Act of July 5, 1966, Pub. L. 89-496, 80 Stat. 270
An Act To amend the Bankruptcy Act with respect to limiting the priority and non-dischargeability of taxes in bankruptcy
Eighty-Ninth Congress, Session II · Approved July 5, 1966
Limits the priority and nondischargeability of taxes. A new section 2a(2A) empowers the court to hear and determine the amount or legality of any unpaid tax not previously adjudicated. Section 17a(1) now excepts from discharge only taxes that became legally due and owing within three years before bankruptcy, with the discharge not releasing taxes that were not assessed because no return was filed, were assessed within a year before bankruptcy where no return was filed, were unreported, were barred from assessment while remedies were pending, or were the subject of a false or fraudulent return or willful evasion, or taxes the bankrupt collected or withheld from others and did not pay over, and with tax liens unaffected. Section 64a(4) limits the tax priority to taxes not released by the discharge. The Act is severable and takes effect on the ninetieth day after enactment.
This is an unofficial transcription, prepared by Robert J. Pfister for ease of reading and copying. The authoritative text is the United States Statutes at Large.
United States Statutes at Large (PDF, 2 pages) (opens in a new tab) Unofficial transcription (PDF, 3 pages) (opens in a new tab)
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subdivision (a) of section 2 of the Bankruptcy Act, as amended (11 U.S.C. 11), is amended by inserting after paragraph (2) the following new paragraph:
“(2A) Hear and determine, or cause to be heard and determined, any question arising as to the amount or legality of any unpaid tax, whether or not previously assessed, which has not prior to bankruptcy been contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction, and in respect to any tax, whether or not paid, when any such question has been contested and adjudicated by a judicial or administrative tribunal of competent jurisdiction and the time for appeal or review has not expired, to authorize the receiver or the trustee to prosecute such appeal or review;”.
Sec. 2. Clause (1) of subdivision a of section 17 of such Act, as amended (11 U.S.C. 35), is amended to read as follows:
“(1) are taxes which became legally due and owing by the bankrupt to the United States or to any State or any subdivision thereof within three years preceding bankruptcy: Provided, however, That a discharge in bankruptcy shall not release a bankrupt from any taxes (a) which were not assessed in any case in which the bankrupt failed to make a return required by law, (b) which were assessed within one year preceding bankruptcy in any case in which the bankrupt failed to make a return required by law, (c) which were not reported on a return made by the bankrupt and which were not assessed prior to bankruptcy by reason of a prohibition on assessment pending the exhaustion of administrative or judicial remedies available to the bankrupt, (d) with respect to which the bankrupt made a false or fraudulent return, or willfully attempted in any manner to evade or defeat, or (e) which the bankrupt has collected or withheld from others as required by the laws of the United States or any State or political subdivision thereof, but has not paid over; but a discharge shall not be a bar to any remedies available under applicable law to the United States or to any State or any subdivision thereof, against the exemption of the bankrupt allowed by law and duly set apart to him under this Act: And provided further, That a discharge in bankruptcy shall not release or affect any tax lien.”
Sec. 3. Clause (4) of subdivision a of section 64 of such Act, as amended (11 U.S.C. 104), is amended to read as follows:
“(4) taxes which became legally due and owing by the bankrupt to the United States or to any State or any subdivision thereof which are not released by a discharge in bankruptcy: Provided, however, That no priority over general unsecured claims shall pertain to taxes not included in the foregoing priority: And provided further, That no order shall be made for the payment of a tax assessed against any property of the bankrupt in excess of the value of the interest of the bankrupt estate therein as determined by the court;”.
Sec. 4. If any provision of this Act, or any amendment made by it, or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions of this Act, or other amendments made by it, or applications thereof which can be given effect without the invalid provision or application.
Sec. 5. (a) Nothing in this Act, or in the amendments made by it, shall operate to release or extinguish any penalty, forfeiture, or liability incurred under the Bankruptcy Act before the effective date of this Act.
(b) The amendments made by this Act shall govern proceedings so far as applicable in cases pending when it takes effect.
Sec. 6. This Act shall take effect on the ninetieth day after the date of its enactment.
Approved July 5, 1966.