Document: 496 U.S. 53 110 S.Ct. 2258 L.Ed.2d 46 Harry P. BEGIER, Jr., etc., Petitionerv.INTERNAL REVENUE SERVICE. No. 89-393. Argued March 27, 1990. Decided June 4, Syllabus The Internal Revenue Code directs "every person receiving any payment for facilities or services" subject to excise taxes "collect the amount of tax from making such payment." 26 U.S.C. § 4291. It also requires an employer "collect" Federal Insurance Contributions Act (FICA) its employees "by deducting wages as and when paid," 3102(a) (emphasis added), "deduct withhold upon [the employee's federal income tax]," 3402(a)(1) added). "collected withheld" is "held be in a special fund trust United States." 7501. Thus, these are often called "trust-fund taxes." After American International Airlines, Inc. (AIA), fell behind trust-fund payments, Service (IRS), pursuant 7512, ordered it deposit all future collected into separate bank account. AIA established account, but did not funds sufficient cover entire obligations. Nonetheless, remained current on obligations, paying part them account general operating funds. In subsequent liquidation proceeding under Bankruptcy Code, petitioner Begier was appointed AIA's trustee. Seeking exercise his power 547(b) Code—which permits trustee avoid certain preferential payments made before debtor files bankruptcy—Begier filed adversary action against Government recover that had paid IRS during 90 days bankruptcy filing. Court refused permit money out ground held IRS. However, allowed him most accounts, holding were property debtor. District affirmed, Appeals reversed, prepetition debtor's property, therefore avoidable preference. Held: accounts transfers cannot avoided preferences. Pp. 58-67. (a) Equality distribution among creditors central policy furthered by extent "property debtor." Although defined debtor" best understood mean would have been estate transferred. Its meaning coextensive with postpetition analog estate," which includes legal equitable interests commencement case. 541(a)(1). Since does own interest he holds another, estate" and, likewise, 58-59. (b) created within 7501 at moment withheld collected. statutory extends withheld," language §§ 4291, 3102(a), makes clear acts collecting withholding occur time payment—the recipient's service case employer's FICA taxes. fact neither put segregated nor somehow never first place. Mandating segregation prerequisite creation make 7512's requirement may limited circumstances superfluous could simply refusing segregate. 60-62. (c) transferred assets. Neither common-law rules tracing res offer guidance how determine whether assets property. And strict rule States v. Randall, 401 513, 91 991, 28 273—which prohibited recovering ahead proceeding's administrative expenses—did survive 1978 restructuring Code. Code's legislative history shows Congress intended courts use "reasonable assumptions" demonstrate amounts still possession petition filed. expected show some connection between sought applied While extensive this nexus must be, identifies one reasonable assumption: voluntary transfer Other might reasonable, only evidence presented suggests preferred one. 62-67. 878 F.2d 762 (CA3 1989), affirmed. MARSHALL, J., delivered opinion Court, REHNQUIST, C.J., BRENNAN, WHITE, BLACKMUN, STEVENS, O'CONNOR, KENNEDY, JJ., joined. SCALIA, concurring judgment, post, p. 67. Paul J. Winterhalter petitioner. Brian Martin respondent. Justice MARSHALL Court. 1 This presents question "avoid" (i.e., recover) (IRS) bankruptcy. We hold here prior payment; instead, they accordingly conclude 2 * Airways, commercial airline. As employer, required collect employees' wages. 3402(a) (income taxes); (FICA taxes). airline, customers Because States," 7501, See, e.g., Slodov States, 436 238, 241, 98 1778, 1782, 56 251 (1978). By early 1984, fallen Government. February year, thereafter nonetheless obligations through $695,000 $946,434 agreed allocated specific 3 On July 19, petitioned relief Chapter 11 1101 et seq. (1982 ed.). unsuccessfully operated three months. Accordingly, September Begier, trustee, plan confirmed. Among powers 547(b)1 "enabl[e] creditor receive greater percentage claim than received if participated bankrupt estate." H.R.Rep. 95-595, 177 (1977), U.S.Code Cong. & Admin. News 1978, pp. 5787, 6138. avoidance power, 4 found part. re Inc., 83 B.R. 324 (ED Pa.1988). theory