Emory Bankruptcy Developments Journal

Bankruptcy Courts’ Authority under § 505
David W. Patton  J.D., Emory University School of Law (2018); B.S., Indiana University (2015). I would like to thank my Notes and Comments Editor, Holland Stewart, and my faculty advisor, Professor Jennifer Mathews, for their advice and suggestions.

Abstract

“[T]he court may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax . . . .” 1 11 U.S.C. § 505(a)(1) (2012). Surprisingly, this provision does not refer to the jurisdiction of tax courts. Instead, 11 U.S.C. § 505 describes the vast statutory authority of bankruptcy courts to determine tax liabilities.

Apart from three narrow exceptions contained within the provision, bankruptcy courts’ authority under § 505 is essentially limitless. 2See id. § 505(a)(2). The broad language of § 505 extends bankruptcy courts’ authority far beyond the context of bankruptcy, and courts have acknowledged that the plain meaning of the statute effectively creates a second tax court system. 3See In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991). Interpreting § 505 in this manner raises constitutionality and federalism concerns and is ostensibly impractical. For these reasons, courts have taken three general approaches to define the extent of bankruptcy courts’ authority under § 505.

This Comment evaluates these three approaches and examines other limitations and mechanisms that courts have utilized to restrict bankruptcy courts’ authority to adjudicate § 505 proceedings. It concludes that the “arising under” approach is the ideal solution to § 505 because it emphasizes practicality while adhering to statutory canons and the goals of bankruptcy.

Introduction

The open-ended language of the United States Bankruptcy Code (the Code) grants bankruptcy courts broad authority to enter final judgments on a variety of issues. This broad authority is inconsistent with the narrower scope of authority bestowed on bankruptcy courts by the Constitution and other statutes. 4See 28 U.S.C. § 157 (2012); U.S. Const. art. III, § 1. Over the years, the Supreme Court has attempted to reconcile the problems that have arisen from these conflicting allocations of authority. 5See Stern v. Marshall, 564 U.S. 462 (2011); see also Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015). Although the Court’s decisions aimed to clarify the true authority of bankruptcy courts, many issues remain. Evidence of this persisting incompatibility is exemplified in the controversy surrounding bankruptcy courts’ authority to make § 505 determinations.

Section 505 of the Code states that bankruptcy courts “may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax, whether or not previously assessed, whether or not paid, and whether or not contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction.” 6 11 U.S.C. § 505(a)(1) (2012). Except for three narrow exceptions listed in § 505, 7 Section 505 states that bankruptcy courts cannot determine tax liabilities (1) if the amount has already been determined by competent tribunal before the start of the case under Title 11, (2) the estate’s right to a tax refund before a specified time period, or (3) if the determination is connected to certain ad valorem taxes. 11 U.S.C. § 505(a)(2) (2012). the plain language of this provision grants bankruptcy courts broad authority to make tax liability determinations. 8Id. § 505. The broad nature of § 505 creates significant overlap with the powers delegated to tax courts and enables bankruptcy courts to make determinations on matters well beyond the scope of bankruptcy. 9Id. In an effort to remedy this predicament, courts have taken several different approaches to limit the authority of bankruptcy courts under § 505.

This Comment analyzes the various approaches courts have applied to determine the extent of bankruptcy courts’ authority to make § 505 determinations. It then concludes that the most viable approach is to treat § 505 proceedings as core proceedings “arising under” Title 11.

Part A briefly describes the legislative and judicial history relating to the general controversy surrounding bankruptcy courts’ authority. Part B describes the three general approaches courts have applied to delineate the authority of bankruptcy courts under § 505. Part C analyzes these approaches, and Part D concludes that applying the “arising under” approach to § 505 proceedings yields the most desirable outcomes.

A. Background on the Authority of Bankruptcy Courts

Prior to 1978, bankruptcy courts operated under a system where “referees” presided over bankruptcy proceedings and orders could be appealed to the federal district court. 10 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 53 (1982). Under the Bankruptcy Reform Act of 1978 (the Act), Congress established bankruptcy courts as “court[s] of record” and as adjuncts to their corresponding federal district courts. 11 Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2657. The Act stated that bankruptcy judges were to be appointed by the President with consent of the Senate for fourteen-year terms. 12Id. It established that bankruptcy judges could be removed by the “judicial council of the circuit” but “only for incompetency, misconduct, neglect of duty or physical or mental disability.” 13Id. Additionally, the Act stated that “the salaries of the bankruptcy judges are set by statute and are subject to adjustment under the Federal Salary Act.” 14 N. Pipeline Const. Co., 458 U.S. at 53. Finally, it expanded the authority of bankruptcy courts to “all ‘civil proceedings arising under title 11 [the bankruptcy title] or arising in or related to cases under title 11.’” 15Id. at 54. Thus, the Act granted bankruptcy judges the type of broad authority that was generally reserved for Article III judges. 16 David G. Epstein, Bruce A. Markell, Steve H. Nickles & Lawrence Ponoroff, Bankruptcy: Dealing with Financial Failure for Individuals and Businesses 561 (4th ed. 2015). However, in contrast to Article III judges, bankruptcy judges did not receive the same benefits such as lifetime appointment and the protection against salary decrease. 17Id.

The Supreme Court was forced to address this disparity in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., in 1982. 18 N. Pipeline Const. Co., 458 U.S. 50. In Northern Pipeline, the Court was asked to determine “whether the assignment by Congress to bankruptcy judges of the jurisdiction granted in 28 U.S.C. § 1471 (1976 ed., Supp.IV) by § 241(a) of the Bankruptcy Act of 1978 violates Art. III of the Constitution.” 19Id. at 52; see Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2668 (“The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.”). In a plurality opinion written by Justice Brennan, the Court noted the importance that the Constitution places on maintaining separation of powers between the three branches of government. 20See N. Pipeline Const. Co., 458 U.S. at 57–60. The plurality explained that the benefits afforded to judges under Article III, including life tenure and protection against diminution of salary, facilitate the Constitution’s separation of powers doctrine by reducing the legislative and executive branches’ influence over the judicial branch. 21Id. at 59–60. As a result, the plurality concluded:

28 U.S.C. § 1471 (1976 ed., Supp.IV), as added by § 241(a) of the Bankruptcy Act of 1978, has impermissibly removed most, if not all, of “the essential attributes of the judicial power” from the Art. III district court, and has vested those attributes in a non-Art. III adjunct. Such a grant of jurisdiction cannot be sustained as an exercise of Congress’ power to create adjuncts to Art. III courts. 22Id. at 87.

1. Current Applicable Statutes

Two years later, in response to the concerns identified by the Supreme Court in Northern Pipeline23 Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. Rev. 384 (2012). Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA). 24 Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA), Pub.L. 98–353, 98 Stat. 333. BAFJA created significant changes regarding the jurisdiction and judicial power of bankruptcy courts. 25Id. As a result, the jurisdiction of bankruptcy courts is currently defined in three key provisions of title 28: §§ 151, 1334, and 157. 26Epstein, supra note 16, at 562.

Section 151 provides:

In each judicial district, the bankruptcy judges in regular active service shall constitute a unit of the district court to be known as the bankruptcy court for that district. Each bankruptcy judge, as a judicial officer of the district court, may exercise the authority conferred under this chapter with respect to any action, suit, or proceeding . . . . 27 28 U.S.C. § 151 (2012).

This provision establishes bankruptcy judges as adjuncts to the district court with judicial authority over the matters referred to them by the district court under chapter 6 of title 28. 28 1 Collier on Bankruptcy ¶ 2.02 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.).

Section 1334 grants and defines federal district courts’ jurisdiction over title 11 cases and proceedings and has two notable implications. 29 28 U.S.C. § 1334 (2012). First, it creates three classifications of civil proceedings associated with title 11. Second, it describes circumstances involving state law where the district court should abstain. 30Id.

Section 1334(a) states that “[e]xcept as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.” 31Id. § 1334(a). In contrast, subsection (b) grants district courts “original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11” aside from the exceptions provided in subsection (e)(2). 32Id. § 1334(b) (emphasis added); see 28 U.S.C. § 1334(e)(2) (2012) (granting the district court exclusive jurisdiction over the property of the debtor and estate as well as over claims involving the employment of professional persons under § 327); see also 1 Collier, supra note 28, at ¶ 3.01 (noting that district courts’ lack of exclusive jurisdiction in subsection (b) allows for civil proceedings in a bankruptcy case to be brought in either federal or state court under specific circumstances). The language of subsection (b) identifies three types of proceedings: “arising under title 11,” “arising in [a case under title 11],” and “related to [a] case[] under title 11.”  33Id. As demonstrated in the following passages, these three categories have provided courts with an organizational structure for determining the extent of bankruptcy judges’ authority.

Section 157 allows district courts to refer title 11 proceedings and cases to bankruptcy judges. 34 28 U.S.C. § 157 (2012). Thus, this provision confers upon bankruptcy judges the authority described in § 151. 35 1 Collier, supra note 28, at ¶ 2.02; see 28 U.S.C. § 151 (2012). The language of § 157 permits district courts to exercise their discretion on whether to refer proceedings and cases to bankruptcy judges. 36 28 U.S.C. § 157 (2012) (stating that district courts “may” refer title 11 cases and proceedings to “the bankruptcy judges for the district”). Congress gave district courts this discretion in an attempt to remedy the constitutional concerns addressed in Northern Pipeline37 1 Collier, supra note 28, at ¶ 3.02. Nevertheless, constitutional issues persisted. 38Id.

Section 157 is significant because it explicitly addresses the authority of bankruptcy judges under the three categories of proceedings described in § 1334. 39 28 U.S.C. § 157 (2012). Section 157(b)(1) provides that “[b]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 . . . and may enter appropriate orders and judgments . . . .” 40Id. § 157(b)(1) (emphasis added). This subsection grants bankruptcy judges clear authority to enter final judgments in core proceedings arising under Title 11 or arising in a case under Title 11. 41Id. § 157; see 28 U.S.C. § 1334(b) (2012). Section 157 fails to provide an exact definition of core proceedings; however, § 157(b)(2) gives sixteen examples of core proceedings and notes that this list is not exhaustive. 42See 28 U.S.C. § 157(b)(2) (2012).

Next, § 157 addresses the third category of proceedings described in § 1334, proceedings related to a case under title 11. 43Id. § 157(c)(1). Section 157(c)(1) states that “[a] bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court.” 44Id. These findings are examined by the district court and any objection by the parties is reviewed on a de novo standard. 45Id. Following this examination and review, the district court enters a final judgment on the proceeding. 46Id.

The limited authority granted to bankruptcy courts over non-core proceedings “related to” a case under title 11 reflects the Supreme Court’s holding in Northern Pipeline that bankruptcy judges do not have the constitutional authority to enter final judgments on these matters. 47In re Wood, 825 F.2d 90, 96 (5th Cir. 1987); see 1 Collier, supra note 28, at ¶ 3.02. In interpreting § 157(b), courts have concluded that core proceedings may only be classified as either arising under title 11 or arising in a case under title 11. 48In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02. In comparison, non-core proceedings at most may be classified as relating to a case under title 11. 49In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02 (“The phraseology of section 157 leads to the conclusion that there is no such thing as a core matter that is ‘related to’ a case under title 11. Core proceedings are, at most, those that arise in title 11 cases or arise under title 11.”).

2. “Arises Under,” “Arising in,” and “Related to” Jurisdiction

The circuits have produced their own definitions for the three categories of civil proceedings listed in § 1334(b). Nevertheless, the circuits have reached similar interpretations for each of these categories.

As noted in the previous section, core proceedings are comprised of matters “arising under” title 11 or “arising in” a title 11 case. 50In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02. The meaning of “arises under” is fairly straightforward since it mirrors the language of § 1331, which grants district courts federal question jurisdiction. 51 1 Collier, supra note 28, at ¶ 3.01; see 28 U.S.C. § 1331 (2012) (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”) (emphasis added). In bankruptcy, “arising under” jurisdiction encompasses rights and causes of action created by title 11. 52 1 Collier, supra note 28, at ¶ 3.01. In comparison, “arising in” proceedings are claims not explicitly created by title 11, but found only in the context of bankruptcy. 53In re Wood, 825 F.2d at 96–97. “Arising in” jurisdiction includes proceedings such as the “allowance or disallowance of claims.” 54Epstein, supra note 16, at 564.

