Iowa Dept. of Revenue v. Philip DeVries, 621 B.R. 445

In 2017 the DeVries sold farmland and farm machinery, generating large capital gains and significant unpaid 2017 income tax liability.
Pre-petition wage withholdings from Angie DeVries paid $2,006 to the Iowa Department of Revenue (IDR) and $4,584 to the IRS.
Debtors filed Chapter 12 in February 2019 and submitted “pro forma” returns showing no tax liability absent the sales.
The confirmed Chapter 12 plan required taxing authorities to refund the alleged 2017 overpayments (the withholdings) to the Chapter 12 trustee for distribution.
IDR and IRS objected; the bankruptcy court overruled objections, relying on §1232 and legislative history to permit disgorgement of pre-petition withholdings; IDR appealed.
The appellate panel reversed confirmation, holding §1232 does not authorize a Chapter 12 plan to compel disgorgement of pre-petition withholdings.

Issue	DeVries' Argument	IDR's Argument	Held
Whether 11 U.S.C. §1232 authorizes a Chapter 12 plan to require taxing authorities to disgorge pre-petition withholdings (i.e., force a refund to the estate)	§1232 (and pro forma returns) permit allocating tax claims so the portion attributable to farm-sale gains can be treated as unsecured and the withheld amounts refunded to the estate	§1232 is a priority-stripping provision only; it does not change how a governmental unit's claim is calculated and does not authorize refunds or turnover of funds collected pre-petition	Reversed: §1232 does not authorize a plan to compel disgorgement or refund of pre-petition withholdings; such withheld amounts were not part of the government’s claim on the petition date

Lamie v. United States Trustee, 540 U.S. 526 (2004) (courts enforce plain statutory language)
Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) (text controls statutory interpretation)
United States v. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989) (plain-meaning rule for statutes)
Knudsen v. I.R.S., 581 F.3d 696 (8th Cir. 2009) (treats §1232 predecessor as a priority-stripping provision for farm-sale taxes)
Hall v. United States, 566 U.S. 506 (2012) (cited regarding limitations and subsequent treatment of related precedent)
In re The Archdiocese of St. Paul and Minn., 888 F.3d 944 (8th Cir. 2018) (de novo review of Bankruptcy Code interpretation)
In re Family Pharmacy, Inc., 614 B.R. 58 (B.A.P. 8th Cir. 2020) (standard of review for bankruptcy appeals)
In re Richards, 618 B.R. 846 (Bankr. S.D. Ind. 2020) (decision addressing post-petition farm sales and refunds; distinguished by this court)