Id., 327. however, "only where actually taxing authority able trace purpose we 329. App. Pet. Cert. A-22-A-26. appeal Government, Third Circuit (1989).2 granted certiorari, 493 1017, 714, 107 734 (1990), now affirm. II A. 5 According policy, equal priority should pro rata shares 726(b) ed.); 95-585, supra, 177-178. Section furthers permitting mechanism prevents favoring over others transferring shortly filing Of course, available proceeding, implicated. reach 547(b)'s 6 define provision preserve includable estate—the creditors—"property proceedings. For guidance, then, turn 541, delineates scope serves debtor."3 7 541(a)(1) provides "all case." 541(d) provides: 8 "Property holds, case, title . becomes subsection section hold." 9 Nor purposes 547(b). parties agree, issue B 10 begin provision: "Whenever internal revenue other pay so shall extends, "the withheld." argues until either sent relevant return placed fund. beginning preference period. contends no ever respect those disagree. "collec[t]" paid." Both provisions act "collecting" occurs mere 12 same analysis applies employers "withhold." deduct tax]." (Emphasis added.) Withholding thus employee net S.Rep. 95-1106, 33 (1978) ("[A]ssume owes $100 salary there $20. If $80, has $20 withheld. If, $85, $15 (which bankruptcy)"). See Slodov, U.S., 243, 1783 (stating "[t]here sums funds," thereby necessarily implying "withheld" segregated). common "withholding" supports our interpretation. Webster's New Dictionary 2627 (1981) (defining procedure source ") 13 Our reading reinforced IRS, proper notice, require taxpayer who failed timely "to collect, truthfully for, [trust-fund taxes]", deposits, returns tax," 7512(a)(1), "deposit keep 7512(b). read mandate trust, become superfluous. Moreover, petitioner's suggestion Nothing indicates, wanted protected insofar dictated whim. conclude, therefore, (from taxes) made. C 14 benefit existed alone answer case: particular dollars Only do escape characterization All reveals point IRS; can decide used belonging trust. 15 absence naturally questions about varieties trusts. Unfortunately, utility context Under principles, property; come existence settlor ascertainable res. G. Bogert, Law Trusts Trustees 111 (rev.2d ed.1984); 1A W. Fratcher, Scott 76 (4th ed.1987). A radically different paradigm, however. That states [trust-fund] Unlike sets aside res, creates abstract "amount"—a dollar figure tied assets—rather actual withheld.4 Common-law rules, designed system identified unhelpful context. 16 law delineating nature relationship limited. explored topic length 273 (1971), dealing discharge accrued prepetition. There, court maintain taxes, comply. When subsequently adjudicated bankrupt, expenses proceeding. argued due traced maintained because declined directly address contentions. 515, S.Ct., 993. Rather, expenses, stating subordinating costs administration served creating enforcing trusts eat up estate, leaving little nothing officers whose goods services assets." 517, 994. 17 fundamentally restructured passing new changes decided modification enunciated Randall old Act. Senate bill attacked directly, providing 541 33. ibid. ("These will regardless way fund, otherwise, deemed applicable law") (footnote omitted). House deal explicitly problem Report stated include another. 368, 6324. unable conference, floor managers met compromises differences two bills. 124 Cong.Rec. 32392 (remarks Rep. Edwards); Klee, Legislative History Law, DePaul L.Rev. 941, 953-954 (1979). compromise reached portion transfers, embodied eventually enacted amendment provided "in title, beneficial property." Cong.Rec., 32417 Edwards). Cf. id., 32363 (text amendment). specifying deleted "unnecessary since [§ 7501], Edwards).5 18 Representative Edwards discussed effects indicating supplant rule: 19 "[A] serious exists 'trust taxes' commingled assumptions Service, authorities, Ibid. 20 Edwards' comment plain discussing post involved focus surprising given addressing, demand But discussion pre explained Supra, 58. apply both contexts. 21 adoption requiring "demonstrate [i.e., petition]," Edwards), Whiting Pools, 462 198, 205, n. 10, 103 2309, 2314, 515 (1983) (IRS exclude property). be. explicit answer, admonition "permit add much. does, give regarding us satisfied here. states: 22 "A constitutes 7501(a), beneficiary authority, class properly payment, payments." 