Opinion ID: 795702
Heading Depth: 2
Heading Rank: 1

Heading: RLCDPA 15 percent safe-harbor provision

Text: 12 Section 548(a)(2) of the Bankruptcy Code states: A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer ... [that may be avoided by the trustee] in any case in which—(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made. 11 U.S.C. § 548(a)(2). We are the first circuit to decide whether this provision applies individually to each charitable contribution or to a debtor's aggregate charitable contributions for the year. 13 Statutory interpretation always begins with the plain language of the statute, assuming the statute is unambiguous. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002); Auburn Hous. Auth. v. Martinez, 277 F.3d 138, 143 (2d Cir.2002). Here the statute uses the singular transfer and contribution, suggesting that contributions should be considered one at a time. The Church argues, and the bankruptcy court agreed, that we should stop there because other sections of the Bankruptcy Code use the plural contributions or the word aggregate, which shows that Congress knew how to use these words when they so desired. See 11 U.S.C. § 548(a)(2)(B) (stating that a transfer cannot be avoided if it was consistent with the practices of the debtor in making charitable contributions.); 11 U.S.C. § 1325(b)(2)(A) (excluding from the definition of disposable income charitable contributions... in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made.); 11 U.S.C. § 547(c)(8) (stating that a transfer cannot be avoided if the aggregate value of all property that constitutes or is affected by such transfer is less than $600.); see also In re Hailes, 77 F.3d 873, 874-75 (5th Cir.1996) (finding 11 U.S.C. § 547(c)(8) requires aggregation). 14 However, one far more significant provision of the Bankruptcy Code that the bankruptcy court did not mention, but that the district court found dispositive, is 11 U.S.C. § 102(7), which provides that [i]n this title—... (7) the singular includes the plural. The Dictionary Act contains a similar provision. See 1 U.S.C. § 1 (In determining the meaning of any Act of Congress, unless the context indicates otherwise—words importing the singular include and apply to several persons, parties, or things....). The Church, relying on two cases regarding the Dictionary Act, argues that we should not apply § 102(7) unless it is necessary to carry out the evident intent of the statute. See First Nat'l Bank in St. Louis v. Missouri, 263 U.S. 640, 657, 44 S.Ct. 213, 68 L.Ed. 486 (1924) (holding the rule that the singular includes the plural obviously ... is not one to be applied except where it is necessary to carry out the evident intent of the statute.); see also Toy Mfrs. of Am., Inc. v. Consumer Prod. Safety Comm'n, 630 F.2d 70, 74 (2d Cir.1980). It is not clear if this rule inhibits reliance on § 102(7), because that subsection appears within the specific title under consideration; its application is therefore more straightforward. 15 Furthermore, we may look to the legislative history to determine the legislative intent where the plain statutory language is ambiguous or would lead to an absurd result. See Lamie v. United States Tr., 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); Canada Life Assurance Co. v. Converium Ruckversicherung (Deutschland) AG, 335 F.3d 52, 57 (2d Cir.2003); see also Toy Mfrs., 630 F.2d at 74 (considering legislative history to determine whether to apply 1 U.S.C. § 1). Here, even if the text of § 548(a)(2) is not ambiguous when read alone, it is ambiguous when § 102(7) is considered. In addition, if § 548(a)(2) requires consideration of each transfer separately, a debtor could contribute all of her income and assets to charity shortly before declaring bankruptcy, provided that she did so in several separate gifts, none of which was larger than 15 percent of her income. This result would be absurd because it would defeat the entire purpose of allowing trustees to protect and enhance the estate by avoiding transfers made in a specific period of time before the bankruptcy petition is filed. Thus, we look to the legislative history to determine the intent of Congress. 16 The legislative history of Section 548(a)(2) generally indicates that Congress intended contributions to be considered in the aggregate, not individually. The House Report on RLCDPA explained that: 17 The 15 percent safe harbor is necessary to protect the tithing practices of certain religious faiths. 2 It is intended to apply to transfers that a debtor makes on an aggregate basis during the one-year reachback period preceding the filing of the debtor's bankruptcy case. Thus, the safe harbor protects annual aggregate contributions up to 15 percent of the debtor's gross annual income. 18 Religious Liberty and Charitable Donation Protection Act of 1997, H.R.Rep. No. 105-556, at 9 (1998) (emphasis and footnote added). 