Bankruptcy courts’ jurisdiction over non-core proceedings is limited to matters “related to” a title 11 case. 55 28 U.S.C. § 157(c)(1) (2012). In Celotex Corp. v. Edwards, the Supreme Court declared that “related to” jurisdiction expanded beyond “proceedings involving the property of the debtor or the estate.” 56 Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995). However, courts have recognized that the “related to” language cannot be viewed without limitations. 57Id. In order to determine whether a proceeding adequately “relates to” a title 11 case, most courts have adapted a test applied by the Third Circuit in Pacor, Inc. v. Higgins. 58 Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984). Under this test, a proceeding is “related to” a title 11 case if “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.” 59Id. (emphasis original).

3. Recent Influential Supreme Court Cases

Three recent Supreme Court cases have dramatically influenced the overall jurisdiction of bankruptcy courts. 60See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011).

In 2011, in Stern v. Marshall, the Court was asked to determine whether the bankruptcy court had the authority to enter a final judgment on a common law tortious interference counterclaim. 61 Stern, 564 U.S. at 469. The Court divided this initial question into two further questions. First, it asked whether the bankruptcy court had statutory authority under § 157 of the Code. 62Id. Second, it asked whether the bankruptcy court had proper constitutional authority. 63Id.

In answering the first question, the Court looked to the plain meaning of the language in § 157, 64Id. at 475. which explicitly authorizes bankruptcy courts to make determinations on “counterclaims by the estate against persons filing claims against the estate.” 65 28 U.S.C. § 157(b)(2)(C) (2012). The Court concluded that the plain language of the statute clearly granted the bankruptcy court the authority to enter a final judgment on the claim. 66 Stern, 564 U.S. at 477–78. The Court recognized that this broad authorization of jurisdiction under § 157 could lead to the same serious constitutional concerns raised in Northern Pipeline67 Stern, 564 U.S. at 477; see N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 57–60 (1982). However, it noted that the language of the statute was unambiguous and did not “leave[] any room for the canon of avoidance.” 68 Stern, 564 U.S. at 478.

The Court analyzed the second question, whether the bankruptcy court had constitutional authority, by looking to Article III of the Constitution. 69Id. at 482–85. Here, the Court concluded that “[a]lthough . . . § 157(b)(2)(C) permits the Bankruptcy Court to enter final judgment on [claimant]’s counterclaim, Article III of the Constitution does not.” 70Id. at 482. The majority explained that granting the bankruptcy court broad jurisdiction under § 157 ran afoul of the separation of powers principle. 71Id. at 482–84. In its opinion, it noted that “Article III of the Constitution provides that the judicial power of the United States may be vested only in courts whose judges enjoy the protections set forth in that Article.” 72Id. at 503. Since bankruptcy courts were established under Article I, the majority held that the bankruptcy court lacked authority to enter a final judgment on the “state law counterclaim.” 73Id. at 503; see U.S. Const. art. I, § 8.

The dissent disagreed and stated that the bankruptcy court had both statutory and constitutional authority to enter judgment on the tortious interference counterclaim. 74 Stern, 564 U.S. at 505–21. In its opinion, the dissent argued that when the possibility of a separation of powers issue arises, the non-Article III judge’s authority should be evaluated “pragmatic[ally]” using the five factors listed in Commodity Futures Trading Commission v. Schor to determine whether the non-Article III judge violated the separation of powers doctrine in a meaningful way75Id. at 510–12. Applying this approach, the dissent concluded that “a grant of authority to a bankruptcy court to adjudicate compulsory counterclaims does not violate any constitutional separation-of-powers principle related to Article III.” 76Id. at 513.

The Court again addressed bankruptcy courts’ jurisdiction in 2014, in Executive Benefits Insurance Agency v. Arkison77 Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014). In Executive Benefits, the Court was asked to determine how a bankruptcy court should proceed when it encounters a Stern claim. 78Id. at 2168. Identified by the characteristics of the counterclaim asserted in Stern v. Marshall, a Stern claim is defined as “a claim designated for final adjudication in the bankruptcy court as a statutory matter, but prohibited from proceeding in that way as a constitutional matter.” 79Id. at 2170 (emphasis added). The Court noted that “lower courts, including the Ninth Circuit in this case, have described Stern claims as creating a statutory ‘gap.’” 80Id. at 2172. This “gap” occurs because although under Stern v. Marshall, bankruptcy courts do not have the authority to enter final judgments on Stern claims, 81Id. at 2172–73. “§ 157(b) does not explicitly authorize bankruptcy judges to submit proposed findings of fact and conclusions of law in a core proceeding,” as it does with non-core proceedings related to a case under title 11. 82Id. at 2173; see 28 U.S.C. § 157(c)(1) (2012) (authorizing bankruptcy judges to “submit proposed findings of fact and conclusions of law to the district court” for non-core proceedings that are “otherwise related to a case under title 11”).

The Court unanimously held that despite this apparent “gap,” bankruptcy courts have the authority to treat Stern claims in the same manner as non-core proceedings under § 157(c). 83 Executive Benefits Ins. Agency, 134 S. Ct. at 2173. As a result, when a bankruptcy court faces a Stern claim it can issue “proposed findings of fact and conclusions of law to be reviewed de novo by the district court.” 84Id. at 2168; see 28 U.S.C. § 157(c) (2012).

In 2015, the Court decided a third case, Wellness International Network, Ltd. v. Sharif85 Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015). that significantly impacted the extent of bankruptcy courts’ jurisdiction. In Wellness, the Court held that Article III permits bankruptcy courts to enter final judgments on Stern claims provided that both parties in the action give their consent. 86Id. at 1944–45. In its opinion, the majority followed a line of reasoning that closely resembled the dissent in Stern87Id. applying a flexible approach to bankruptcy courts’ jurisdiction that takes into account the factors listed in Commodity Futures Trading Commission v. Schor88Id.; see Stern v. Marshall, 564 U.S. 462, 510–12 (2011). The Court in Wellness concluded that when evaluating Stern claims:

The Court must weigh “the extent to which the essential attributes of judicial power are reserved to Article III courts, and, conversely, the extent to which the non-Article III forum exercises the range of jurisdiction and powers normally vested only in Article III courts, the origins and importance of the right to be adjudicated, and the concerns that drove Congress to depart from the requirements of Article III.” Applying these factors, we conclude that allowing bankruptcy litigants to waive the right to Article III adjudication of Stern claims does not usurp the constitutional prerogatives of Article III courts. 89 Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45.

Thus, the Court’s holding in Wellness allows bankruptcy courts to administer final judgments in Stern claims provided that they obtain the consent of all parties involved in the action. 90Id. at 1944–45. Furthermore, the majority held that such consent may be satisfied by the express or implied consent of the parties. 91Id. at 1947; see 28 U.S.C. § 157(c)(2) (2012). The Court’s holding in Wellness supports a broad and pragmatic interpretation of bankruptcy courts’ authority to enter final judgments.

B. Bankruptcy Courts’ Authority in the Context of § 505

Many of the 1984 modifications to the Code, including those codified in §§ 151, 1334, and 157, aimed to remedy the constitutional issues identified by the Court in Northern Pipeline92 Pardo, supra note 23. Despite these attempts, difficulties surrounding the extent of bankruptcy courts’ authority under title 11 persist. 93See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern, 564 U.S. 462. One particular area of ambiguity is the scope of bankruptcy courts’ authority to enter final judgments on tax liability claims under § 505. 94See 11 U.S.C. § 505 (2012). Courts have produced a variety of interpretations regarding the jurisdiction of bankruptcy courts over § 505 proceedings, which can be classified under three broad approaches. 95See In re Johnston, 484 B.R. 698, 708 (Bankr. S.D. Ohio 2012). These approaches are by no means absolute and courts sometimes augment and combine them. Furthermore, jurisdictional determinations under these methods are still subject to certain limitations, as discussed later in Part C(5). Nevertheless, the three approaches depicted in the following sections exemplify the predominant applications of § 505. These three approaches are described in the cases below and analyzed in greater detail in Part C.

1. Section 505 as an Independent Basis for Jurisdiction

One approach, taken by several courts, treats § 505 as an independent basis for bankruptcy courts to make determinations on tax liability claims. 96Id. An example of this interpretation is found in the case of In re Luongo97In re Luongo, 259 F.3d 323 (5th Cir. 2001). In its opinion, the Fifth Circuit declined to classify § 505 proceedings under the three jurisdictional classifications of § 1334. 98Id. at 329. Instead, the court concluded that § 505 itself grants bankruptcy courts vast authority that is restricted only by the limitations expressly stated in the provision itself. 99Id. at 328–29.

This view was also expressed in the case of In re Fyfe100In re Fyfe, 186 B.R. 290, 292 (Bankr. N.D. Ga. 1995). Here, the bankruptcy court held that “the determination of tax liability by a bankruptcy court is discretionary under section 505(a), with the only restraint on bankruptcy court determinations being a previous determination of the amount or legality of the tax liability by a court of competent jurisdiction before the filing of the bankruptcy petition.” 101Id. The opinion describes bankruptcy courts’ authority as “discretionary” because it is widely accepted that the language of § 505 allows bankruptcy judges to abstain from ruling on requests for tax liability determinations. This topic is discussed in detail in Part C(6).

The opinions of In re Luongo and In re Fyfe reflect the view that § 505 independently grants bankruptcy courts jurisdictional and substantive authority to make tax liability determinations. 102In re Luongo, 259 F.3d 323; In re Fyfe, 186 B.R. 290. This is the broadest interpretation courts have adopted.

2. Core Proceedings “Arising Under” Title 11

The second approach many courts have applied concludes that bankruptcy courts have jurisdiction over § 505 proceedings based on the premise that such cases qualify as “arising under” jurisdiction under § 1334. The bankruptcy court’s discussion in In re UAL Corp. exemplifies this interpretation. 103In re UAL Corp., 336 B.R. 370 (Bankr. N.D. Ill. 2006). In this case, the court asserted that “[t]he determination of tax liability provided for by § 505(a) ‘arises under’ the Bankruptcy Code.” 104Id. at 371. In support of this assertion, it referred to the Fifth Circuit’s opinion in In re Wood105Id.; see In re Wood, 825 F.2d 90, 96–97 (5th Cir. 1987). Here, the Fifth Circuit discussed the three categories of proceedings listed in § 1334 and stated that the “arising under” title 11 category includes “proceedings that involve a cause of action created or determined by a statutory provision of title 11.” 106In re Wood, 825 F.2d at 96. Under this view, the language of § 505 satisfies “arising under” jurisdiction since it authorizes bankruptcy courts to make tax liability determinations, thereby creating a cause of action under title 11. 107 11 U.S.C. § 505(a)(1) (2012). The court noted that on its face, the wording of § 505 seems to grant bankruptcy courts nearly unlimited authority to make tax liability determinations. 108In re UAL Corp., 336 B.R. at 374. It explained that courts have recognized and responded to this predicament by establishing restrictions on bankruptcy courts’ § 505 authority based on time and the parties involved. 109Id. at 374–75. The limitations regarding the timing of the tax liability and the parties involved provide important constraints which are described later in Part C(5).

The bankruptcy court in In re Kennedy also utilized this approach to § 505. 110In re Kennedy, 529 B.R. 345 (Bankr. N.D. Ga. 2015). In its opinion, the court stated that “[a] proceeding ‘arising under’ title 11 involves a substantive right created by the Bankruptcy Code.” 111Id. at 349. Following this interpretation, the court held that “[t]he determination of tax liability provided for by § 505(a) ‘arises under’ the Bankruptcy Code, and is a core proceeding under 28 U.S.C. § 157(b)(2)(B), (I), and (O).” 112Id. (internal quotations omitted).

3. Non-core Proceedings “Related to” a Title 11 Case

Under the third approach taken by courts, bankruptcy courts only have the possibility of § 1334 “related to” jurisdiction over § 505 proceedings. Under this approach, “determinations as to the dischargeability of particular debts” are a recognized exception because these determinations are expressly identified as core proceedings under § 157(b)(2)(I). 113 28 U.S.C. § 157(b)(2)(I) (2012). As a result, nearly all courts agree that bankruptcy courts have “arising under” jurisdiction over tax dischargeability determinations. 114Id. § 157. However, other than those proceedings explicitly listed in § 157, this approach provides that bankruptcy courts at most have § 1334 “related to” jurisdiction over § 505 claims.

