or a final order entered by a nonbankruptcy tribunal, but 
does not include a return made pursuant to section 
6020(b) of the Internal Revenue Code of 1986, or a simi-
lar State or local law.’’. 
SEC. 715. DISCHARGE OF THE ESTATE’S LIABILITY FOR UN-
PAID TAXES. 
Section 505(b)(2) of title 11, United States Code, as 
amended by section 703, is amended by inserting ‘‘the es-
tate,’’ after ‘‘misrepresentation,’’. 
SEC. 716. REQUIREMENT TO FILE TAX RETURNS TO CON-
FIRM CHAPTER 13 PLANS. 
(a) FILING
OF PREPETITION TAX RETURNS RE-
QUIRED FOR PLAN CONFIRMATION.—Section 1325(a) of 
title 11, United States Code, as amended by sections 102,
270
213, and 306, is amended by inserting after paragraph 
(8) the following: 
‘‘(9) the debtor has filed all applicable Federal, 
State, and local tax returns as required by section 
1308.’’. 
(b) ADDITIONAL TIME PERMITTED FOR FILING TAX 
RETURNS.—
(1) IN GENERAL.—Subchapter I of chapter 13 
of title 11, United States Code, is amended by add-
ing at the end the following: 
‘‘§ 1308. Filing of prepetition tax returns 
‘‘(a) Not later than the day before the date on which 
the meeting of the creditors is first scheduled to be held 
under section 341(a), if the debtor was required to file 
a tax return under applicable nonbankruptcy law, the 
debtor shall file with appropriate tax authorities all tax 
returns for all taxable periods ending during the 4-year 
period ending on the date of the filing of the petition. 
‘‘(b)(1) Subject to paragraph (2), if the tax returns 
required by subsection (a) have not been filed by the date 
on which the meeting of creditors is first scheduled to be 
held under section 341(a), the trustee may hold open that 
meeting for a reasonable period of time to allow the debtor 
an additional period of time to file any unfiled returns,
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but such additional period of time shall not extend be-
yond—
‘‘(A) for any return that is past due as of the 
date of the filing of the petition, the date that is 120 
days after the date of that meeting; or 
‘‘(B) for any return that is not past due as of 
the date of the filing of the petition, the later of—
‘‘(i) the date that is 120 days after the 
date of that meeting; or 
‘‘(ii) the date on which the return is due 
under the last automatic extension of time for 
filing that return to which the debtor is enti-
tled, and for which request is timely made, in 
accordance with applicable nonbankruptcy law. 
‘‘(2) After notice and a hearing, and order entered 
before the tolling of any applicable filing period deter-
mined under this subsection, if the debtor demonstrates 
by a preponderance of the evidence that the failure to file 
a return as required under this subsection is attributable 
to circumstances beyond the control of the debtor, the 
court may extend the filing period established by the trust-
ee under this subsection for—
‘‘(A) a period of not more than 30 days for re-
turns described in paragraph (1); and
272
‘‘(B) a period not to extend after the applicable 
extended due date for a return described in para-
graph (2). 
‘‘(c) For purposes of this section, the term ‘return’ 
includes a return prepared pursuant to subsection (a) or 
(b) of section 6020 of the Internal Revenue Code of 1986, 
or a similar State or local law, or a written stipulation 
to a judgment or a final order entered by a nonbankruptcy 
tribunal.’’. 
(2) CONFORMING AMENDMENT.—The table of 
sections for subchapter I of chapter 13 of title 11, 
United States Code, is amended by adding at the 
end the following:
‘‘1308. Filing of prepetition tax returns.’’.
(c) DISMISSAL
OR CONVERSION
ON FAILURE TO 
COMPLY.—Section 1307 of title 11, United States Code, 
is amended—
(1) by redesignating subsections (e) and (f) as 
subsections (f) and (g), respectively; and 
(2) by inserting after subsection (d) the fol-
lowing: 
‘‘(e) Upon the failure of the debtor to file a tax return 
under section 1308, on request of a party in interest or 
the United States trustee and after notice and a hearing, 
the court shall dismiss a case or convert a case under this
273
chapter to a case under chapter 7 of this title, whichever 
is in the best interest of the creditors and the estate.’’. 
