Plan’s Interest Rate Held to Govern Tax Claims, Not the Rate in the IRS Code
‘Strained’ argument by the IRS about recoupment didn’t overcome terms of a confirmed plan.
Judge Name - Do not use it.
Kevin Gross
%1
Energy Future Wrangles with Vistra over Tax Breaks
Energy Future Holdings Corp. is battling some of its former businesses in a tax dispute with Vistra Energy Corp., and hedge fund Elliott Management Corp. is chiming in, Fox Business reported yesterday. Vistra is made up of Energy Future's former power-producing and retailing businesses, which exited from bankruptcy last year as a new company. Still stuck in chapter 11, Energy Future on Tuesday sued Vistra, accusing it of violating an agreement on how to divide the energy giant's tax breaks. Elliott, Energy Future’s largest creditor, filed papers seeking to weigh in on the fight, which focuses on an agreement struck in August 2016, as the former TXU retailing and power-generating businesses, TXU Energy and Luminant, were preparing to exit bankruptcy. Taxes were a driving force in shaping Energy Future's restructuring, which saw the company split in two. Done incorrectly, the breakup of Energy Future could have left behind a multibillion-dollar unpaid tax bill, which would have been a major embarrassment for private-equity owners KKR & Co., TPG Capital and an arm of Goldman Sachs Group Inc. To prevent the tax-liability overhang, Energy Future engaged in extensive talks with the IRS and devised a complex deal structure meant to produce the desired effect, accompanied by a pact to cooperate in filing tax returns. New court papers say Energy Future doesn't believe Vistra is abiding by the tax agreement, and will further violate it Oct. 16, when it files its tax returns.
Ninth Circuit Splits with Seventh on Sovereign Immunity and Derivative Suits by a Trustee
Ninth Circuit criticizes the Seventh for making the sovereign immunity waiver meaningless for Section 544(b)(1) suits.
Judge Name - Do not use it.
Richard Z. Paez
Bankruptcy Code
IRS Doled Out More Than $24 Billion in Potentially Bogus Refunds, Audit Says
The IRS doled out more than $24 billion in potentially bogus refunds claimed under several controversial tax credits in 2016, according to a new audit that said $118 million was even paid to people who weren’t authorized to work in the U.S. in the first place, The Washington Times reported yesterday. Some $16.8 billion in payments were made on improper claims under the Earned Income Tax Credit, signifying a 24 percent error rate. Investigators also estimated $7.2 billion in improper payments for the Additional Child Tax Credit, representing 25 percent of the total, and $1.1 billion in improper payments, or 24 percent, for a higher education tax credit. The totals and error rates for the earned income and child credits were comparable for 2015, while the education tax credit saw improvement. One particular problem the IRS faces is checking people who have Social Security numbers but who aren’t authorized to work in the U.S.
Circuits Split on Enjoining the IRS from Pursuing Corporate Officer to Collect Taxes
Puerto Rico judge sides with the Third Circuit by upholding the Anti-Injunction Act in bankruptcy cases.
Judge Name - Do not use it.
Brian K. Tester
Even Without the One-Day-Late Rule, Tax Liability Still Wasn’t Discharged
A tax return late by three years wasn’t ‘honest and reasonable.’
Trump to Propose Deep Cuts to Anti-Poverty Programs and Medicaid
President Donald Trump plans to propose $1.7 trillion in cuts to a category of spending that includes major social and entitlement programs for lower-income Americans, as part of an effort to balance the budget within a decade, Bloomberg reported yesterday. The White House will issue a formal budget request Tuesday that includes $274 billion in cuts over 10 years to means-tested anti-poverty programs, including food stamps. The upcoming budget request for fiscal 2018, which include dropping the top individual tax rate to 35 percent, is already attracting criticism from Democrats. Trump’s proposal will also call for $800 billion in cuts to Medicaid, the health program for the poor. Trump is proposing to cut $193 billion from the Supplemental Nutrition Assistance Program, commonly known as food stamps, over the next decade. The cuts, which would amount to an approximate 25 percent reduction, would be achieved in part by limiting eligibility for food stamps and by requiring work, according to the document. Spending on the Earned Income Tax Credit and Child Tax Credit would also be reduced by $40 billion, in part by requiring proof that recipients are authorized to work in the U.S. Traditional welfare payments, known as Temporary Assistance for Needy Families, would be cut by $21 billion. The budget is also expected to propose major domestic discretionary spending cuts; an earlier version of the budget called for $54 billion in such cuts next year alone, although Republicans in Congress have already rejected many of them.
