Source: http://openjurist.org/245/f3d/1161
Timestamp: 2013-05-25 17:33:38
Document Index: 653974941

Matched Legal Cases: ['§ 1292', '§ 1292', '§ 505', '§ 1334', '§ 505', '§ 505', '§ 505', '§ 505', '§ 1334', '§ 505', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334']

The bankruptcy court entered an order approving the trustee's amended final accounts. In its order, the bankruptcy court attempted to "cede jurisdiction of the determination of the Bankruptcy Estates tax liabilities to the [district court in Colorado]." The bankruptcy court ordered that $1.2 million be disbursed from the bankruptcy estates to the receiver and that the receiver hold the money in escrow for the purpose of covering the potential 1999 tax liabilities of the debtors. The government appealed the bankruptcy court's findings, conclusions, and order to the Bankruptcy Appellate Panel for the First Circuit.3
In an order entered on July 19, 2000, the district court affirmed the magistrate's order and overruled the government's objections. It extended until August 31, however, the deadline by which the IRS needed to address the merits of the bankruptcy estates' tax liabilities. In its order, the district court indicated that the issue of whether it had jurisdiction over the IRS's tax liability determinations for entities within the receivership estate was a controlling question of law as to which there was substantial ground for a difference of opinion.4 In a separate order entered the same day, the district court also certified the question of whether it had the authority to set enforceable deadlines for such tax determinations. The court concluded that an immediate appeal of these questions would advance the ultimate termination of the case, thereby satisfying the conditions of 28 U.S.C. § 1292(b). This court stayed the district court orders pending appeal.
This court's jurisdiction arises pursuant to 28 U.S.C. § 1292(b), which allows this court to review the district court's interlocutory order. See Homeland Stores, Inc. v. Resolution Trust Corp., 17 F.3d 1269, 1271 (10th Cir. 1994). The controlling questions of law certified by the district court involve (1) its jurisdiction over the government's tax liability determinations for entities within the receivership estate, which includes the debtor corporations in this case, and (2) the district court's authority to set enforceable deadlines for these tax determinations.5 On appeal, the government claims the district court lacks jurisdiction to determine the income tax liabilities of the five corporations. Further, it argues the district court lacks jurisdiction to order the IRS to complete a tax examination before the expiration of the statutory deadline and to permanently enjoin the assertion of tax liabilities if the IRS fails to meet the court's deadline. This court reviews questions of law, including determinations of jurisdiction, de novo. See Sac & Fox Nation of Mo. v. Pierce, 213 F.3d 566, 571 (10th Cir. 2000).
In its motion involving the bankruptcy estates' tax liabilities, however, the receiver invoked the power of a district court to make a determination of taxes under 11 U.S.C. § 505, with 28 U.S.C. § 1334(b) providing the jurisdictional authority.6 Although a proceeding under 11 U.S.C. § 505 is exempted from the statutory bar against declaratory judgments with respect to federal taxes, the exception does not apply in this case because the receiver's motion in federal district court does not properly invoke § 505.
Section 505 authorizes bankruptcy courts to "determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax, whether or not previously assessed, whether or not paid." 11 U.S.C. § 505(a)(1). This court has previously indicated that "[s]section 505 gives federal courts authority to determine, in bankruptcy proceedings, the amount and legality of any tax." City Vending of Muskogee, Inc. v. Okla. Tax Comm'n, 898 F.2d 122, 124 (10th Cir. 1990) (emphasis added). The receiver cannot invoke § 505 in this case because the proceeding in federal district court is a receivership action, not a bankruptcy proceeding. Even though § 1334(b) confers jurisdiction on a district court to make a determination of tax liability under § 505, the purpose of § 1334(b) is "to allow district courts in which the bankruptcy case is filed to adjudicate bankruptcy- related actions." Gruntz v. County of L.A. (In re Gruntz), 202 F.3d 1074, 1083 (9th Cir. 2000). The receiver's request for a determination of taxes is not related to a bankruptcy proceeding under title 11 in federal district court because there is no such proceeding in the district court. Thus, the district court does not have jurisdiction to provide the requested relief pursuant to § 1334(b) because the action neither arose in, nor was related to, a bankruptcy action in the district court.7
Having decided that the district court has no authority to determine the corporate tax liabilities in this case, this court must turn to the question of whether the district court may enjoin the IRS from determining the tax liabilities of the five corporations should the government fail to consider the corporate tax returns by the court- imposed deadline. The district court characterizes its order as an attempt to set deadlines and create procedures as it would for any party that comes before it. This court agrees, however, with the government's characterization of the district court's order as an attempt to enjoin the IRS from assessing and collecting taxes.
Indian Motocycle Manufacturing, Inc. is not to be confused with the company in receivership, Indian Motorcycle Manufacturing, Inc.
The original motion included the years 1993 through 1999, but the bankruptcy trustee, the receiver, and the IRS agreed that the tax returns for the years before 1999 were correct with the exception of one deduction.
The Bankruptcy Appellate Panel disposed of this appeal on March 13, 2001, holding that the bankruptcy court erred in ceding jurisdiction to the federal district court in Colorado and reversing the bankruptcy court's order which capped the determination of the debtors' tax liability at $1.2 million and made a final distribution of the estates.
A thorough reading of the district court's order suggests that it means to include the three debtor corporations in its reference to "receivership estate."
Also before this court is the government's motion to strike the receiver's first submission of supplemental authority. Because the receiver's submission contains legal arguments, this motion is granted. See Fed. R. App. P. 28(j) ("The letter [informing the court of supplemental authority] must state without argument the reasons for the supplemental citations...." (emphasis added)).
Section 1334(b) gives district courts original jurisdiction over all civil proceedings "arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b).
For the same reasons discussed supra, 28 U.S.C. § 1334(a) does not confer the requisite jurisdictional authority upon the district court. See 28 U.S.C. § 1334(a) (providing district court with original and exclusive jurisdiction of all cases under title 11).
Home245 f3d 1161 sterling consulting corporatio v. united states of america