In re Juntoff
| Decision Date | 15 April 2021 |
| Docket Number | Case No. 19-17032,Case No. 20-13035 |
| Parties | In re: HOWARD D. JUNTOFF, Debtor. In re: GEORGE J. McPHERSON & MELANIE A. McPHERSON, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically on April 15, 2021, which may be different from its entry on the record.
MEMORANDUM OF OPINION1
In these two Chapter 13 cases, the debtors have objected to the claims filed by the United States on behalf of the Internal Revenue Service ("IRS"). At issue is whether the shared responsibility payment for not having health insurance underthe Affordable Care Act is entitled to priority as "a tax on or measured by income or gross receipts" or "an excise tax on . . . a transaction" under § 507(a)(8)(A) or (E) of the Bankruptcy Code. For the reasons that follow, the Court finds that the shared responsibility payment is neither "a tax on or measured by income or gross receipts" nor "an excise tax on . . . a transaction" within the meaning of § 507(a)(8)(A) or (E) of the Bankruptcy Code and sustains the debtors' objections to the United States' claims.
These are core proceedings under 28 U.S.C. § 157(b)(2)(I). The Court has jurisdiction over core proceedings under 28 U.S.C. §§ 1334 and 157(a) and Local General Order 2012-7 of the United States District Court for the Northern District of Ohio.
The sole issue in each of these two Chapter 13 cases is whether the debtors' shared responsibility payment under the Affordable Care Act, included in the United States' proof of claim, is entitled to priority as "a tax on or measured by income or gross receipts" or "an excise tax on . . . a transaction" under § 507(a)(8)(A) or (E) of the Bankruptcy Code. Because the parties have stipulated that this issue is properly presented and can be resolved on the record without anevidentiary hearing, the Court will limit its presentation of the factual and procedural background to those matters needed to understand the context of the issue at hand.
On November 15, 2019, debtor Howard Juntoff filed for relief under Chapter 13 of the Bankruptcy Code. Case No. 19-17032; Docket No. 1. Although the United States has amended its proof of claim three times, the amount attributable to Juntoff's liability for the shared responsibility payment for calendar year 2018—the only portion of the proof of claim at issue—has remained unchanged. The United States claims a tax in the amount of $1,016 and prepetition interest of $26.39, for a total priority claim attributable to the shared responsibility payment for calendar year 2018 of $1,042.39. The United States identified this obligation as an "excise tax" on the original and first two amended proofs of claim, and as an "excise/income tax" on the third amended proof of claim. Although Juntoff filed his claim objection before the United States filed its third amended proof of claim, by agreement, the Court will treat Juntoff's claim objection as challenging the United States' third amended proof of claim.
Juntoff's Chapter 13 plan, which was confirmed on March 22, 2021, provides for payment in full of all priority tax claims and no payment for generalunsecured claims. Juntoff does not challenge the remainder of the United States' third amended proof of claim, which includes an additional $3,950.03 in priority tax claims. Thus, Juntoff's priority tax liability to the United States is either $4,992.42, if the $1,042.39 attributable to the shared responsibility payment for calendar year 2018 is allowed as a priority tax under § 507(a)(8), or $3,950.03, if the $1,042.39 is disallowed as a priority tax under § 507(a)(8).
On June 24, 2020, debtors George and Melanie McPherson filed for relief under Chapter 13 of the Bankruptcy Code. Case No. 20-13035; Docket No. 1. Although the United States has amended its proof of claim three times, the amount attributable to the McPhersons' liability for the shared responsibility payment for calendar year 2017—the only portion of the proof of claim at issue—has remained unchanged. The United States claims a tax in the amount of $1,564 and prepetition interest of $136.70, for a total priority claim attributable to the shared responsibility payment for calendar year 2017 of $1,700.70. The United States identified this obligation as an "excise tax" on the original and first amended proofs of claim, and as an "excise/income tax" on the second and third amended proofs of claim. Although the McPhersons filed their claim objection before the United States filed its second and third amended proofs of claim, by agreement, theCourt will treat the McPhersons' claim objection as challenging the United States' third amended proof of claim.
The McPhersons' Chapter 13 plan, which was confirmed on November 16, 2020, provides for payment in full of all priority tax claims and payment of $29,168 or 22 percent, whichever is greater, for general unsecured claims. The McPhersons do not challenge the remainder of the United States' third amended proof of claim, which includes an additional $3,950.03 in priority tax claims. Thus, the McPhersons' priority tax liability to the United States is either $5,674.93, if the $1,700.70 attributable to the shared responsibility payment for calendar year 2017 is allowed as a priority tax under § 507(a)(8), or $3,974.23, if the $1,700.70 is disallowed as a priority tax under § 507(a)(8). If the McPhersons' shared responsibility payment for calendar year 2017 is disallowed as a priority tax under § 507(a)(8), the United States would also receive a pro rata distribution as the holder of a general unsecured claim in the amount of $1,700.70.
In addition to the initial claim objection and response in each of the two cases, see Case No. 19-17032, Docket Nos. 34, 37, 38; Case No. 20-13035, Docket Nos. 37, 49, the Court permitted a number of supplemental briefs. See Case No. 19-17032, Docket Nos. 48, 70, 75; Case No. 20-13035, Docket No. 56. TheCourt heard oral argument on Juntoff's objection to the United States' claim on August 13, 2020, September 24, 2020, January 7, 2021, and February 18, 2021. The Court heard oral argument on the McPhersons' objection to the United States' claim in conjunction with oral argument on Juntoff's objection on January 7, 2021, and February 18, 2021. Juntoff and the McPhersons are represented by the same attorney.
During the argument on February 18, 2021, the parties agreed that the sole issue in each of these two Chapter 13 cases is whether the debtors' shared responsibility payment under the Affordable Care Act, included in the United States' proof of claim, is a priority tax under § 507(a)(8) of the Bankruptcy Code. The parties further agreed that this issue is properly presented and can be resolved on the record without an evidentiary hearing.
The United States asserts that in each of these two Chapter 13 cases, the debtors' shared responsibility payment under the Affordable Care Act, included in the United States' proof of claim, is a priority tax under § 507(a)(8)(A) or (E) of the Bankruptcy Code.
Section 507 provides in pertinent part:
11 U.S.C. § 507(a)(8)(A), (E).
In addition, § 523(a) of the Bankruptcy Code makes debts that fall within the priority provisions of § 507(a)(8) nondischargeable.
Section 523(a) provides in pertinent part:
11 U.S.C. §523(a)(1)(A).
For Chapter 13 debtors such as Juntoff and the McPhersons, their Chapter 13 plan must provide for full payment of all claims entitled to priority under § 507.
Section 1322(a) provides in pertinent part:
11 U.S.C. §1322(a)(2).
Thus, whether the shared responsibility payments under the Affordable Care Act are entitled to priority under § 507(a)(8) of the Bankruptcy Code determines not only whether the resulting claim receives priority treatment over general unsecured creditors (for example, in the Juntoff case, the difference is payment in full as a priority claim versus no payment whatsoever as a general unsecured claim), it also dictates how much debtors must pay for a plan to be confirmed and for the debtor to receive a general discharge of all other debts under § 1328(a). In other words, a Chapter 13 debtor must pay in full all allowed priority claims under § 507(a)(8) in order to discharge any other debts.
26 U.S.C. § 5000A
The statutory authority for the shared responsibility payment at issue in these two Chapter 13 cases is contained in 26 U.S.C. § 5000A. Congress created § 5000A as part of the Affordable Care Act. See Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119.
Under § 5000A(a), as amended, Congress required applicable individuals to maintain a minimum level of health insurance coverage for such...
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