Opinion ID: 163850
Heading Depth: 2
Heading Rank: 2

Heading: Ownership of the Tax Refund Under the Plan

Text: 36 Having resolved the threshold question in favor of the Trustee, we must now consider the Midkiffs' additional argument. They contend that under 11 U.S.C. § 1325(b)(1)(B), the Trustee was not entitled to the tax refund. 37 A court may not approve a plan unless the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan. 11 U.S.C. § 1325(b)(1)(B) (emphasis added). The Midkiffs contend that because the tax refund in question was not projected at the time the plan was approved, and because they did not actually receive the tax refund within the three-year period, the Trustee is not entitled to it. We are not persuaded by these arguments. 38 The Midkiffs fail to note that § 1325(b)(1), which leads into subsection (b)(1)(B), makes it clear that the ensuing statutory requirements are conditional: If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan — . There is no indication before us that any relevant party objected to the confirmation of the plan, which means that the ensuing conditions are not relevant here. 4 39 Moreover, even if § 1325(b)(1) were relevant to our analysis, it merely provides a minimum set of provisions that any bankruptcy plan must contain. The Midkiffs' plan set standards higher than the minimum, and we must enforce those higher standards. 40 The Midkiffs' argument is thus ultimately defeated by the language of the plan, which expressly addressed the matter of tax refunds and stated: For purposes of determining disposable income, tax refunds to which the debtor(s) is entitled during the first 36 months of the plan are deemed disposable income unless otherwise ordered by the court and will be submitted to the chapter 13 trustee. Aple's Supp.App. at 7 (emphasis added); see also Midkiff, 271 B.R. at 384 (citing the plan). The order confirming the plan echoed that language: For purposes of determining disposable income, income tax refunds to which the debtors are entitled during the first 36 months of the plan are deemed disposable income, unless otherwise ordered by the court, and will be submitted to the chapter 13 trustee, subject to any setoff rights of the Internal Revenue Service. Aple's Supp.App. at 11 (Order Filed May 6, 1998) (emphasis added). 41 The tax refund at issue was based on the calendar year 2000. As the BAP concluded, the Midkiffs were entitled to the tax refund at the end of [that] tax year — December 31, 2000, which was during the first 36 months of the plan. Midkiff, 271 B.R. at 388; see also, In re Glenn, 207 B.R. 418, 420 (E.D.Pa.1997) (noting that the vast majority of courts to consider this issue have held that a taxpayer's interest in a tax refund arises at the end of the taxable year). Thus, under the terms of the plan, the tax refund constitutes disposable income to which the Midkiffs were entitled and which the Midkiffs were obligated to submit to the Trustee.