Opinion ID: 528454
Heading Depth: 2
Heading Rank: 3

Heading: The 1985 and 1987 Personal Property Taxes

Text: 43 Neither the bankruptcy court nor the district court distinguished the real property taxes from the personal property taxes. Although West Virginia law provides that real property tax claims become liens at the time they are assessed, see supra p. 8, personal property tax claims do not automatically become liens at the time of assessment. The local taxing authorities must obtain relief from the automatic stay to distrain the property or sue the debtor to obtain a judicial lien. See supra, p. 9. In this case, no action was taken by the local authorities to create liens in the personal property either by distraint or the filing of a collection suit. Therefore, the 1985 and 1987 personal property taxes are not automatically payable out of the proceeds from the sale as were the 1985 real property taxes which had already attached to the property pre-petition. 44 The 1985 personal property taxes are classifiable as section 507(a)(7) expenses entitled to seventh priority of payment. Pursuant to section 507(a)(7), taxes assessed before the filing of the petition and payable without penalty after one year before the date of the petition have a seventh priority. 11 U.S.C. Sec. 507(a)(7). Under West Virginia law, they were assessed on July 1, 1984, and were last payable without penalty on October 1, 1985, which is after one year before the bankruptcy petition was filed. See W. Va.Code Sec. 11A-1-3. Like the 1987 real property taxes, they may also be section 506 expenses that benefit the secured creditor and are therefore payable by the secured creditor. 45 The 1987 personal property taxes are classifiable as first priority administrative expenses. They were assessed on July 1, 1986, not before the filing of the petition, and therefore do not fall into the section 507(a)(7) exception to section 503(b)(1). They are classifiable as administrative expenses unless they serve as a benefit to the secured creditor, in which case the secured creditor should pay the taxes pursuant to section 506(c). The 1987 personal property taxes therefore are payable either by the trustee as first priority administrative expenses pursuant to section 503 or by the secured creditors pursuant to section 506. 6 Because neither court has addressed the personal property issue in these terms, and because there will also be factual development necessary, we will exercise our discretion to remand for further consideration of this issue as well.