The court in In re Bush articulated the reasoning behind this approach. 115In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 (S.D. Ind. Aug. 12, 2016). In the interest of full disclosure, the author of this Comment was the 2016 summer intern for the Honorable William Lawrence who presided over this case. Here, the court held that a debtor’s motion under § 505 does not invoke a substantive right that satisfies the requirements for “arising under” jurisdiction under § 1334. 116Id. at *7–8. Instead, § 505 provides only a procedural right under title 11, whereas the actual substantive right is created by the Internal Revenue Code. 117Id. at *8. Therefore, under this approach, except for tax dischargeability determinations, bankruptcy courts are limited to § 1334 “related to” jurisdiction for determinations under § 505. 118Id. at *8–9 Moreover, before the bankruptcy court can assert “related to” jurisdiction over the § 505 proceedings, it must determine whether the circumstances satisfy the applicable standard for “related to.” 119 Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995); see 28 U.S.C. § 157(c)(1) (2012).

Courts determine whether the “related to” standard is met by applying tests like the previously described Pacor test, which asks if the proceeding will have any conceivable impact on the estate. 120 Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984). In In re Bush, the circumstances of the § 505 motion failed to satisfy the more stringent “related to” test applied in the Seventh Circuit. 121In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *8–9. This test maintains that a proceeding is only “related to” a title 11 case if “it affects the amount of property available for distribution or the allocation of property among creditors.” 122In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987). Because the proceeding failed this test, the court held that the bankruptcy court did not have the proper jurisdiction to enter a judgment or submit reviewable findings of fact and legal conclusions on the § 505 motion. 123In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *11–12; see 28 U.S.C. § 157 (2012).

Following a similar analysis, the court in In re Johnston held that it lacked subject matter jurisdiction over a requested tax liability determination. 124In re Johnston, 484 B.R. 698, 714 (Bankr. S.D. Ohio 2012). In its analysis, it noted that even within the Sixth Circuit, courts were split on whether § 505 independently granted bankruptcy courts jurisdiction over tax liability disputes. 125Id. at 708. Nevertheless, the court concluded “that § 505 does not serve as an additional grant of jurisdiction to the bankruptcy courts.” 126Id. at 712. Instead, it held that § 505 “allow[s] the court to determine tax liability . . . if the court otherwise has jurisdiction over that proceeding under the confines of the jurisdiction granted to it by § 1334(a) or (b).” 127Id.

The court then assessed the proceedings under each of the categories listed in § 1334. 128Id. at 711–14. It stated that the proceeding failed to satisfy the “arising in” classification since the requested determination regularly arises outside the context of bankruptcy cases. 129Id. at 712. The court also determined that the proceeding did not meet the standard for “arising under” title 11. 130Id. It noted that although the debtor argued that his complaint centered around dischargeability, the substantive issue actually concerned the separate issue of whether the debtor qualified as a “responsible person” under federal, state, and municipal tax law. 131Id. Finally, the court utilized the Pacor test to assess the proceeding under the “related to” classification. 132Id. at 711. It stated that the proceeding failed to meet the “related to” standard because the “rendering of the responsible person determination does not have any conceivable effect on the estate being administered . . . .” 133Id. As a result, the court held that it lacked subject matter jurisdiction under § 1334 and dismissed the case. 134Id. at 714.

C. Analysis of § 505 Approaches

The “independent basis,” “arising under,” and “related to” approaches described above attempt to outline bankruptcy courts’ jurisdictional limits over § 505 claims. 135 Not all courts use this bright line distinction. Some rely on a combination and try to differentiate each proceeding on an individual basis. However, distinguishing between individual circumstances is inefficient and can lead to inconsistencies. A bright line interpretation under one of these three approaches greatly simplifies this process and provides a more precise articulation of bankruptcy courts’ authority under § 505. Although each interpretation has advantages and disadvantages, the analysis below reveals that the “arising under” approach provides the optimal solution.

1. Constitutional Concerns

As discussed previously in Part A(3), the Supreme Court’s concerns regarding the extent of bankruptcy courts’ jurisdiction are reflected in the recent rulings of Stern v. Marshall, Executive Benefits Insurance Agency v. Arkison, and Wellness International Network, Ltd. v. Sharif136See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011). In these cases, the Court was forced to determine whether the Constitution permitted the broad authority granted to bankruptcy courts under the Code. 137 Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462. Specifically, all three holdings expressed concerns about bankruptcy courts’ authority extending to include subject matter reserved for Article III judges by the Constitution. 138 Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462. These separation of powers concerns echoed the apprehension the Court articulated almost thirty years earlier in Northern Pipeline139 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 54–55 (1982); see Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462. Together, these cases emphasize that lower courts should be wary of these concerns when they attempt to circumscribe the jurisdictional limitations of bankruptcy courts.

Although Northern Pipeline, Stern, Executive Benefits, and Wellness had a seismic impact on the overall jurisdiction of bankruptcy courts, the separation of powers concerns raised in these cases are not implicated in the context of § 505 proceedings. Section 505 creates an overlap between the subject matter jurisdiction of bankruptcy courts and tax courts. 140 11 U.S.C. § 505 (2012). However, Article I, § 8 of the Constitution states “[t]he Congress shall have power to lay and collect taxes,” and “[the power to] establish . . . uniform laws on the subject of bankruptcies throughout the United States.” 141 U.S. Const. art. I, § 8, cl. 1, 4. This language grants the legislative branch the authority to establish both tax courts and bankruptcy courts. 142 U.S. Const. art. I, § 8. As a result, the overlap between tax courts and bankruptcy courts created by § 505 only involves Article I judges. 143Id. Therefore, in the context of § 505, bankruptcy courts are not at risk of intruding on subject matter delegated to Article III judges. For this reason, granting bankruptcy courts broad authority under § 505 does not invoke the separation of powers concerns described by the Supreme Court in the previous four cases. 144See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

Further analysis of the Court’s more recent holdings in Stern, Executive Benefits, and Wellness reveals a trend that favors an expansive reading of § 505. 145See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462. This trend is initially demonstrated by the dissent in Stern, which supported a broad yet pragmatic approach to bankruptcy courts’ jurisdiction. 146 Stern, 564 U.S. at 510–12 (J. Breyer, dissenting). Three years later in Executive Benefits, the Court expanded bankruptcy courts’ jurisdiction to allow them to submit reviewable findings of fact and conclusions of law in core proceedings where they lack constitutional authority. 147 Executive Benefits Ins. Agency, 134 S. Ct. at 2170. Finally, in Wellness, the Court increased bankruptcy courts’ jurisdiction even further by holding that the constitutional limitations of Stern claims could be overcome so long as both parties consented to the bankruptcy court’s jurisdiction. 148 Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45. These three cases demonstrate the Court’s current trend of expanding bankruptcy courts’ jurisdiction. 149See Stern, 564 U.S. at 510–12 (J. Breyer, dissenting); Executive Benefits Ins. Agency, 134 S. Ct. at 2170; Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45. This continued expansion of bankruptcy courts’ jurisdiction supports granting bankruptcy courts’ broad authority to make determinations under § 505.

Another possible constitutional concern arises from bankruptcy courts’ ability to adjudicate state taxes. There are four types of courts that have original jurisdiction over federal tax litigation: the district courts, tax courts, courts of federal claims, and bankruptcy courts. 150 Steve R. Johnson, The Phoenix and the Perils of the Second Best: Why Heightened Appellate Deference to Tax Court Decisions is Undesirable, 77 Or. L. Rev. 235, 238–40 (1998). With respect to state taxes, the Tax Injunction Act, codified in 28 U.S.C. § 1341, prevents federal courts from “enjoin[ing], suspend[ing] or restrain[ing] the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 151 28 U.S.C. § 1341 (2012). For this reason, “[m]any people believe that [§ 1341] insulates state tax determinations almost entirely from federal court oversight.” 152 Clark R. Calhoun & Timothy L. Fallaw, Avoiding the TIA: Not Impossible, But Close, Tax Analysts Audit + Beyond 425, 425 (2010). However, bankruptcy courts are a unique exception to § 1341. 153 City Vending of Muskogee, Inc. v. Oklahoma Tax Comm’n, 898 F.2d 122, 123 (10th Cir. 1990). As the Tenth Circuit noted, “[§ 1341] will not preclude the determination of state tax liability where federal courts have jurisdiction under the Bankruptcy Code, 11 U.S.C. § 505.” 154Id. As a result, § 505 appears to create federalism concerns.

Courts have recognized this problem, and in response, they have limited bankruptcy courts’ authority to determine state taxes. As one court noted,

[§ 1341’s exception for bankruptcy courts] does not mean that § 505 should permit a debtor/taxpayer simply to forego the state process and use the bankruptcy court’s adversary proceeding vehicle to “federalize” a question that otherwise would be exclusively an issue of state law. A taxpayer cannot challenge a state tax for the first time in federal court when a state provides a process to challenge the tax, see, e.g., Patel v. City of San Bernardino, 310 F.3d 1138, 1141 (9th Cir. 2002); Bernard v. Village of Spring Valley, N.Y., 30 F.3d 294, 297 (2d Cir. 1994) (holding that action in federal court was barred when plaintiff had procedurally adequate remedies that could be sought in state court); Daytona Beach Racing and Recreational Facilities Dist. v. County of Volusia, 579 F.2d 367, 369 (5th Cir. 1978) (holding that plaintiff could not “fail to take advantage of the state remedy and then litigate in federal court”). 155In re Pontes, 310 F. Supp. 2d 447, 453 (D.R.I. 2004).

The restriction described above is significant because it allows for a broad approach to § 505 while minimizing federalism issues.

2. Goals of Bankruptcy

Bankruptcy law in the modern era has two primary goals. First, it aims to facilitate “equitable distribution of the debtor’s assets among his or her creditors.” 156 9 Am. Jur. 2d Bankruptcy § 5. Second, it hopes to provide debtors with a fresh start. 157Id.

Evaluating the “independent basis,” “arising under,” and “related to” approaches to § 505 in light of the two goals of bankruptcy supports granting bankruptcy courts broad authority. Vesting the bankruptcy courts with broad authority promotes these goals because bankruptcy judges are in a better position to understand the debtor’s financial circumstances and ability to repay. Bankruptcy judges’ additional knowledge of the debtor’s financial situation enables them to better determine the amount of tax liabilities the debtor can reasonably afford, thereby facilitating repayment to creditors as well as the debtor’s fresh start. Furthermore, in most cases, granting the bankruptcy judge broad authority under § 505 allows for more efficient determinations of the debtor’s tax liabilities. In turn, this increased efficiency expedites the bankruptcy process, thereby facilitating both the distribution of the debtor’s assets as well as the debtor’s fresh start. For these reasons, the “independent basis” or “arising under” approaches to § 505 would help promote the two primary goals of bankruptcy. In contrast, the “related to” approach, where the final determination is left to the district or tax court, would likely hinder bankruptcy’s main objectives.

3. Statutory Analysis

Several canons of statutory interpretation should also be considered when evaluating courts’ approaches to § 505 proceedings.

a. Plain Meaning Canon

First, one should examine the plain meaning of § 505. As the Court stated in Caminetti v. United States:

It is elementary that the meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain, and if the law is within the constitutional authority of the lawmaking body which passed it, the sole function of the courts is to enforce it according to its terms. 158 Caminetti v. United States, 242 U.S. 470, 485 (1917).

As previously noted, the constitutional authority “to lay and collect taxes” is expressly delegated to Congress under Article I of the Constitution. 159 U.S. Const. art. I, § 8, cl. 1. Therefore, as required by Caminetti, the legislative branch has the proper “constitutional authority” to grant bankruptcy courts the power to make tax determinations under § 505. 160 U.S. Const. art. I, § 8; see Caminetti, 242 U.S. at 485.

Section 505(a)(1) states:

Except as provided in paragraph (2) of this subsection, the court may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax, whether or not previously assessed, whether or not paid, and whether or not contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction. 161 11 U.S.C. § 505(a)(1) (2012) (emphasis added).