19 In addition, during debate on the statute, the following colloquy occurred between Representatives Nadler and Gekas: 20 [Mr. NADLER] 21 Mr. Speaker, I would ask the gentleman from Pennsylvania (Mr. GEKAS) to confirm my understanding as set forth in the committee report that the intent of this provision [§ 548(a)(2)] is to protect qualified contributions of up to 15 percent of the debtor's gross annual income in the aggregate for the year in which the contribution was made, and that we do not intend this language to allow multiple contributions to a given organization or to more than one organization which in the aggregate exceed 15 percent of the debtor's gross annual income to be protected. Would the gentleman confirm whether this is his understanding as well? 22 ... 23 Mr. GEKAS. 24 Mr. Speaker, I appreciate the opportunity at this juncture to explain in response to the gentleman's question that this legislation is not intended to diminish any of the protections against pre-petition, fraudulent transfers available under section 548 of the Bankruptcy Code. First, it applies to transfers that a debtor makes, and I emphasize this, on an aggregate basis during the one year reach-back period to which the gentleman has referred preceding the filing of the debtor's bankruptcy case. 25 144 Cong. Rec. H3999-02, H4000-01 (1998) (emphasis added). 26 Finally, during Senate hearings on the bill, there was testimony that: [The Act] creates a safe harbor which protects all such transfers up to an aggregate amount of fifteen percent of the gross annual income of the debtor for the year in which the transfer is made.... that figure will be sufficient to include the total contributions made in good faith by most Americans to charities and churches in any given year.... At the same time, that amount is not so large as to interfere substantially with a creditor's ability to collect on its claim.... Limiting the safe harbor to fifteen percent is designed primarily as a mechanism to prevent abuse of the provision. 27 Bankruptcy Issues in Review: The Bankruptcy Code's Effect on Religious Freedom and a Review of the Need for Additional Bankruptcy Judgeships, Subcommittee on Administrative Oversight and the Courts of the Senate Judiciary Committee, 1997 WL 612979 (September 22, 1997) (statement of Todd J. Zywicki, Assistant Professor of Law at Mississippi College School of Law) (emphasis added). 28 As the Church points out, legislative history is rarely all on one side, and there was also testimony during the Senate hearings that as drafted, the 15% threshold appears to apply to single contributions-allowing the possibility that multiple contributions, each less than 15% of gross income, could be immunized, even though they exceed 15% of gross income in the aggregate. The Religious Liberty and Charitable Donation Protection Act of 1997, Subcommittee on Administrative Oversight and the Courts of the Senate Judiciary Committee, 1997 WL 612960 (September 22, 1997) (statement of Donald S. Bernstein, National Bankruptcy Conference). While the testimony before the Senate Committee is somewhat contradictory, testimony is an especially indirect method of deriving the understanding of the legislators, and the other, more probative legislative history, including the House Report, all indicate that Congress intended contributions to be considered in the aggregate. See Disabled in Action of Metro. New York v. Hammons, 202 F.3d 110, 124 (2d Cir.2000) (noting that the conference committee report, committee reports, sponsor/floor manager statement and floor and hearing colloquy are the most authoritative and reliable materials of legislative history). Furthermore, the statements against aggregation were made by opponents, rather than sponsors, of the RLCDPA, who had an incentive to exaggerate the perils of the statute. See id. 29 Because we conclude that Congress intended the safe harbor to apply to the aggregate of a debtor's charitable contributions, we apply Section 102(7) in interpreting Section 548(a)(2) in order to effectuate that intent. Therefore, we read Section 548(a)(2) to exempt from avoidance charitable contributions where those contributions do not exceed 15 percent of the debtor's adjusted gross income. Thus, we affirm the district court and hold that the safe harbor under Section 548(a)(2) requires consideration of the debtor's aggregate annual contributions, not each individual contribution. 3 30 The Church argues that this holding will lead to unfair results where a debtor makes contributions to more than one charity during the year, which are each individually less than 15 percent of the debtor's income but in the aggregate exceed 15 percent. It is not clear whether in such a situation the trustee could pick and choose among charities in deciding what transfers to avoid. Because this problem is not implicated by the present case, we need not address it here.