(d) TIMELY FILED CLAIMS.—Section 502(b)(9) of 
title 11, United States Code, is amended by inserting be-
fore the period at the end the following: ‘‘, and except that 
in a case under chapter 13, a claim of a governmental 
unit for a tax with respect to a return filed under section 
1308 shall be timely if the claim is filed on or before the 
date that is 60 days after the date on which such return 
was filed as required’’. 
(e) RULES FOR OBJECTIONS TO CLAIMS AND TO 
CONFIRMATION.—It is the sense of Congress that the Ju-
dicial Conference of the United States should, as soon as 
practicable after the date of enactment of this Act, pro-
pose amended Federal Rules of Bankruptcy Procedure 
that provide—
(1) notwithstanding the provisions of Rule 
3015(f), in cases under chapter 13 of title 11, 
United States Code, that an objection to the con-
firmation of a plan filed by a governmental unit on 
or before the date that is 60 days after the date on 
which the debtor files all tax returns required under 
sections 1308 and 1325(a)(7) of title 11, United 
States Code, shall be treated for all purposes as if
274
such objection had been timely filed before such con-
firmation; and 
(2) in addition to the provisions of Rule 3007, 
in a case under chapter 13 of title 11, United States 
Code, that no objection to a claim for a tax with re-
spect to which a return is required to be filed under 
section 1308 of title 11, United States Code, shall 
be filed until such return has been filed as required. 
SEC. 717. STANDARDS FOR TAX DISCLOSURE. 
Section 1125(a)(1) of title 11, United States Code, 
is amended—
(1) by inserting ‘‘including a discussion of the 
potential material Federal tax consequences of the 
plan to the debtor, any successor to the debtor, and 
a hypothetical investor typical of the holders of 
claims or interests in the case,’’ after ‘‘records,’’; 
and 
(2) by striking ‘‘a hypothetical reasonable inves-
tor typical of holders of claims or interests’’ and in-
serting ‘‘such a hypothetical investor’’. 
SEC. 718. SETOFF OF TAX REFUNDS. 
Section 362(b) of title 11, United States Code, as 
amended by sections 224, 303, 311, and 401, is amended 
by inserting after paragraph (25) the following:
275
‘‘(26) under subsection (a), of the setoff under 
applicable nonbankruptcy law of an income tax re-
fund, by a governmental unit, with respect to a tax-
able period that ended before the date of the order 
for relief against an income tax liability for a taxable 
period that also ended before the date of the order 
for relief, except that in any case in which the setoff 
of an income tax refund is not permitted under ap-
plicable nonbankruptcy law because of a pending ac-
tion to determine the amount or legality of a tax li-
ability, the governmental unit may hold the refund 
pending the resolution of the action, unless the 
court, on the motion of the trustee and after notice 
and a hearing, grants the taxing authority adequate 
protection (within the meaning of section 361) for 
the secured claim of such authority in the setoff 
under section 506(a);’’. 
SEC. 719. SPECIAL PROVISIONS RELATED TO THE TREAT-
MENT OF STATE AND LOCAL TAXES. 
(a) IN GENERAL.—
(1) SPECIAL PROVISIONS.—Section 346 of title 
11, United States Code, is amended to read as fol-
lows:
276
‘‘§ 346. Special provisions related to the treatment of 
State and local taxes 
‘‘(a) Whenever the Internal Revenue Code of 1986 
provides that a separate taxable estate or entity is created 
in a case concerning a debtor under this title, and the in-
come, gain, loss, deductions, and credits of such estate 
shall be taxed to or claimed by the estate, a separate tax-
able estate is also created for purposes of any State and 
local law imposing a tax on or measured by income and 
such income, gain, loss, deductions, and credits shall be 
taxed to or claimed by the estate and may not be taxed 
to or claimed by the debtor. The preceding sentence shall 
not apply if the case is dismissed. The trustee shall make 
tax returns of income required under any such State or 
local law. 