Here, the plain and general meaning of § 505 supports granting bankruptcy courts broad authority. 162Id. § 505. The expansive nature of the statute is reflected in the repeated use of the word “any” and the phrase “whether or not.” 163Id. § 505(a)(1). There is no limiting language within subsection (1) itself, and as discussed later, the restrictions imposed in subsection (2) are minimal. 164Id. § 505(a). These restrictions are discussed in greater detail in Part C(5)(a). Thus, under the plain meaning approach described in Caminetti, § 505 appears to grant bankruptcy courts an independent basis for jurisdiction. 165See 11 U.S.C. § 505 (2012); Caminetti, 242 U.S. at 485.

However, as discussed throughout this Comment, the plain language of § 505 allows for bankruptcy courts to adjudicate matters far beyond the scope of bankruptcy. 166 11 U.S.C. § 505 (2012). The Sixth Circuit recognized this concern and noted that “a literal reading of section 505(a) could lead to absurd results: ‘[T]aken at face value, without recourse to the legislative history, § 505 makes the Bankruptcy Courts a second tax court system, empowering the Bankruptcy Court to consider “any” tax whatsoever, on whomsoever imposed.’” 167In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991). For this reason, although the plain meaning canon favors granting bankruptcy courts broad authority, further analysis is required to determine the necessary limitations of § 505.

b. Congressional Purpose

An additional aspect of § 505 that should be considered is Congress’s purpose in drafting the statute. “When [plain] meaning has led to absurd or futile results . . . this Court has looked beyond the words to the purpose of the act.” 168 United States v. Am. Trucking Ass’ns, 310 U.S. 534, 543 (1940). The court in In re Luongo noted that pursuant to the statutory history of § 505 “the section ‘authorizes the bankruptcy court to rule on the merits of any tax claim involving an unpaid tax, fine, or penalty relating to a tax, or any addition to a tax, of the debtor or the estate.’” 169In re Luongo, 259 F.3d 323, 328 (5th Cir. 2001). The court noted that legislative statements at the enactment of § 505 indicated:

[U]nder the paragraph heading “Jurisdiction of the tax court in bankruptcy cases,” the legislative statements instruct that “the bankruptcy judge will have authority to determine which court will determine the merits of the tax claim both as to claims against the estate and claims against the debtor concerning his personal liability for nondischargeable taxes.” 170Id. at 328–29 (emphasis original).

These discussions demonstrate Congress’s intent for bankruptcy courts to have authority beyond tax dischargeability determinations. 171Id. However, the legislative history provided in In re Luongo does not define the extent of bankruptcy courts’ authority under § 505. Thus, although these statements should be considered and support granting bankruptcy courts broad authority, further analysis is required. 172 Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 606–07 (1991).

c. Holistic Interpretation

Analyzing § 505 under the well-established principle of interpretation described in Utility Air Regulatory Group v. EPA yields an important distinction from the previous two approaches. 173 Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427 (2014). In this case, the Court emphasized that statutory interpretation must account for the “‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’” 174Id. at 2441.

Sections 151, 157, and 1334 are all located under title 28 “Judiciary and Judicial Procedure.” 175 28 U.S.C. §§ 151, 157, 1334 (2012). Section 1334 is titled “Bankruptcy Cases and Proceedings,” and it can be found under part IV “Jurisdiction and Venue” within chapter 85 “District Courts; Jurisdiction.” 176Id. § 1334. Sections 151 and 157 are titled “Designation of Bankruptcy Courts” and “Procedures” respectively. 177Id. §§ 151, 157. Sections 151 and 157 are located under part I “Organization of Courts,” within chapter 6 “Bankruptcy Judges.” 178Id. The placement and titles assigned to §§ 151, 157, and 1334 include references to bankruptcy judges and jurisdiction. Hence, the placement of these sections indicate that they are intended to grant jurisdictional authority.

In contrast, § 505 is titled “Determination of Tax Liability.” 179 11 U.S.C. § 505 (2012). It is found in title 11 “Bankruptcy” under chapter 5 “Creditors, the Debtor, and the Estate” subchapter I “Creditors and Claims.” 180Id. None of these titles refer to jurisdiction or the procedural aspects of bankruptcy courts. Thus, there is no indication that § 505’s placement is intended to confer jurisdiction.

As a result, the canon used in Utility Air demonstrates that § 505 does not grant jurisdiction like the “independent basis” approach suggests. 181 Util. Air Regulatory Grp., 134 S. Ct. at 2441. Instead, the organization of the U.S. Code indicates that bankruptcy courts’ jurisdiction arises from §§ 151, 157, and 1334. This favors the “arising under” and “related to” approaches since both derive bankruptcy courts’ jurisdiction from these three sections. 182Id.

Statutory analysis under these three canons produces slightly different conclusions. However, the canons of plain meaning and congressional purpose appear to support granting bankruptcy courts broad authority under § 505. 183See In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991). Furthermore, under the holistic principle described in Utility Air, the placement of § 505 within the Code strongly indicates that it does not independently confer jurisdiction. As a result, these three canons are best reconciled by the “arising under” approach to § 505. The “arising under” approach grants bankruptcy courts broad authority and justifies the placement of § 505 in the context of the Code.

4. Practical Considerations

In comparing the “independent basis,” “arising under,” and “related to” approaches to § 505, it is important to evaluate their practicality. Although the “related to” approach appears to be the most inefficient, as demonstrated in the subsequent paragraphs, this is not necessarily true. Under the “related to” approach, the bankruptcy judge must employ the following two-step analysis.

First, the judge must decide whether the non-core § 505 proceeding passes the applicable “related to” test. 184 28 U.S.C. § 157(b)(3) (2012). This test does not apply to tax dischargeability determinations which are expressly listed as core proceedings in § 157. 28 U.S.C. § 157(b)(2)(I) (2012). Most jurisdictions including the First, Fourth, Fifth, Sixth, Eighth, Ninth, Tenth, and Eleventh Circuits utilize the Pacor test or something closely resembling it. 185 Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995); see Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984); In re General Oil Distributors, Inc., 21 B.R. 888, 892 n. 13 (Bankr. E.D.N.Y. 1982) (identifying a proceeding as “related to” a Title 11 case if “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.”). However, other circuits apply different standards to determine if the proceedings are “related to” a title 11 case. For example, the Seventh Circuit holds that a proceeding is only adequately “related to” a title 11 case if “it affects the amount of property available for distribution or the allocation of property among creditors.” 186In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987). If it is uncertain whether the determination under § 505 will affect the estate, then the proceeding is considered “unrelated” and the bankruptcy court lacks subject matter jurisdiction. 187See In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867, at *4 (S.D. Ind. Aug. 12, 2016).

If the § 505 proceeding satisfies the applicable “related to” test, the bankruptcy court then proceeds to the second step. Under the second step, “the bankruptcy judge . . . submit[s] proposed findings of fact and conclusions of law to the district court.” 188 28 U.S.C. § 157(c)(1) (2012). The district judge will review these findings under a de novo standard and enter a final order or judgment on the matter. 189Id.

The two-step analysis required under the “related to” approach initially appears to be the most inefficient of the three approaches given that the other approaches allow the bankruptcy judge to make independent determinations. However, this is not necessarily true. Sometimes, when a case originates in the tax court, the party may qualify to file for bankruptcy. In this case, the party can file a bankruptcy petition followed by a § 505 motion requesting that the bankruptcy judge make specified tax liabilities determinations. The party’s act of filing the bankruptcy petition will operate as a stay on the tax court proceedings until the stay is lifted by the bankruptcy judge. 190 11 U.S.C. § 362(a)(1) (2012). In these circumstances, the tax court proceedings are completely suspended, and if the bankruptcy court has jurisdiction, the bankruptcy court is authorized to make tax liability determinations that would otherwise be decided in the tax court. This scenario leads to inefficiencies and raises concerns of forum shopping by debtors who believe that the bankruptcy court will offer a more favorable determination of their tax liabilities. 191See In re Encompass Servs. Corp., 337 B.R. 864, 876 (Bankr. S.D. Tex. 2006). Although this scenario will occur regardless of which § 505 approach is applied, there is likely an even greater risk of forum shopping in jurisdictions that apply the “independent basis” or “arising under” approaches.

Forum shopping is more likely to occur under the “independent basis” or “arising under” approaches because the potential debtor knows that the bankruptcy court will have the authority to make the requested tax determinations. Furthermore, these two approaches raise an additional fear for taxing authorities. Taxing entities argue that granting bankruptcy courts broad authority under § 505 “will further diminish the ability of the taxing authority to collect revenue by allowing the bankruptcy court to dictate the amounts owed to it.” 192 Shu-Yi Oei, Rethinking the Jurisdiction of Bankruptcy Courts over Post-Confirmation Federal Tax Liabilities: Towards A New Jurisprudence of 11 U.S.C. § 505, 19 Akron Tax J. 49, 66 (2004). Therefore, it can be argued that the “independent basis” and “arising under” approaches may promote inefficiencies as well as diminish the revenues of tax entities.

However, the practical concerns associated with granting the bankruptcy court broad authority under § 505 are significantly outweighed by the benefits afforded to debtors. Debtors often believe they will receive more favorable judgments in a bankruptcy court due to the goals of bankruptcy and the judge’s more extensive knowledge of their financial circumstances. 193 T. Keith Fogg, Grover Hartt, III & Mark S. Wallace, When, Why, and How Should A District Court Be Asked to Withdraw the Reference of A Tax Controversy to A Bankruptcy Court? Who Will Hear What When Bankruptcy Meets the Tax Code?, 20 Prac. Tax L. 41 (2005–2006). This perception bolsters debtors’ cooperation with courts and their judgments, which in turn facilitates repayments to creditors, including taxing authorities.

Moreover, in many cases, tax liabilities pose a significant burden for debtors to overcome before they can receive a fresh start. In contrast, taxing entities generally stand to gain very little from recovering these liabilities, especially considering the amount of resources they must expend if the taxes are disputed. For these reasons, this Comment proposes that granting bankruptcy courts broad authority under § 505 produces significant benefits that outweigh the increased risk of forum shopping and possible harm to tax entities.

5. Recognized Limitations

Apart from the “independent basis,” “arising under,” and “related to” approaches discussed above, courts have applied additional restrictions and methods to limit the expansive language of § 505.

a. Statutory Limitations

The language of § 505 itself provides three undisputed limitations. 194See 11 U.S.C. § 505(a)(2) (2012). Section 505(a)(2) expressly states that the bankruptcy court may not make tax liability determinations concerning:

(A) the amount or legality of a tax, fine, penalty, or addition to tax if such amount or legality was contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction before the commencement of the case under this title;
(B) any right of the estate to a tax refund, before the earlier of--

(i) 120 days after the trustee properly requests such refund from the governmental unit from which such refund is claimed; or

(ii) a determination by such governmental unit of such request; or

(C) the amount or legality of any amount arising in connection with an ad valorem tax on real or personal property of the estate, if the applicable period for contesting or redetermining that amount under applicable nonbankruptcy law has expired. 195Id. (emphasis added).

The first limitation imposed by § 505(a)(2)(A) reflects the well-known principle of res judicata along with the Rooker-Feldman doctrine. 196See Elizabeth Weller, Does the Bankruptcy Court Really Have Unlimited Authority to Redetermine Taxes?, 26 Am. Bankr. Inst. J. 9, 12 (2010); see also 18B Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Vikram David Amar, Richard D. Freer, Helen Hershkoffa, Joan E. Steinman & Catherine T. Struve, Federal Practice & Procedure § 4469.1 (2d ed. 2002) (explaining that the Rooker-Feldman doctrine establishes that “[t]he general statutes that establish original federal subject-matter jurisdiction in the district courts do not extend to an ‘appeal’ from a state-court judgment”). The adjudications identified in § 505(a)(2)(A), which bar the bankruptcy court from making a determination, also include “administrative orders” and “[n]egotiated settlements, which would operate to bar further litigation in state court.” 197 Weller, supra note 196.

The second limitation imposed by § 505(a)(2)(B) inhibits bankruptcy courts from making determinations over tax refunds “unless a refund has been ‘properly requested’ from the relevant governmental unit.” 198Id. This restriction encourages the trustee and debtor to comply with appropriate procedures, such as time limitations, when requesting a tax refund. 199Id.

