Opinion
No. B79-2125A
July 8, 1980
Former Bankruptcy Act Reorganization — Unsecured Debts Jurisdiction — Validity of Tax Assessment
Since there was no appeal of the debtor's tax assessment to the county board of equalization, which was the means provided under state law to determine the validity of an assessment, this bankruptcy court had jurisdiction to resolve the tax dispute at issue. See Sec. 2a(2A) at ¶ 2043-2 and Sec. 505 at ¶ 9019.
Former Bankruptcy Act — Priorities — Taxes
When the amount of taxes assessed against inventory did not exceed its value in the bankrupt estate, the tax claim was allowed in full and accorded priority pursuant to Section 64a(4) of the Bankruptcy Act even though the inventory in the debtor's possession was not the inventory that was originally assessed for tax purposes. See Sec. 64a(4) at ¶ 2628 and Sec. 547(d) at ¶ 9537.
[Digest of Opinion]
The county tax commissioner filed a "proof of claim" for the debtor's unpaid taxes on machinery and equipment. It was stipulated by the parties that the valuation of the debtor's inventory was correct. However, the debtor asserted that the claim should be reduced by the amount of the applicable "freeport" exemption.
The issues before the court concerned the jurisdictional question whether there had been an adjudication of the dispute and whether the debtor's failure to exhaust the remedies provided by Georgia law precluded the contesting of the tax commissioner's claim in this proceeding.
The tax commissioner alleged that the debtor had adjudicated this dispute by appealing its assessment to the Joint City County Board of Tax Assessors. However, the court found, that this board was not a quasi-judicial agency since judicial power to determine matters of taxability, uniformity of assessment and value was vested in the county boards of equalization. In addition, the court determined that since the debtor failed to make a timely appeal of its assessment, he would be precluded from pursuing the avenues of review provided by Georgia law.
The court then turned its attention to whether the debtor's failure to exhaust state remedies prohibited the court from reviewing the taxes assessed on the debtor's inventory and equipment.
In City of Amarillo v. Eakens, 399 F.2d 541 (5th Cir. 1968) the court rejected the argument that the bankruptcy court is deprived of jurisdiction in those instances where remedies provided by state law have not been exhausted. The court concluded that it had jurisdiction to resolve the tax dispute involved.
Further, the debtor contended that the tax commissioner should not be allowed to have a priority claim for back taxes owed under Section 64a(4) of the Bankruptcy Act because the inventory the debtor held on the filing date of the petition was not the inventory on which the assessment was made. The court observed that Fifth Circuit case law indicated that a tax claim may have priority under Section 64a(4) of the Bankruptcy Act even when the property on which the tax was assessed never came into the bankruptcy estate. In Glass v. Phillips, 139 F.2d 1016 (5th Cir. 1943) the court held that because the amount of the taxes assessed against the inventory was less than the value of the inventory in the hands of the trustee, the tax collector should have priority for the entire amount of taxes. Since there was no evidence in the record that the amount of the claim exceeded the value of the debtor's interest in the inventory in the bankrupt estate, there was no reason for the court to deny priority.