Family Farmer Bankruptcy Clarification Act of 2017

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Family Farmer Bankruptcy 
Clarification Act of 2017''.

SEC. 2. CLARIFICATION OF RULE ALLOWING DISCHARGE TO GOVERNMENTAL CLAIMS 
              ARISING FROM THE DISPOSITION OF FARM ASSETS UNDER CHAPTER 
              12 BANKRUPTCIES.

    (a) In General.--Subchapter II of chapter 12 of title 11, United 
States Code, is amended by adding at the end the following:
``Sec. 1232. Claim by a governmental unit based on the disposition of 
              property used in a farming operation
    ``(a) Any unsecured claim of a governmental unit against the debtor 
or the estate that arises before the filing of the petition, or that 
arises after the filing of the petition and before the debtor's 
discharge under section 1228, as a result of the sale, transfer, 
exchange, or other disposition of any property used in the debtor's 
farming operation--
            ``(1) shall be treated as an unsecured claim arising before 
        the date on which the petition is filed;
            ``(2) shall not be entitled to priority under section 507;
            ``(3) shall be provided for under a plan; and
            ``(4) shall be discharged in accordance with section 1228.
    ``(b) For purposes of applying sections 1225(a)(4), 1228(b)(2), and 
1229(b)(1) to a claim described in subsection (a) of this section, the 
amount that would be paid on such claim if the estate of the debtor 
were liquidated in a case under chapter 7 of this title shall be the 
amount that would be paid by the estate in a chapter 7 case if the 
claim were an unsecured claim arising before the date on which the 
petition was filed and were not entitled to priority under section 507.
    ``(c) For purposes of applying sections 523(a), 1228(a)(2), and 
1228(c)(2) to a claim described in subsection (a) of this section, the 
claim shall not be treated as a claim of a kind specified in section 
523(a)(1).
    ``(d)(1) A governmental unit may file a proof of claim for a claim 
described in subsection (a) that arises after the date on which the 
petition is filed.
    ``(2) If a debtor files a tax return after the filing of the 
petition for a period in which a claim described in subsection (a) 
arises, and the claim relates to the tax return, the debtor shall serve 
notice of the claim on the governmental unit charged with the 
responsibility for the collection of the tax at the address and in the 
manner designated in section 505(b)(1). Notice under this paragraph 
shall state that the debtor has filed a petition under this chapter, 
state the name and location of the court in which the case under this 
chapter is pending, state the amount of the claim, and include a copy 
of the filed tax return and documentation supporting the calculation of 
the claim.
    ``(3) If notice of a claim has been served on the governmental unit 
in accordance with paragraph (2), the governmental unit may file a 
proof of claim not later than 180 days after the date on which such 
notice was served. If the governmental unit has not filed a timely 
proof of the claim, the debtor or trustee may file proof of the claim 
that is consistent with the notice served under paragraph (2). If a 
proof of claim is filed by the debtor or trustee under this paragraph, 
the governmental unit may not amend the proof of claim.
    ``(4) A claim filed under this subsection shall be determined and 
shall be allowed under subsection (a), (b), or (c) of section 502, or 
disallowed under subsection (d) or (e) of section 502, in the same 
manner as if the claim had arisen immediately before the date of the 
filing of the petition.''.
    (b) Technical and Conforming Amendments.--
            (1) In general.--Subchapter II of chapter 12 of title 11, 
        United States Code, is amended--
                    (A) in section 1222(a)--
                            (i) in paragraph (2), by striking 
                        ``unless--'' and all that follows through ``the 
                        holder'' and inserting ``unless the holder'';
                            (ii) in paragraph (3), by striking ``and'' 
                        at the end;
                            (iii) in paragraph (4), by striking the 
                        period at the end and inserting ``; and''; and
                            (iv) by adding at the end the following:
            ``(5) subject to section 1232, provide for the treatment of 
        any claim by a governmental unit of a kind described in section 
        1232(a).'';
                    (B) in section 1228--
                            (i) in subsection (a)--
                                    (I) in the matter preceding 
                                paragraph (1)--
                                            (aa) by inserting a comma 
                                        after ``all debts provided for 
                                        by the plan''; and
                                            (bb) by inserting a comma 
                                        after ``allowed under section 
                                        503 of this title''; and
                                    (II) in paragraph (2), by striking 
                                ``the kind'' and all that follows and 
                                inserting ``a kind specified in section 
                                523(a) of this title, except as 
                                provided in section 1232(c).''; and
                            (ii) in subsection (c)(2), by inserting ``, 
                        except as provided in section 1232(c)'' before 
                        the period at the end; and
                    (C) in section 1229(a)--
                            (i) in paragraph (2), by striking ``or'' at 
                        the end;
                            (ii) in paragraph (3), by striking the 
                        period at the end and inserting ``; or''; and
                            (iii) by adding at the end the following:
            ``(4) provide for the payment of a claim described in 
        section 1232(a) that arose after the date on which the petition 
        was filed.''.
            (2) Table of sections.--The table of sections for 
        subchapter II of chapter 12 of title 11, United States Code, is 
        amended by adding at the end the following:

``1232. Claim by a governmental unit based on the disposition of 
                            property used in a farming operation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any bankruptcy case that--
            (1) is pending on the date of enactment of this Act and 
        relating to which an order of discharge under section 1228 of 
        title 11, United States Code, has not been entered; or
            (2) commences on or after the date of enactment of this 
        Act.

Summary: Family Farmer Bankruptcy Clarification Act of 2017 This bill amends the federal bankruptcy code to include an unsecured claim by a governmental unit (e.g., a tax claim by the Internal Revenue Service) resulting from the sale, transfer, exchange, or disposition of farming property in chapter 12 bankruptcy (family farmer or fisherman reorganization) proceedings. Such a claim that arises before a debtor's discharge, regardless of whether the claim is pre-petition or post-petition, must be treated as a pre-petition claim, is not entitled to priority status, must be provided for under the bankruptcy plan, and is dischargeable.