Source: https://law.justia.com/codes/us/2013/title-11/chapter-5/subchapter-i/section-507/
Timestamp: 2019-04-21 20:18:41
Document Index: 737717353

Matched Legal Cases: ['§ 507', '§ 501', '§ 501', '§ 501', '§350', '§2522', '§108', '§207', '§304', '§501', '§212', '§705', '§1401', '§1502', '§1101', '§2', '§ 507', '§507']

Priorities - 11 U.S.C. § 507 (2013) :: Title 11 - Bankruptcy :: 2013 US Code :: US Codes and Statutes :: US Law :: Justia
Justia US Law US Codes and Statutes US Code 2013 US Code Title 11 - Bankruptcy Chapter 5 - CREDITORS, THE DEBTOR, AND THE ESTATE (§§ 501 - 562) Subchapter I - CREDITORS AND CLAIMS (§§ 501 - 511) Section 507 - Priorities
Subchapter I - CREDITORS AND CLAIMS (§§ 501 - 511)
Section 507 - Priorities
Source Credit Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2583; Pub. L. 98-353, title III, §§350, 449, July 10, 1984, 98 Stat. 358, 374; Pub. L. 101-647, title XXV, §2522(d), Nov. 29, 1990, 104 Stat. 4867; Pub. L. 103-394, title I, §108(c), title II, §207, title III, §304(c), title V, §501(b)(3), (d)(11), Oct. 22, 1994, 108 Stat. 4112, 4123, 4132, 4142, 4145; Pub. L. 109-8, title II, §§212, 223, title VII, §§705, 706, title XIV, §1401, title XV, §1502(a)(1), Apr. 20, 2005, 119 Stat. 51, 62, 126, <!-- PDFPage:114 -->214, 216; Pub. L. 111-203, title XI, §1101(b), July 21, 2010, 124 Stat. 2115; Pub. L. 111-327, §2(a)(15), Dec. 22, 2010, 124 Stat. 3559.
Statutes at Large References 92 Stat. 2583
98 Stat. 358
104 Stat. 4867
119 Stat. 51, 215
124 Stat. 2115, 3559, 3563
Public Law References Public Law 95-598, Public Law 98-353, Public Law 101-647, Public Law 103-394, Public Law 109-8, Public Law 111-203, Public Law 111-327
Priorities - 11 U.S.C. § 507 (2013)
(4) Fourth, allowed unsecured claims, but only to the extent of $10,000 for each individual or corporation, as the case may be, earned within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first, for—
First. Administration expenses: The amendment generally follows the Senate amendment in providing expressly that taxes incurred during the administration of the estate share the first priority given to administrative expenses generally. Among the taxes which receives first priority, as defined in section 503, are the employees&apos; and the employer's shares of employment taxes on wages earned and paid after the petition is filed. Section 503(b)(1) also includes in administration expenses a tax liability arising from an excessive allowance by a tax authority of a "quickie refund" to the estate. (In the case of Federal taxes, such refunds are allowed under special rules based on net operating loss carrybacks (sec. 6411 of the Internal Revenue Code [title 26]).
Third. Certain taxes on prepetition wages: Wage claims entitled to third priority are for compensation which does not exceed $2,000 and was earned during the 90 days before the filing of the bankruptcy petition or the cessation of the debtor's business. Certain employment taxes receive third priority in payment from the estate along with the payment of wages to which the taxes relate. In the case of wages earned before the filing of the petition, but paid by the trustee (rather than by the debtor) after the filing of the petition, claims or the employees&apos; share of the employment taxes (withheld income taxes and the employees&apos; share of the social security or railroad retirement tax) receive third priority to the extent the wage claims themselves are entitled to this priority.
Fifth. Taxes which the debtor was required by law to withhold or collect from others and for which he is liable in any capacity, regardless of the age of the tax claims. This category covers the so-called "trust fund" taxes, that is, income taxes which an employer is required to withhold from the pay of his employees, and the employees&apos; share of social security taxes.
In addition, this category includes the liability of a responsible officer under the Internal Revenue Code (sec. 6672) [title 26] for income taxes or for the employees&apos; share of social security taxes which that officer was responsible for withholding from the wages of employees and paying to the Treasury, although he was not himself the employer. This priority will operate when a person found to be a responsible officer has himself filed in title 11, and the priority will cover the debtor's responsible officer liability regardless of the age of the tax year to which the tax relates. The U.S. Supreme Court has interpreted present law to require the same result as will be reached under this rule. U.S. v. Sotelo, 436 U.S. 268 (1978) [98 S.Ct. 1795, 56 L.Ed.2d 275, rehearing denied 98 S.Ct. 3126, 438 U.S. 907, 57 L.Ed.2d 1150].