The final limitation imposed by Section 505(a)(2)(C) restricts bankruptcy courts’ authority to redetermine ad valorem taxes. 200Id.; see Black’s Law Dictionary (10th ed. 2014) (“(Of a tax) proportional to the value of the thing taxed”). This provision was added by Congress in 2005 to further limit the broad authority of bankruptcy courts under § 505. 201 Weller, supra note 196.

b. Party Limitations

Another established restriction limits bankruptcy courts’ jurisdiction to make determinations under § 505 to only debtors in the case. 202See In re UAL Corp., 336 B.R. 370, 374 (Bankr. N.D. Ill. 2006). The Sixth Circuit in In re Wolverine Radio Co. identified this limitation, stating “virtually all the courts which have considered the issue have concluded that section 505(a) does not extend the bankruptcy court’s jurisdiction to parties other than the debtor.” 203In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991); In re Brandt–Airflex Corp., 843 F.2d 90, 94–96 (2d Cir. 1988); In re Interstate Motor Freight Sys., 62 B.R. 805 (Bankr. W.D. Mich. 1986). This limitation was also recognized by the Fifth Circuit in In re Prescription Home Health Care, Inc. 204In re Prescription Home Health Care, Inc., 316 F.3d 542 (5th Cir. 2002). In its opinion, the court noted that although the language of § 505 appears to enable bankruptcy courts to make tax liability determinations for all parties, in reality “it [only] grants jurisdiction to determine the tax liabilities of the debtor and the estate, not those of third parties.” 205Id. at 547.

c. Timing Limitations of § 505 Determinations

Bankruptcy judges’ authority under § 505 is additionally restricted based on when the tax liabilities accrued. 206 Oei, supra note 192, at 56 (emphasizing that the time distinctions under § 505 are based when the tax accrued rather than when the § 505 motion is brought). However, “in contrast to [the] consensus as to whose tax issues may be adjudicated under § 505(a), the courts have reached no consensus as to when a tax issue must arise in order to be subject to that adjudication.” 207In re UAL Corp., 336 B.R. 370, 374 (Bankr. N.D. Ill. 2006). In a bankruptcy case, tax liabilities can accrue in one of three timeframes: pre-petition tax liabilities, tax liabilities that occur during the “gap” after filing of a bankruptcy case but before confirmation of a plan, and post-confirmation tax liabilities. 208 Oei, supra note 192, at 54–58.

Pre-petition tax liabilities encompass those that have arisen before the debtor has filed for bankruptcy as well as tax refunds that are the result of pre-bankruptcy tax years. 209Id. at 54–55. Tax liabilities that accrue during the “gap” period are treated as administrative expenses under 11 U.S.C. § 503 “[e]xcept to the extent that they are priority taxes.” 210Id. at 55–56 (citing 11 U.S.C. §§ 503(b)(1)(B), 507(a)(8) (2012). Finally, post-confirmation tax liabilities accrue after a plan has been confirmed. 211Id. at 56. Commentaries on § 505 assert that bankruptcy judges have the authority to enter judgments on pre-petition tax liabilities. 212Id. at 55. Furthermore, § 505(b)(2) explicitly addresses bankruptcy judges’ ability to make determinations concerning tax liabilities arising during the “gap” period. 213 11 U.S.C. § 505(b)(2) (2012); see Oei, supra note 192, at 56. However, the extent of bankruptcy judges’ authority over post-confirmation tax liabilities is particularly controversial and subject to a range of court interpretations. 214In re UAL Corp., 336 B.R. at 374.

Under a broad view, post-confirmation tax liability determinations are permissible if they will affect the success of the plan. 215 Oei, supra note 192, at 71. Supporters of this perspective often rely on 11 U.S.C. § 1142, which indicates that bankruptcy courts have authority over post-confirmation determinations “necessary for the consummation of the [bankruptcy] plan.” 216 11 U.S.C. § 1142(b) (2012); see, e.g., In re U.S. Brass Corp., 301 F.3d 296, 305–06 (5th Cir. 2002) (holding that the bankruptcy court properly had jurisdiction and authority to enter judgment over post-confirmation claims identified as core proceedings). Proponents also note that neither the legislative history nor § 505 itself provides clear limitations regarding post-confirmation determinations. 217See In re Goldblatt Bros., Inc., 106 B.R. 522, 529–30 (Bankr. N.D. Ill. 1989). Therefore, § 1142 and the lack of limitations regarding § 505 indicate that bankruptcy courts are allowed to enter judgments on post-confirmation tax liabilities. 218Id. Courts have upheld this view with regard to post-confirmation tax liability determinations of confirmed chapter 11 plans. 219See id. at 525–26 (holding that post-confirmation tax liability claims were core proceedings that fell within the bankruptcy court’s jurisdiction under § 505); see also In re U.S. Brass Corp., 301 F.3d at 305–06 (holding that bankruptcy court properly had jurisdiction and authority to enter judgment over post confirmation claims identified as core proceedings). However, courts have not allowed bankruptcy judges to make § 505 determinations concerning the tax implications of merely proposed chapter 11 plans. 220See In re UAL Corp., 336 B.R. at 375–80 (holding that the bankruptcy court lacked jurisdiction under § 505 “to determine the tax effects of a Chapter 11 plan before it has been confirmed”).

In comparison, proponents of a narrower view argue that bankruptcy courts completely lack the authority to make § 505 determinations for post-confirmation tax liabilities. 221 Oei, supra note 192, at 60; see In re Holly’s, Inc., 172 B.R. 545, 562 (Bankr. W.D. Mich. 1994) (holding that “although § 505(a) speaks in broad terms, it does not grant a bankruptcy court subject matter jurisdiction over postconfirmation tax years”). The court in In re Hartman Material Handling Systems, Inc., agreed with this interpretation, stating that “‘[a]ny tax’ does not mean any tax of any entity at any point in time.” 222In re Hartman Material Handling Sys., Inc., 141 B.R. 802, 812 (Bankr. S.D.N.Y. 1992). The court noted that no section in the Code including § 505 grants bankruptcy courts’ authority over post-confirmation tax determinations. 223Id. at 812–13. Additionally, the court asserted that expanding bankruptcy courts’ jurisdiction in this manner would “establish a precedent for a former debtor to return to bankruptcy court to have any and all of its future tax consequences determined.” 224Id.

One author, Shu-Yi Oei, analyzed courts’ perspectives on § 505 post-confirmation tax determinations and concluded that bankruptcy courts should apply the narrower interpretation for three reasons. 225 Oei, supra note 192, at 96. First, she pointed out that § 505 is located under subchapter I, titled “Creditors and Claims” and is surrounded by other sections dealing with claims against the estate. 226Id. at 87. Oei notes that both pre-petition tax liabilities as well as “gap” tax liabilities, classified as administrative expenses, satisfy the definition of “claims” in bankruptcy; however, post-confirmation tax liabilities are not considered “claims” under the Code. 227Id.; see also In re UAL Corp., 336 B.R. at 375 (noting that § 505’s placement within subchapter I. indicates that tax determinations under § 505 “must be those that generate or offset claims against the estate, thus including matters that arose before the case was filed or during its administration, but not claims based on facts that would only arise after the estate has been terminated by confirmation of a plan”). Furthermore, Oei reasons that the surrounding sections indicate that § 505 should be classified as a “substantive” provision “that specifies the content of the bankruptcy court’s authority concerning a special type of bankruptcy claim” rather than a provision that grants jurisdiction. 228 Oei, supra note 192, at 86.

Second, Oei concedes that the legislative history fails to mention whether § 505 grants authority over post-confirmation tax liabilities. 229Id. at 87–88; see also In re Goldblatt Bros., Inc., 106 B.R. 522, 529–30 (Bankr. N.D. Ill. 1989). However, Oei cites to the legislative history of the Bankruptcy Reform Act, which indicates that chapter 5 was intended to focus “on the actions and property of the debtor prior to the bankruptcy filing and on debts owing by the debtor as of the day of the bankruptcy filing.” 230 Oei, supra note 192, at 88. Oei asserts that these factors reveal that the legislative history of § 505 supports the exclusion of bankruptcy courts’ authority over post-confirmation tax liabilities. 231Id.

The third reason Oei provides in support of the narrower view of § 505 is the narrower view’s consistency with general bankruptcy policy. 232Id. at 89. Typically, the bankruptcy court lacks authority over other kinds of post-confirmation claims. 233Id. Thus, allowing post-confirmation determinations under § 505 would be an abnormal extension of the bankruptcy court’s authority inconsistent with the overall structure of the Code. 234Id. This Comment agrees with Oei’s reasoning and assertion that bankruptcy courts should only have the authority to make § 505 determinations for tax liabilities accruing pre-petition and during the “gap” period, but not after a chapter 11 plan has been confirmed. 235Id. at 96.

d. External Time Restrictions

Although there is uncertainty regarding bankruptcy judges’ authority over tax liabilities based on when they accrue, it is widely accepted that § 505 determinations do not override other extenuating time limitations. “[S]ection 505 does not serve to revive a period of limitation if it has otherwise expired prior to the filing of the petition.” 236In re Qual Krom S., Inc., 119 B.R. 327, 329 (Bankr. S.D. Fla. 1990). This principle is exemplified in In re Home and Housing of Dade County, Inc. 237In re Home & Hous. of Dade Cty., Inc., 220 B.R. 492 (S.D. Fla. 1998). In this case, the court held that the debtor’s application for a charitable use exemption was time barred under Florida law, and the bankruptcy court’s § 505 determination could not usurp this time requirement.  238Id. at 495. Another example of this concept is reflected in the court’s holding in In re Millsaps239In re Millsaps, 133 B.R. 547 (Bankr. M.D. Fla. 1991). In this case, the court held that the debtor could not use § 505 to refile a tax refund that was time barred under the Internal Revenue Code. 240Id. at 553. As these cases demonstrate, if a debtor has failed to file a claim for a tax exemption or a tax refund within the required time period, the debtor will be unable to use § 505 to resurrect these claims. 241See In re Home & Hous. of Dade Cty., Inc., 220 B.R. at 495; In re Millsaps, 133 B.R. at 553.

The types of restrictions described above enable courts to significantly reduce the overlap between the jurisdiction of bankruptcy and tax courts. As a result, they prevent the “absurd” outcome produced by the plain meaning of § 505 which would otherwise allow bankruptcy courts to operate as a second tax court system.

6. Abstention

Finally, it is important to recognize that in certain circumstances a bankruptcy court may have jurisdiction, yet it is nevertheless ill-suited to adjudicate the matter at issue. In these situations, bankruptcy courts can and should abstain from the § 505 proceedings. Under both 28 U.S.C. § 1334(c)(1) and 11 U.S.C. § 505(a)(1), bankruptcy courts can exercise their discretion to abstain from adjudicating § 505 claims. 242 28 U.S.C. § 1334(c)(1) (2012); 11 U.S.C. § 505(a)(1) (2012). Abstention under these provisions is an important mechanism that bankruptcy courts should utilize to self-regulate the extent of their authority. 243 Some courts analyze both statutes when considering abstention; however, often courts invoke § 505(a)(1) as a basis for abstention without any discussion of § 1334(c)(1). See In re Hosp. Ventures/Lavista, 314 B.R. 843, 848–49 (Bankr. N.D. Ga. 2004) (“Most courts have exercised discretion . . . without even mentioning § 1334(c)(1) or note it without any meaningful discussion; courts that consider both statutes have concluded either that § 1334(c)(1) governs the question, that § 505(a) does, or that the bankruptcy court may abstain under either.”). Moreover, if applied properly, abstention alleviates many of the jurisdictional concerns previously described in this Comment.

Section 1334(c)(1) grants bankruptcy courts the discretion to voluntarily abstain from proceedings “in the interest of justice, or in the interest of comity with State courts or respect for State law.” 244 28 U.S.C. § 1334(c)(1) (2012). Courts have articulated several factors that should be weighed when a bankruptcy court is considering abstaining under § 1334(c)(1). 245In re Johnston, 484 B.R. 698, 714 (Bankr. S.D. Ohio 2012). The court in Johnston listed thirteen factors to consider: (1) the effect or lack of effect on the efficient administration of the estate if a court abstains; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court; (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the substance rather than form of an asserted core proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; (9) the burden of this court’s docket; (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; (11) the existence of a right to a jury trial; (12) the presence in the proceeding of non-debtor parties; and (13) any unusual or other significant factors. These factors include the proceeding’s impact on the estate, whether bankruptcy law issues predominate, and the relatedness of the § 505 proceeding to the overall bankruptcy case. 246Id. Courts have noted that abstention under § 1334 “is the exception, not the rule,” and it is only appropriate in extraordinary circumstances. 247Id.; see also McDaniel v. ABN Amro Mortg. Grp., 364 B.R. 644, 649 (S.D. Ohio 2007).

