Opinion ID: 695256
Heading Depth: 2
Heading Rank: 1

Heading: Priority Under Section 507(a)(7)

Text: 6 The IRS contends that CF&I's section 4971(a) liability is a governmental claim entitled to priority under subsection 507(a)(7)(E) or, in the alternative, subsection 507(a)(7)(G). Section 507(a)(7)(E) accords priority to an excise tax on ... a transaction occurring before the date of the filing of the petition for which a return ... is last due ... after three years before the date of the filing of the petition. 11 U.S.C. Sec. 507(a)(7)(E)(i). The same priority is accorded to a penalty related to a claim of a kind specified in this paragraph and in compensation for actual pecuniary loss. Id. Sec. 507(a)(7)(G). The tax at issue here, IRC section 4971(a), is included in Subtitle D of the IRC, entitled Miscellaneous Excise Tax. The IRS argues that, because the tax is labeled an excise tax under the IRC, it must be considered an excise tax under the Bankruptcy Code as well. 7 On December 7, 1992, after the bankruptcy court issued its first order in this case, we decided Cassidy, 983 F.2d 161. In Cassidy, we held that Congress' labeling of [an] exaction as a tax is not determinative of its status for priority in bankruptcy. Id. at 163. The tax at issue in Cassidy was the ten percent additional tax imposed by 26 U.S.C. Sec. 72(t) on early distributions from qualified retirement plans. Section 72 is in subtitle A, chapter 1, subchapter B, part II of the IRC, which is titled Items Specifically Included in Gross Income. Thus, the government argued, it should be given priority under section 507(a)(7)(A) as a tax on or measured by income. We disagreed with the government and held that the label given a tax in the IRC was not determinative of its status for priority under section 507(a)(7). Cassidy further held that, to determine whether an exaction is a tax or penalty for priority in bankruptcy purposes, we apply the four-part test from In re Lorber Indus., 675 F.2d 1062 (9th Cir.1982). Cassidy, 983 F.2d at 163. 8 In the present case, the government vigorously argues that Cassidy was wrongly decided, again contending that a court should defer to Congress's designation of an exaction rather than look beyond the statutory label to the nature of the exaction. Cassidy binds this panel, however, because it is the law of this circuit. See In re Smith, 10 F.3d 723, 724 (10th Cir.1993) (per curiam) (We are bound by the precedent of prior panels absent en banc reconsideration or a superseding contrary decision by the Supreme Court.), cert. denied, --- U.S. ----, 115 S.Ct. 53, 130 L.Ed.2d 13 (1994). We therefore conclude that the bankruptcy court correctly refused to treat the IRC's label as determinative for priority in bankruptcy purposes. 9 Instead, the bankruptcy court looked beyond the IRC's label and analyzed the nature of the exaction using the Lorber test. The court concluded that CF&I's section 4971(a) liability was not entitled to priority. We agree with the bankruptcy court's analysis and therefore affirm the order of the district court for substantially the reasons given by the bankruptcy court. See In re CF&I Fabricators, 148 B.R. 332.