‘‘(b) 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 in-
come, gain, loss, deductions, and credits of an estate shall 
be taxed to or claimed by the debtor, 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. The trustee shall make such tax 
returns of income of corporations and of partnerships as 
are required under any State or local law, but with respect
277
to partnerships, shall make such returns only to the extent 
such returns are also required to be made under such 
Code. The estate shall be liable for any tax imposed on 
such corporation or partnership, but not for any tax im-
posed on partners or members. 
‘‘(c) With respect to a partnership or any entity treat-
ed as a partnership under a State or local law imposing 
a tax on or measured by income that is a debtor in a case 
under this title, any gain or loss resulting from a distribu-
tion of property from such partnership, or any distributive 
share of any income, gain, loss, deduction, or credit of a 
partner or member that is distributed, or considered dis-
tributed, from such partnership, after the commencement 
of the case, is gain, loss, income, deduction, or credit, as 
the case may be, of the partner or member, and if such 
partner or member is a debtor in a case under this title, 
shall be subject to tax in accordance with subsection (a) 
or (b). 
‘‘(d) For purposes of any State or local law imposing 
a tax on or measured by income, the taxable period of 
a debtor in a case under this title shall terminate only 
if and to the extent that the taxable period of such debtor 
terminates under the Internal Revenue Code of 1986. 
‘‘(e) The estate in any case described in subsection 
(a) shall use the same accounting method as the debtor
278
used immediately before the commencement of the case, 
if such method of accounting complies with applicable non-
bankruptcy tax law. 
‘‘(f) For purposes of any State or local law imposing 
a tax on or measured by income, a transfer of property 
from the debtor to the estate or from the estate to the 
debtor shall not be treated as a disposition for purposes 
of any provision assigning tax consequences to a disposi-
tion, except to the extent that such transfer is treated as 
a disposition under the Internal Revenue Code of 1986. 
‘‘(g) Whenever a tax is imposed pursuant to a State 
or local law imposing a tax on or measured by income pur-
suant to subsection (a) or (b), such tax shall be imposed 
at rates generally applicable to the same types of entities 
under such State or local law. 
‘‘(h) The trustee shall withhold from any payment of 
claims for wages, salaries, commissions, dividends, inter-
est, or other payments, or collect, any amount required 
to be withheld or collected under applicable State or local 
tax law, and shall pay such withheld or collected amount 
to the appropriate governmental unit at the time and in 
the manner required by such tax law, and with the same 
priority as the claim from which such amount was with-
held or collected was paid.
279
‘‘(i)(1) To the extent that any State or local law im-
posing a tax on or measured by income provides for the 
carryover of any tax attribute from one taxable period to 
a subsequent taxable period, the estate shall succeed to 
such tax attribute in any case in which such estate is sub-
ject to tax under subsection (a). 
‘‘(2) After such a case is closed or dismissed, the 
debtor shall succeed to any tax attribute to which the es-
tate succeeded under paragraph (1) to the extent con-
sistent with the Internal Revenue Code of 1986. 
‘‘(3) The estate may carry back any loss or tax at-
tribute to a taxable period of the debtor that ended before 
the date of the order for relief under this title to the extent 
that— 
‘‘(A) applicable State or local tax law provides 
for a carryback in the case of the debtor; and 
‘‘(B) the same or a similar tax attribute may be 
carried back by the estate to such a taxable period 
of the debtor under the Internal Revenue Code of 
1986. 
‘‘(j)(1) For purposes of any State or local law impos-
ing a tax on or measured by income, income is not realized 
by the estate, the debtor, or a successor to the debtor by 
reason of discharge of indebtedness in a case under this