Sixth. The employer's share of employment taxes on wages paid before the petition and on third-priority wages paid postpetition by the estate. The priority rules under the House amendment governing employment taxes can thus be summarized as follows: Claims for the employees&apos; shares of employment taxes attributable to wages both earned and paid before the filing of the petition are to receive sixth priority. In the case of employee wages earned, but not paid, before the filing of the bankruptcy petition, claims for the employees&apos; share of employment taxes receive third priority to the extent the wages themselves receive third priority. Claims which relate to wages earned before the petition, but not paid before the petition (and which are not entitled to the third priority under the rule set out above), will be paid as general claims. Since the related wages will receive no priority, the related employment taxes would also be paid as nonpriority general claims.
The employer's share of the employment taxes on wages earned and paid before the bankruptcy petition will receive sixth priority to the extent the return for these taxes was last due (including extensions of time) within 3 years before the filing of the petition, or was due after the petition was filed. Older tax claims of this nature will be payable as general claims. In the case of wages earned by employees before the petition, but actually paid by the trustee (as claims against the estate) after the title 11 case commenced, the employer's share of the employment taxes on third priority wages will be payable as sixth priority claims and the employer's taxes on prepetition wages which are treated only as general claims will be payable only as general claims. In calculating the amounts payable as general wage claims, the trustee must pay the employer's share of employment taxes on such wages. The House amendment thus deletes the provision of the Senate amendment that certain employer taxes receive third priority and are to be paid immediately after payment of third priority wages and the employees&apos; shares of employment taxes on those wages.
In the case of employment taxes relating to wages earned and paid after the petition, both the employees&apos; shares and the employer's share will receive first priority as administration expenses of the estate.
Paragraph (3) expands and increases the wage priority found in current section 64a(2) [section 104(a)(2) of former title 11]. The amount entitled to priority is raised from $600 to $1,800. The former figure was last adjusted in 1926. Inflation has made it nearly meaningless, and the bill brings it more than up to date. The three month limit of current law is retained, but is modified to run from the earlier of the date of the filing of the petition or the date of the cessation of the debtor's business. The priority is expanded to cover vacation, severance, and sick leave pay. The bill adds to the third priority so-called "trust fund" taxes, that is, withheld income taxes and the employees&apos; share of the social security or railroad retirement taxes, but only to the extent that the wages on which taxes are imposed are themselves entitled to third priority.
Taxes (not covered by the third priority) which the debtor was required by law to withhold or collect from others and for which he is liable in any capacity, regardless of the age of the tax claims (§507(a)(6)(D)) are included. This category covers the so-called "trust fund" taxes, that is, income taxes which an employer is required to withhold from the pay of his employees, the employees&apos; shares of social security and railroad retirement taxes, and also Federal unemployment insurance. This category also includes excise taxes which a seller of goods or services is required to collect from a buyer and pay over to a taxing authority.
This category also covers the liability of a responsible corporate officer under the Internal Revenue Code [title 26] for income taxes or for the employees&apos; share of employment taxes which, under the tax law, the employer was required to withhold from the wages of employees. This priority will operate where a person found to be a responsible officer has himself filed a petition under title 11, and the priority covers the debtor's liability as an officer under the Internal Revenue Code, regardless of the age of the tax year to which the tax relates.
The priority rules under the bill governing employment taxes can be summarized as follows: In the case of wages earned and actually paid before the petition under title 11 was filed, the liability for the employees&apos; share of the employment taxes, regardless of the prepetition year in which the wages were earned and paid. The employer's share of the employment taxes on all wages earned and paid before the petition receive sixth priority; generally, these taxes will be those for which a return was due within three years before the petition. With respect to wages earned by employees before the petition but actually paid by the trustee after the title 11 case commenced, taxes required to be withheld receives the same priority as the wages themselves. Thus, the employees&apos; share of taxes on third priority wages also receives third priority. Taxes on the balance of such wages receive no priority and are collectible only as general claims because the wages themselves are payable only as general claims and liability for the taxes arises only to the extent the wages are actually paid. The employer's share of employment taxes on third priority wages earned before the petition but paid after the petition was filed receives third priority, but only if the wages in this category have first been paid in full. Assuming there are sufficient funds to pay third priority wages and the related employer taxes in full, the employer's share of taxes on the balance of wage payments becomes a general claim (because the wages themselves are payable as general claims). Both the employees&apos; and the employer's share of employment taxes on wages earned and paid after the petition was filed receive first priority as administrative expenses.
By notice dated Feb. 12, 2013, 78 F.R. 12089, effective Apr. 1, 2013, in subsec. (a)(4), dollar amount "11,725" was adjusted to "12,475"; in subsec. (a)(5), dollar amount "11,725" was adjusted to "12,475"; in subsec. (a)(6), dollar amount "5,775" was adjusted to "6,150"; and, in subsec. (a)(7), dollar amount "2,600" was adjusted to "2,775". See notice of the Judicial Conference of the United States set out as a note under section 104 of this title.