Section 505(a)(1) states “the court may determine,” rather than “must determine,” the tax liability issue. 248 11 U.S.C. § 505(a)(1) (2012) (emphasis added). Most courts agree that the permissive language of § 505(a)(1) allows bankruptcy courts to decide whether they should abstain from adjudicating a § 505 claim. Some courts have concluded that bankruptcy judges should only abstain from § 505 determinations when another suitable forum is available; however, most courts have not limited abstention to these circumstances. 249 Weller, supra note 196. Instead, “the majority have looked to the traditional basis for abstention and chosen to abstain where the determination of taxes would not benefit the bankruptcy estate or unsecured creditors, or would interfere with the uniformity of tax assessment within the tax jurisdiction.” 250Id. In these situations, a state or tax court may provide a better forum for adjudicating the tax liability issues. In determining whether abstention is appropriate under § 505(a)(1), courts have again articulated several factors to consider, including whether the proceeding involves complex tax issues, the proceeding’s effect on the administration of the bankruptcy case, and the proceeding’s impact on the bankruptcy court’s docket. 251In re Johnston, 484 B.R. at 718 (Bankr. S.D. Ohio 2012). The court in In re Johnston listed six abstention factors: (1) the complexity of the tax issues to be decided; (2) the need to administer the bankruptcy case in an orderly and efficient manner; (3) the burden on the bankruptcy court’s docket; (4) the length of time for trial and decision; (5) the asset and liability structure of the debtor; and (6) the prejudice to the debtor and the potential prejudice to the taxing authorities.

Although these factors provide guidance, bankruptcy courts have complete discretion to decide whether to abstain under either § 1334(c)(1) or § 505(a)(1). 252In re Middlesex Power Equip. & Marine, Inc., 292 F.3d 61, 69 (1st Cir. 2002). Furthermore, a bankruptcy court’s abstention decision is only reviewable for “abuse of discretion.” 253Id.; see also Gober v. Terra+Corp. (In re Gober), 100 F.3d 1195, 1207 (5th Cir. 1996); Coker v. Pan Am. World Airways, Inc. (In re Pan Am. Corp.), 950 F.2d 839, 844 (2d Cir. 1991). As a result of this high standard, abstention decisions are rarely overturned on appeal.

In addition to abstaining based on the factors discussed above, most courts agree that two particular instances involving § 505 proceedings strongly support abstention. The first situation that generally favors abstention is a chapter 7 no-asset case. 254In re Johnston, 484 B.R. at 719. In a chapter 7 no-asset case, the debtor lacks any assets that can be distributed amongst the creditors. 255Bankruptcy Basics Glossary, United States Courts, http://www.uscourts.gov/educational-resources/educational-activities/bankruptcy-basics-glossary#content-for-n (last visited Mar. 5, 2017). No-asset cases comprise the majority of chapter 7 bankruptcy cases and are created through state and federal exemptions. 256Id. Bankruptcy judges have the authority to make determinations under § 505 regardless of whether the proceeding is an asset or no-asset case. 257In re Smith, 122 B.R. 130, 133–34 (Bankr. M.D. Fla. 1990). However, no-asset cases often represent circumstances where the bankruptcy judge should abstain from making a § 505 determination. 258E.g., In re Smith, 122 B.R. 130. In these cases, the § 505 proceedings will have no impact on the estate. In addition, the trustee cannot facilitate asset distribution amongst creditors, thus limiting the court’s ability to further the goals of bankruptcy. 259See 9 Am. Jur. 2d Bankruptcy § 5. For these reasons, if there is another available forum, then the bankruptcy court should likely abstain.

A second situation that generally supports abstention is § 505 proceedings concerning nondischargeable tax liabilities. 260In re Luongo, 259 F.3d 323, 328–29 (5th Cir. 2001). Nondischargeable tax liabilities invoke factors for abstention under § 1334(c)(1) as well as § 505(a)(1) and, as a result, often present a situation where the bankruptcy court should consider abstaining. 261In re Johnston, 484 B.R. at 714, 718. The Code explicitly provides that bankruptcy judges have the authority to make determinations regarding the dischargeability of specific claims. 262 28 U.S.C. § 157(b)(2)(I) (2012). In addition, bankruptcy judges are authorized to enter judgments concerning taxes already identified as nondischargeable. 263 11 U.S.C. § 505 (2012). As the Fifth Circuit pointed out, the legislative statements accompanying § 505 demonstrate that Congress intended for bankruptcy judges to have the authority to make tax liability determinations for nondischargeable taxes. 264In re Luongo, 259 F.3d at 328–29. “[T]he bankruptcy judge will have authority to determine which court will determine the merits of the tax claim both as to claims against the estate and claims against the debtor concerning his personal liability for nondischargeable taxes.” 265Id. (internal quotations omitted).

While the bankruptcy court clearly has authority regardless of a tax’s dischargeability status, whether the § 505 motion relates to a dischargeable or nondischargeable tax is an important factor in deciding if the bankruptcy judge should abstain. This is a significant consideration because bankruptcy cannot provide debtors with relief from nondischargeable taxes. 266 11 U.S.C. § 523(a)(1) (2012); see 11 U.S.C. § 507(a)(8)(G) (2012). Although the debtor will be burdened if he is found liable for the nondischargeable taxes, this remains true irrespective of the forum where the proceedings are held. 267In re Johnston, 484 B.R. at 715. Thus, in these circumstances, the bankruptcy court cannot facilitate the debtor’s “fresh start.” 268See id. at 715–16. Furthermore, the determination of a debtor’s liability for a nondischargeable tax is generally rooted in state and federal tax law and fails to invoke substantive bankruptcy issues. 269Id. As a result, bankruptcy courts should strongly consider abstaining when faced with these proceedings. 270See 9 Am. Jur. 2d Bankruptcy § 5.

The ability of bankruptcy courts to abstain from § 505 determinations offers a remedy for several of the jurisdictional concerns discussed in the previous sections. First, it eases the tension caused by the jurisdictional overlap of bankruptcy and tax courts by allowing bankruptcy judges to abstain when significant tax issues arise. 271See Weller, supra note 196. Second, it enables bankruptcy judges to self-impose limitations on their authority. This is exemplified by the prevailing tendency of bankruptcy judges to abstain from § 505 determinations that do not impact the bankruptcy estate. 272See id. Finally, the factors for deciding whether to abstain directly encourage the bankruptcy judge to consider practical concerns such as efficiency, and the burdens imposed on debtors and taxing authorities. 273See id. Abstention can be used to alleviate many of the jurisdictional issues surrounding § 505; however, the discretionary nature of abstention prevents it from serving as a conclusive solution.

7. Outcome of Comment’s Proposal on Cases Discussed in Part B

As previously discussed, the “arising under” approach best reconciles the applicable canons of statutory interpretation. In addition, this approach promotes the goals of bankruptcy and has many practical benefits. This Comment asserts that the “arising under” approach, in conjunction with recognized limitations and proper use of abstention, provides the ideal solution to the broad language of § 505. An application of this assertion to the cases in Part B demonstrates its notable advantages and illuminates a particular weakness.

In re Luongo involved a debtor’s claim to compel the return of an income tax overpayment which the IRS used to setoff an unpaid tax liability. 274In re Luongo, 259 F.3d at 327. The claimant argued that the setoff was improper because the tax liability was discharged in bankruptcy and the overpayment had been exempted from the claimant’s bankruptcy estate. 275Id. The court in In re Luongo held that the bankruptcy court had the jurisdiction and authority to enter judgment on the dispute solely based on § 505, and it did not abuse its discretion by refusing to abstain. 276Id. at 336.

Utilizing the “arising under” approach produces the same results. “Arising under” jurisdiction would be satisfied because the dispute involved the legality of a debtor’s tax, which is considered a core proceeding. 277See 11 U.S.C. § 505(a)(1) (2012); 28 U.S.C. § 157(b)(1) (2012). Under the “arising under” approach, the bankruptcy court’s jurisdiction and authority are derived from §§ 1334 and 157 rather than from § 505 alone. 278 28 U.S.C. §§ 157, 1334 (2012). The bankruptcy court’s decision not to abstain did not constitute an abuse of discretion, and several abstention factors indicated that the bankruptcy court should adjudicate the claim. 279In re Luongo, 259 F.3d at 332. Specifically, the claim primarily involved issues regarding the Code and invoked bankruptcy’s goal of providing debtors with a fresh start. 280Id. Thus, applying the “arising under” approach to this case would yield the same outcome for slightly different reasons.

In re Fyfe was a chapter 7 case involving determinations for the amount of federal income tax liability, the dischargeability of debt arising from federal income taxes, and for the validity of a tax lien on debtor’s property. 281In re Fyfe, 186 B.R. 290, 291 (Bankr. N.D. Ga. 1995). As with In re Luongo, applying the “arising under” approach to this case produces the same outcome utilizing different reasoning. In In re Fyfe, the court stated that § 505(a) alone granted the bankruptcy court jurisdiction and authority to enter judgment on the tax liabilities in dispute. 282Id. In contrast, if the “arising under” approach is applied, the disputed tax liabilities would be considered “core” proceedings. 283See 11 U.S.C. § 505 (2012). As a result, the bankruptcy court would have proper jurisdiction and authority premised on §§ 1334 and 157. 284See id. § 505(a)(1); 28 U.S.C. § 157(b)(1) (2012).

Application of the “arising under” approach in In re Johnston has a significant impact on the court’s reasoning. 285In re Johnston, 484 B.R. 698 (Bankr. S.D. Ohio 2012).In re Johnston involved a chapter 7 no-asset case, where the bankruptcy court was asked to determine whether the debtor was liable for unpaid trust fund taxes that arose from three corporate entities which he solely owned. 286Id. at 702. Although, as the court noted, it could be argued that the bankruptcy court’s decision concerned whether the debtor qualified as a “responsible person,” a holistic view of the proceeding demonstrated that the fundamental issue was whether the debtor was liable for the unpaid trust fund taxes. 287Id. at 704. Under the “arising under” approach this tax liability determination would fall within the broad language of § 505(a)(1) and would create a cause of action under title 11 thereby satisfying “arising under” jurisdiction under § 1334.

Although applying the “arising under” approach grants the bankruptcy court proper subject matter jurisdiction, the circumstances of the case strongly suggest that the court should abstain. The court in In re Johnston recognized this and despite its holding that it lacked jurisdiction, the court continued to evaluate the proceeding by weighing the factors associated with §§ 1334 and 505 abstention. 288Id. at 714–19. In its analysis the court emphasized many significant facts that favored abstention under § 1334 including: (1) the lack of effect on the administration of the estate and distributions to creditors; (2) the nondischargeable nature of the taxes; (3) the absence of bankruptcy issues; (4) the availability of an alternative forum; and (5) the court’s lack of jurisdiction over the person that the debtor alleged was the actual “responsible person.” 289Id. at 714–18.

The court also noted several factors that supported abstention under § 505 such as: (1) the absence of complex tax issues; (2) the lack of effect on the bankruptcy estate; (3) the determination would likely delay in estate’s closing; and (4) there were no assets to administer or distribute among creditors. 290Id. at 718–19. For these reasons, even though jurisdiction would be proper if the “arises under” approach is applied, careful consideration of the abstention factors associated with §§ 1334 and 505 demonstrates that the bankruptcy court should abstain. 291See id. at 714–19. This situation exemplifies how bankruptcy courts can effectively utilize abstention to limit their authority in circumstances where jurisdiction is controversial and where they are ill-suited to adjudicate the proceeding.

Application of the “arising under” approach to In re Bush produces a significant change in the case’s outcome. This case involved a chapter 7 debtor’s § 505 motion to determine the type and amount of tax penalties the debtor owed. 292In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *1 (S.D. Ind. Aug. 12, 2016). In In re Bush, the court applied the “related to” approach. 293Id. at *6–8. The debtor’s motion failed to satisfy the Seventh Circuit’s “related to” test, 294Id. at *11. which required the proceedings to “affect[] the amount of property available for distribution or the allocation of property among creditors.” 295In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987). As a result, the court held that the bankruptcy court lacked jurisdiction to enter judgment or submit reviewable findings of facts and legal conclusions on the motion. 296In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *11.

