Opinion ID: 402430
Heading Depth: 2
Heading Rank: 2

Heading: Relation of Fees to Terms and Purposes of the Act

Text: 29 The conclusion that these charges are not entitled to priority is entirely consistent with the terms and purposes of the Act. We find no clear indication in section 64(a) that user fees such as these are to be granted priority status. 30 Recognition of tax debts as priority claims was first provided in the 1867 version of the Act. The statute then granted second priority to all taxes and assessments under the laws of the United States. Bankruptcy Act of 1867, § 28. The 1898 Act included as taxes entitled to priority all taxes legally due and owing by the bankrupt to the United States, State, county, district or municipality.... Bankruptcy Act of 1898, § 64. That expansion of the priority category, however, was followed by an increase in the types and levels of taxation imposed by the federal, state and local governments. As accelerating taxation absorbed greater percentages of the bankrupt's estate, Congress recognized that broad priority classifications hampered the goal of equitable distribution of the estate and penalized general creditors. S.Rep.No.1158, 89th Cong., 2d Sess., reprinted in (1966) U.S.Code Cong. & Ad.News 2468, 2469. As a result, the trend of amendments to section 64(a) has been to erode the preferred status of taxes. 5 See Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws-Priority & Dischargability of Tax Claims, 59 Cornell L.Rev. 991 (1974); Marsh, Triumph or Tragedy? The Bankruptcy Act Amendments of 1966, 42 Wash.L.Rev. 681 (1967). In view of this trend, it would be inappropriate for this court to expand priority status without a clear congressional mandate. 31 Our conclusion is further supported by the difference in protections accorded federal government and state government claims under the Act. Debts due to the United States are granted unique priority status under 11 U.S.C. § 104(a)(5) and 31 U.S.C. § 191. Thus a fee imposed by the federal government which could not be classified as a tax would still be eligible for priority status. However, the Act provides no priority protection for non-tax debts due to states and their subdivisions. 6 The District's demand for protection of its non-tax debt is thus contrary to the structure of section 64. 32 We agree with the concern expressed by the district court that bankruptcy proceedings should not be allowed to impede local government agencies in the collection of essential funds. However, the District had a remedy under the Act that would have fully protected its interests. The state statutes under which the District operates provide that unpaid user fees constitute a lien against the user's real property. Cal.Health & Safety Code §§ 5473.5 and 5473.11. Had the District perfected such a lien, it would have been entitled to claim the protections of section 60 of the Act, 11 U.S.C. § 96, as a secured creditor. 33 We hold that the user fees assessed to Lorber by the District are not taxes and do not constitute claims entitled to priority under § 64(a) of the Act. The judgment of the district court is REVERSED.