373, 6329.6 23 literal above passage, expressly states, limitation "have payment" "if voluntarily obligation establish "amount" paid. 24 adopt reading. what apply, relegated history. directed govern funds, assumption casts doubt reasonableness assumption. too, see reason disregard evidence. III 25 debtor," instead Such judgment Affirmed. 27 judgment. Edwards, manager said "[t]he know anyone except presiding officer present hear Edwards. Indeed, sure words even uttered rather inserted Congressional Record afterwards. speak words, present, surprised talking inasmuch consideration relate contained mentioning bill, proposal, mentioned taxes—and former whatever S. 2266, 95th Cong., 2d Sess., Committee unenacted subject. 29 basis statement, today's concludes " (presumably means Congress, just Edwards) 'reasonable assumptions' funds." Ante, 67 I agree. conveys directions Statutes Large, excerpts Record, much less clarify text pending proposal. 30 Even direction so, certainly think One "traces" after "following res" identifying with. grips point, once again resorts history, further afield. relies later became 547, says: 31 373 Admin.News 6329. 32 decides "adopting" "a reading" language. 66. demeaning unproductive ponder not-so-literal readings Reports, though controlling text. applying lax legislative-history standards recent years, considered relevant. welfare conditioned benefits maximum level "income," well (regrettably) regard authoritative Report's statement "income" "income computed Code"; surely receipt Authoritativeness latter sort accepts proposed (and ultimately enacted) pertained setting forth five conditions voidable preference, follows: "Except section, debtor— 34 "(1) creditor; 35 "(2) antecedent debt owed made; 36 "(3) while insolvent; 37 "(4) date .; 38 "(5) enables more [under chapter distribution]." H.R. 8200, (1977); 39 period presumably clarifies phrase concerning construction effect imagine laws Report. matter seems me plainly too far beyond immediate legislation resolved accompanying thoughtful whoever drafted report try kind equitable, possesses paid, "rider" ardent devotees ignore. 40 statute standard tools reasoning, scouring scrap ipso facto relevant, unlikely congressional reliance attention), result today, obviously intends advantages always succeed doing so. without decree pink rock-candy mountain. things identified. Ordinarily trust; initially (if all) statute, (as discuss) reidentification taxpayer. Where res: collections. There difficulty them, exist. Where, identification. worker $90 clearly identifiable locus $10 him. my total conceivable locus. 41 grapple lack identification arises, hitherto unheard-of floating unidentified taxpayer's later-acquired immediately, wrote check designated (It scheme identify fund; indeed, 7512 compel made.) written, then. 26.5 ed.1987) (promise create effective otherwise designates 42 designation here, occurred 90-day Ordinarily, alienation declaring constitute me, least 7501's expressed sometimes ineffectual intent trust: unencumbered assets, collection withholding. estate. 43 reasons, concur governed ed.), reads: made— "(A) petition; "(B) year petition, creditor, transfer— "(i) insider; "(ii) cause believe insolvent transfer; if— title; "(C) title." amended replace "an 3, infra. version amendment. No precise Ninth Columbia Circuits have, authorities cases presenting related issues. R T Roofing Structures Commercial Framing, 887 981, 987 (CA9 1989) (rejecting Government's argument seized satisfy deciding effected seizure exempt avoidance); Drabkin Columbia, 263 U.S.App. D.C. 122, 125, 824 1102, 1105 (1987) (reaching similar conclusion local "essentially mirror[ed]" 7501). To 1984 amendments confirm view guides substitution property" (1988 mirrors 541's definition "interests introducing predecessor described "clarifying change." 98-65, 81 (1983). older ("property debtor") ("an property") term absent invalidate binding Congress. conference key roles played counterpart Senator DeConcini, treated their statements Reform persuasive intent. Commodity Futures Trading Comm'n Weintraub, 471 343, 351, 105 1986, 1992, 85 372 (1985). 32391 Rousselot) (expressing remarks being report"). Petitioner's irrelevant Bill error. exact quoted refers law. Compare 1st (1977). original implicit beneficiary's

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