Under the “arising under” approach, the debtor’s motion would constitute a core proceeding, thus granting the bankruptcy court jurisdiction to enter a final judgment based on §§ 1334 and 157. 297See 11 U.S.C. § 505 (2012); 28 U.S.C. § 157 (2012). Although the bankruptcy court would have proper jurisdiction and authority under this approach, assessing the circumstances using the abstention factors discussed in Part C(6) strongly suggests that the bankruptcy court should abstain. 298In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867; see Part C(6). For example, the distribution of the estate would be unaffected by the determination since the penalties, regardless of type, “are subordinated to all other prepetition claims” and the debtor’s assets are insufficient to satisfy these other claims. 299In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *8. The debtor filed his bankruptcy case the morning his tax court trial was scheduled to commence. 300Id. at *2.

In addition, determining the type of tax penalties to be assessed was the only remaining issue before the tax court. 301Id. The filing of the bankruptcy case followed by the § 505 motion hindered the tax court from efficiently administering the case. 302Id. Furthermore, the suspicious timing of the debtor’s actions suggests that the debtor was engaging in forum shopping. 303See id. It is also unclear whether the penalties would be dischargeable and to what extent. 304Id. at *9. Thus, it is difficult to demonstrate how the determination would support the bankruptcy court’s fresh start objective. Finally, since determining the type of tax penalties was the only matter at issue, it is evident that the case did not involve complex bankruptcy issues that would have favored the bankruptcy court’s expertise. 305Id. at *8–9.

Despite the presence of these factors, the bankruptcy judge in In re Bush failed to abstain, and it is unlikely his decision would qualify as abuse of discretion on appeal, 306Id. at *1. demonstrating the biggest weakness in the “arising under” approach. Since this approach grants bankruptcy courts broad authority, instances may arise where bankruptcy judges will have the power to enter final judgments on § 505 motions even when the circumstances make it inadvisable. Situations like In re Bush, where a bankruptcy judge fails to adhere to the abstention factors, allow for inconsistent administration of the law and intrude on the authority delegated to the tax court system.

8. Predicting Future Trends

In recent years, the law regarding bankruptcy courts’ jurisdiction has undergone significant changes. 307See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011). Section 505 is only a small portion of bankruptcy courts’ overall authority. However, analyzing the major revisions that have occurred to bankruptcy courts’ jurisdiction as a whole sheds light on how § 505 claims are likely to be handled. As described in Part A, the Supreme Court’s opinion in Northern Pipeline revealed the Court’s strict adherence to constitutional ideals—specifically the separation of powers doctrine. 308 N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 59–60 (1982). The Court’s opinion in Northern Pipeline followed by BAFJA and its decision in Stern v. Marshall each sought to reduce the scope of bankruptcy courts’ authority. 309 Stern, 564 U.S. at 469; N. Pipeline Constr. Co., 458 U.S. at 87; Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA), Pub. L. 98–353, 98 Stat. 333. This pattern shifted in Executive Benefits Insurance Agency and most recently in Wellness International Network, where the Court expanded bankruptcy courts’ authority and emphasized practicality when assessing their jurisdictional limitations. 310 Exec. Benefits Ins. Agency, 134 S. Ct. 2165; Wellness Int’l Network, Ltd., 135 S. Ct. at 1944. In the context of § 505, this trend by the Court appears to favor approaches like the “arising under” approach suggested by this Comment. The “arising under” approach to § 505 reflects the Court’s recent priorities because it grants bankruptcy courts broad authority while implementing restrictions in a practical manner through abstention and other recognized limitations.

Conclusion

Analysis of the “independent basis,” “arising under,” and “related to” approaches to § 505 reveals advantages and disadvantages associated with each approach. However, when compared to each other, the most viable interpretation is that § 505 proceedings are core proceedings “arising under” title 11. This view adheres to the goals of bankruptcy by granting bankruptcy courts broad authority to make determinations. Furthermore, this approach aligns with applicable principles of statutory interpretation while facilitating efficient and effective administration of bankruptcy proceedings. These theoretical and practical considerations demonstrate that the “arising under” approach offers the most suitable interpretation of § 505. Nevertheless, it is important for courts to apply and create jurisdictional limitations like the ones described in Part C(1) and Part C(5). These restrictions create practical boundaries on the authority of bankruptcy courts and prevent them from operating as a secondary tax court system. Even with these limitations, cases will arise where a bankruptcy court has jurisdiction; however, the particular circumstances of the case make jurisdiction highly unfavorable. Therefore, it is crucial for bankruptcy courts to utilize their ability to abstain when these situations occur. As demonstrated in this Comment, the “arising under” approach, combined with agreed upon limitations and conscientious abstention, produces the most pragmatic solution to the ambiguities surrounding § 505.

Footnotes

1 11 U.S.C. § 505(a)(1) (2012).

2See id. § 505(a)(2).

3See In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991).

4See 28 U.S.C. § 157 (2012); U.S. Const. art. III, § 1.

5See Stern v. Marshall, 564 U.S. 462 (2011); see also Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015).

6 11 U.S.C. § 505(a)(1) (2012).

7 Section 505 states that bankruptcy courts cannot determine tax liabilities (1) if the amount has already been determined by competent tribunal before the start of the case under Title 11, (2) the estate’s right to a tax refund before a specified time period, or (3) if the determination is connected to certain ad valorem taxes. 11 U.S.C. § 505(a)(2) (2012).

8Id. § 505.

9Id.

10 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 53 (1982).

11 Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2657.

12Id.

13Id.

14 N. Pipeline Const. Co., 458 U.S. at 53.

15Id. at 54.

16 David G. Epstein, Bruce A. Markell, Steve H. Nickles & Lawrence Ponoroff, Bankruptcy: Dealing with Financial Failure for Individuals and Businesses 561 (4th ed. 2015).

17Id.

18 N. Pipeline Const. Co., 458 U.S. 50.

19Id. at 52; see Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2668 (“The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.”).

20See N. Pipeline Const. Co., 458 U.S. at 57–60.

21Id. at 59–60.

22Id. at 87.

23 Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. Rev. 384 (2012).

24 Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA), Pub.L. 98–353, 98 Stat. 333.

25Id.

26Epstein, supra note 16, at 562.

27 28 U.S.C. § 151 (2012).

28 1 Collier on Bankruptcy ¶ 2.02 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.).

29 28 U.S.C. § 1334 (2012).

30Id.

31Id. § 1334(a).

32Id. § 1334(b) (emphasis added); see 28 U.S.C. § 1334(e)(2) (2012) (granting the district court exclusive jurisdiction over the property of the debtor and estate as well as over claims involving the employment of professional persons under § 327); see also 1 Collier, supra note 28, at ¶ 3.01 (noting that district courts’ lack of exclusive jurisdiction in subsection (b) allows for civil proceedings in a bankruptcy case to be brought in either federal or state court under specific circumstances).

33Id.

34 28 U.S.C. § 157 (2012).

35 1 Collier, supra note 28, at ¶ 2.02; see 28 U.S.C. § 151 (2012).

36 28 U.S.C. § 157 (2012) (stating that district courts “may” refer title 11 cases and proceedings to “the bankruptcy judges for the district”).

37 1 Collier, supra note 28, at ¶ 3.02.

38Id.

39 28 U.S.C. § 157 (2012).

40Id. § 157(b)(1) (emphasis added).

41Id. § 157; see 28 U.S.C. § 1334(b) (2012).

42See 28 U.S.C. § 157(b)(2) (2012).

43Id. § 157(c)(1).

44Id.

45Id.

46Id.

47In re Wood, 825 F.2d 90, 96 (5th Cir. 1987); see 1 Collier, supra note 28, at ¶ 3.02.

48In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02.

49In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02 (“The phraseology of section 157 leads to the conclusion that there is no such thing as a core matter that is ‘related to’ a case under title 11. Core proceedings are, at most, those that arise in title 11 cases or arise under title 11.”).

50In re Wood, 825 F.2d at 96; see 1 Collier, supra note 28, at ¶ 3.02.

51 1 Collier, supra note 28, at ¶ 3.01; see 28 U.S.C. § 1331 (2012) (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”) (emphasis added).

52 1 Collier, supra note 28, at ¶ 3.01.

53In re Wood, 825 F.2d at 96–97.

54Epstein, supra note 16, at 564.

55 28 U.S.C. § 157(c)(1) (2012).

56 Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995).

57Id.

58 Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984).

59Id. (emphasis original).

60See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011).

61 Stern, 564 U.S. at 469.

62Id.

63Id.

64Id. at 475.

65 28 U.S.C. § 157(b)(2)(C) (2012).

66 Stern, 564 U.S. at 477–78.

67 Stern, 564 U.S. at 477; see N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 57–60 (1982).

68 Stern, 564 U.S. at 478.

69Id. at 482–85.

70Id. at 482.

71Id. at 482–84.

72Id. at 503.

73Id. at 503; see U.S. Const. art. I, § 8.

74 Stern, 564 U.S. at 505–21.

75Id. at 510–12.

76Id. at 513.

77 Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014).

78Id. at 2168.

79Id. at 2170 (emphasis added).

80Id. at 2172.

81Id. at 2172–73.

82Id. at 2173; see 28 U.S.C. § 157(c)(1) (2012) (authorizing bankruptcy judges to “submit proposed findings of fact and conclusions of law to the district court” for non-core proceedings that are “otherwise related to a case under title 11”).

83 Executive Benefits Ins. Agency, 134 S. Ct. at 2173.

84Id. at 2168; see 28 U.S.C. § 157(c) (2012).

85 Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015).

86Id. at 1944–45.

87Id.

88Id.; see Stern v. Marshall, 564 U.S. 462, 510–12 (2011).

89 Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45.

90Id. at 1944–45.

91Id. at 1947; see 28 U.S.C. § 157(c)(2) (2012).

92 Pardo, supra note 23.

93See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern, 564 U.S. 462.

94See 11 U.S.C. § 505 (2012).

95See In re Johnston, 484 B.R. 698, 708 (Bankr. S.D. Ohio 2012).

96Id.

97In re Luongo, 259 F.3d 323 (5th Cir. 2001).

98Id. at 329.

99Id. at 328–29.

100In re Fyfe, 186 B.R. 290, 292 (Bankr. N.D. Ga. 1995).

101Id. The opinion describes bankruptcy courts’ authority as “discretionary” because it is widely accepted that the language of § 505 allows bankruptcy judges to abstain from ruling on requests for tax liability determinations. This topic is discussed in detail in Part C(6).

102In re Luongo, 259 F.3d 323; In re Fyfe, 186 B.R. 290.

103In re UAL Corp., 336 B.R. 370 (Bankr. N.D. Ill. 2006).

104Id. at 371.

105Id.; see In re Wood, 825 F.2d 90, 96–97 (5th Cir. 1987).

106In re Wood, 825 F.2d at 96.

107 11 U.S.C. § 505(a)(1) (2012).

108In re UAL Corp., 336 B.R. at 374.

109Id. at 374–75. The limitations regarding the timing of the tax liability and the parties involved provide important constraints which are described later in Part C(5).

110In re Kennedy, 529 B.R. 345 (Bankr. N.D. Ga. 2015).

111Id. at 349.

112Id. (internal quotations omitted).

113 28 U.S.C. § 157(b)(2)(I) (2012).

114Id. § 157.

115In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 (S.D. Ind. Aug. 12, 2016). In the interest of full disclosure, the author of this Comment was the 2016 summer intern for the Honorable William Lawrence who presided over this case.

116Id. at *7–8.

117Id. at *8.

118Id. at *8–9

119 Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995); see 28 U.S.C. § 157(c)(1) (2012).

120 Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984).

121In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *8–9.

122In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987).

123In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *11–12; see 28 U.S.C. § 157 (2012).

124In re Johnston, 484 B.R. 698, 714 (Bankr. S.D. Ohio 2012).

125Id. at 708.

126Id. at 712.

127Id.

128Id. at 711–14.

129Id. at 712.

130Id.

131Id.

132Id. at 711.

133Id.

134Id. at 714.

