610 B.R. 663
Bankr. D. Mont.2019Background
- Debtors Levi and Martha Jones filed Chapter 13 on February 16, 2019; the IRS filed an amended proof of claim for $2,105.68 (unsecured).
- The IRS characterized $1,995.18 as priority: $1,018.18 income tax + $977 as an excise tax (the portion in dispute).
- The $977 stems from the Shared Responsibility Payment (SRP) under 26 U.S.C. § 5000A for failing to maintain minimum essential health coverage (reported on Form 1040, “Other Taxes,” line 61).
- Debtors objected, arguing the SRP is not an “excise tax on a transaction” as required for priority under 11 U.S.C. § 507(a)(8)(E); the IRS contended the SRP functions as an excise tax and is therefore priority.
- The parties submitted stipulated facts and tax returns; no testimony was offered.
- Ruling: The court held the SRP satisfies the Ninth Circuit’s Lorber test and is an excise tax, but it is not imposed "on a transaction," so the $977 is disallowed as a priority claim and is allowed only as an unsecured nonpriority claim.
Issues
| Issue | Debtors' Argument | IRS' Argument | Held |
|---|---|---|---|
| Whether the SRP under 26 U.S.C. § 5000A is an "excise tax on a transaction" for priority under 11 U.S.C. § 507(a)(8)(E) | SRP arises from a failure/inaction (not a transaction) and thus cannot be a § 507(a)(8)(E) priority excise tax | SRP functions as an excise tax and should be treated as a priority excise tax on a transaction | Court: SRP is an excise tax under the Lorber test but is not imposed on a "transaction," so it is not entitled to § 507(a)(8)(E) priority; $977 is nonpriority unsecured |
Key Cases Cited
- Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519 (SRP may reasonably be characterized as a tax)
- United States v. Reorganized CF & I Fabricators of Utah, 518 U.S. 213 (courts look to operation of a provision, not just labels)
- In re Lorber Industries of Cal. Inc., 675 F.2d 1062 (9th Cir. 1982) (established multi‑part test for excise tax)
- Lorber v. East Bay Municipal Utility Dist., 564 F.3d 1098 (9th Cir. 2009) (Lorber test applied/affirmed)
- In re George, 361 F.3d 1157 (9th Cir. 2004) (failure to obtain insurance is not a "transaction" for § 507(a)(8)(E); private‑creditor hypothesizing rule)
- In re DeRoche, 287 F.3d 751 (9th Cir. 2002) (reimbursement to special fund held an excise tax "on a transaction")
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (use ordinary meaning when statute undefined)
- U.S. v. 432 Mastercases of Cigarettes, More or Less, 448 F.3d 1168 (9th Cir. 2006) (definition/discussion of excise taxes)