135 Not all courts use this bright line distinction. Some rely on a combination and try to differentiate each proceeding on an individual basis. However, distinguishing between individual circumstances is inefficient and can lead to inconsistencies. A bright line interpretation under one of these three approaches greatly simplifies this process and provides a more precise articulation of bankruptcy courts’ authority under § 505.

136See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011).

137 Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

138 Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

139 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 54–55 (1982); see Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

140 11 U.S.C. § 505 (2012).

141 U.S. Const. art. I, § 8, cl. 1, 4.

142 U.S. Const. art. I, § 8.

143Id.

144See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

145See Wellness Int’l Network, Ltd., 135 S. Ct. 1932; Executive Benefits Ins. Agency, 134 S. Ct. 2165; Stern, 564 U.S. 462.

146 Stern, 564 U.S. at 510–12 (J. Breyer, dissenting).

147 Executive Benefits Ins. Agency, 134 S. Ct. at 2170.

148 Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45.

149See Stern, 564 U.S. at 510–12 (J. Breyer, dissenting); Executive Benefits Ins. Agency, 134 S. Ct. at 2170; Wellness Int’l Network, Ltd., 135 S. Ct. at 1944–45.

150 Steve R. Johnson, The Phoenix and the Perils of the Second Best: Why Heightened Appellate Deference to Tax Court Decisions is Undesirable, 77 Or. L. Rev. 235, 238–40 (1998).

151 28 U.S.C. § 1341 (2012).

152 Clark R. Calhoun & Timothy L. Fallaw, Avoiding the TIA: Not Impossible, But Close, Tax Analysts Audit + Beyond 425, 425 (2010).

153 City Vending of Muskogee, Inc. v. Oklahoma Tax Comm’n, 898 F.2d 122, 123 (10th Cir. 1990).

154Id.

155In re Pontes, 310 F. Supp. 2d 447, 453 (D.R.I. 2004).

156 9 Am. Jur. 2d Bankruptcy § 5.

157Id.

158 Caminetti v. United States, 242 U.S. 470, 485 (1917).

159 U.S. Const. art. I, § 8, cl. 1.

160 U.S. Const. art. I, § 8; see Caminetti, 242 U.S. at 485.

161 11 U.S.C. § 505(a)(1) (2012) (emphasis added).

162Id. § 505.

163Id. § 505(a)(1).

164Id. § 505(a). These restrictions are discussed in greater detail in Part C(5)(a).

165See 11 U.S.C. § 505 (2012); Caminetti, 242 U.S. at 485.

166 11 U.S.C. § 505 (2012).

167In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991).

168 United States v. Am. Trucking Ass’ns, 310 U.S. 534, 543 (1940).

169In re Luongo, 259 F.3d 323, 328 (5th Cir. 2001).

170Id. at 328–29 (emphasis original).

171Id.

172 Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 606–07 (1991).

173 Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427 (2014).

174Id. at 2441.

175 28 U.S.C. §§ 151, 157, 1334 (2012).

176Id. § 1334.

177Id. §§ 151, 157.

178Id.

179 11 U.S.C. § 505 (2012).

180Id.

181 Util. Air Regulatory Grp., 134 S. Ct. at 2441.

182Id.

183See In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991).

184 28 U.S.C. § 157(b)(3) (2012). This test does not apply to tax dischargeability determinations which are expressly listed as core proceedings in § 157. 28 U.S.C. § 157(b)(2)(I) (2012).

185 Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995); see Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984); In re General Oil Distributors, Inc., 21 B.R. 888, 892 n. 13 (Bankr. E.D.N.Y. 1982) (identifying a proceeding as “related to” a Title 11 case if “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.”).

186In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987).

187See In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867, at *4 (S.D. Ind. Aug. 12, 2016).

188 28 U.S.C. § 157(c)(1) (2012).

189Id.

190 11 U.S.C. § 362(a)(1) (2012).

191See In re Encompass Servs. Corp., 337 B.R. 864, 876 (Bankr. S.D. Tex. 2006).

192 Shu-Yi Oei, Rethinking the Jurisdiction of Bankruptcy Courts over Post-Confirmation Federal Tax Liabilities: Towards A New Jurisprudence of 11 U.S.C. § 505, 19 Akron Tax J. 49, 66 (2004).

193 T. Keith Fogg, Grover Hartt, III & Mark S. Wallace, When, Why, and How Should A District Court Be Asked to Withdraw the Reference of A Tax Controversy to A Bankruptcy Court? Who Will Hear What When Bankruptcy Meets the Tax Code?, 20 Prac. Tax L. 41 (2005–2006).

194See 11 U.S.C. § 505(a)(2) (2012).

195Id. (emphasis added).

196See Elizabeth Weller, Does the Bankruptcy Court Really Have Unlimited Authority to Redetermine Taxes?, 26 Am. Bankr. Inst. J. 9, 12 (2010); see also 18B Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Vikram David Amar, Richard D. Freer, Helen Hershkoffa, Joan E. Steinman & Catherine T. Struve, Federal Practice & Procedure § 4469.1 (2d ed. 2002) (explaining that the Rooker-Feldman doctrine establishes that “[t]he general statutes that establish original federal subject-matter jurisdiction in the district courts do not extend to an ‘appeal’ from a state-court judgment”).

197 Weller, supra note 196.

198Id.

199Id.

200Id.; see Black’s Law Dictionary (10th ed. 2014) (“(Of a tax) proportional to the value of the thing taxed”).

201 Weller, supra note 196.

202See In re UAL Corp., 336 B.R. 370, 374 (Bankr. N.D. Ill. 2006).

203In re Wolverine Radio Co., 930 F.2d 1132, 1139 (6th Cir. 1991); In re Brandt–Airflex Corp., 843 F.2d 90, 94–96 (2d Cir. 1988); In re Interstate Motor Freight Sys., 62 B.R. 805 (Bankr. W.D. Mich. 1986).

204In re Prescription Home Health Care, Inc., 316 F.3d 542 (5th Cir. 2002).

205Id. at 547.

206 Oei, supra note 192, at 56 (emphasizing that the time distinctions under § 505 are based when the tax accrued rather than when the § 505 motion is brought).

207In re UAL Corp., 336 B.R. 370, 374 (Bankr. N.D. Ill. 2006).

208 Oei, supra note 192, at 54–58.

209Id. at 54–55.

210Id. at 55–56 (citing 11 U.S.C. §§ 503(b)(1)(B), 507(a)(8) (2012).

211Id. at 56.

212Id. at 55.

213 11 U.S.C. § 505(b)(2) (2012); see Oei, supra note 192, at 56.

214In re UAL Corp., 336 B.R. at 374.

215 Oei, supra note 192, at 71.

216 11 U.S.C. § 1142(b) (2012); see, e.g., In re U.S. Brass Corp., 301 F.3d 296, 305–06 (5th Cir. 2002) (holding that the bankruptcy court properly had jurisdiction and authority to enter judgment over post-confirmation claims identified as core proceedings).

217See In re Goldblatt Bros., Inc., 106 B.R. 522, 529–30 (Bankr. N.D. Ill. 1989).

218Id.

219See id. at 525–26 (holding that post-confirmation tax liability claims were core proceedings that fell within the bankruptcy court’s jurisdiction under § 505); see also In re U.S. Brass Corp., 301 F.3d at 305–06 (holding that bankruptcy court properly had jurisdiction and authority to enter judgment over post confirmation claims identified as core proceedings).

220See In re UAL Corp., 336 B.R. at 375–80 (holding that the bankruptcy court lacked jurisdiction under § 505 “to determine the tax effects of a Chapter 11 plan before it has been confirmed”).

221 Oei, supra note 192, at 60; see In re Holly’s, Inc., 172 B.R. 545, 562 (Bankr. W.D. Mich. 1994) (holding that “although § 505(a) speaks in broad terms, it does not grant a bankruptcy court subject matter jurisdiction over postconfirmation tax years”).

222In re Hartman Material Handling Sys., Inc., 141 B.R. 802, 812 (Bankr. S.D.N.Y. 1992).

223Id. at 812–13.

224Id.

225 Oei, supra note 192, at 96.

226Id. at 87.

227Id.; see also In re UAL Corp., 336 B.R. at 375 (noting that § 505’s placement within subchapter I. indicates that tax determinations under § 505 “must be those that generate or offset claims against the estate, thus including matters that arose before the case was filed or during its administration, but not claims based on facts that would only arise after the estate has been terminated by confirmation of a plan”).

228 Oei, supra note 192, at 86.

229Id. at 87–88; see also In re Goldblatt Bros., Inc., 106 B.R. 522, 529–30 (Bankr. N.D. Ill. 1989).

230 Oei, supra note 192, at 88.

231Id.

232Id. at 89.

233Id.

234Id.

235Id. at 96.

236In re Qual Krom S., Inc., 119 B.R. 327, 329 (Bankr. S.D. Fla. 1990).

237In re Home & Hous. of Dade Cty., Inc., 220 B.R. 492 (S.D. Fla. 1998).

238Id. at 495.

239In re Millsaps, 133 B.R. 547 (Bankr. M.D. Fla. 1991).

240Id. at 553.

241See In re Home & Hous. of Dade Cty., Inc., 220 B.R. at 495; In re Millsaps, 133 B.R. at 553.

242 28 U.S.C. § 1334(c)(1) (2012); 11 U.S.C. § 505(a)(1) (2012).

243 Some courts analyze both statutes when considering abstention; however, often courts invoke § 505(a)(1) as a basis for abstention without any discussion of § 1334(c)(1). See In re Hosp. Ventures/Lavista, 314 B.R. 843, 848–49 (Bankr. N.D. Ga. 2004) (“Most courts have exercised discretion . . . without even mentioning § 1334(c)(1) or note it without any meaningful discussion; courts that consider both statutes have concluded either that § 1334(c)(1) governs the question, that § 505(a) does, or that the bankruptcy court may abstain under either.”).

244 28 U.S.C. § 1334(c)(1) (2012).

245In re Johnston, 484 B.R. 698, 714 (Bankr. S.D. Ohio 2012). The court in Johnston listed thirteen factors to consider: (1) the effect or lack of effect on the efficient administration of the estate if a court abstains; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court; (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the substance rather than form of an asserted core proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; (9) the burden of this court’s docket; (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; (11) the existence of a right to a jury trial; (12) the presence in the proceeding of non-debtor parties; and (13) any unusual or other significant factors.

246Id.

247Id.; see also McDaniel v. ABN Amro Mortg. Grp., 364 B.R. 644, 649 (S.D. Ohio 2007).

248 11 U.S.C. § 505(a)(1) (2012) (emphasis added).

249 Weller, supra note 196.

250Id.

251In re Johnston, 484 B.R. at 718 (Bankr. S.D. Ohio 2012). The court in In re Johnston listed six abstention factors: (1) the complexity of the tax issues to be decided; (2) the need to administer the bankruptcy case in an orderly and efficient manner; (3) the burden on the bankruptcy court’s docket; (4) the length of time for trial and decision; (5) the asset and liability structure of the debtor; and (6) the prejudice to the debtor and the potential prejudice to the taxing authorities.

252In re Middlesex Power Equip. & Marine, Inc., 292 F.3d 61, 69 (1st Cir. 2002).

253Id.; see also Gober v. Terra+Corp. (In re Gober), 100 F.3d 1195, 1207 (5th Cir. 1996); Coker v. Pan Am. World Airways, Inc. (In re Pan Am. Corp.), 950 F.2d 839, 844 (2d Cir. 1991).

254In re Johnston, 484 B.R. at 719.

255Bankruptcy Basics Glossary, United States Courts, http://www.uscourts.gov/educational-resources/educational-activities/bankruptcy-basics-glossary#content-for-n (last visited Mar. 5, 2017).

256Id.

257In re Smith, 122 B.R. 130, 133–34 (Bankr. M.D. Fla. 1990).

258E.g., In re Smith, 122 B.R. 130.

259See 9 Am. Jur. 2d Bankruptcy § 5.

260In re Luongo, 259 F.3d 323, 328–29 (5th Cir. 2001).

261In re Johnston, 484 B.R. at 714, 718.

262 28 U.S.C. § 157(b)(2)(I) (2012).

263 11 U.S.C. § 505 (2012).

264In re Luongo, 259 F.3d at 328–29.

265Id. (internal quotations omitted).

266 11 U.S.C. § 523(a)(1) (2012); see 11 U.S.C. § 507(a)(8)(G) (2012).

267In re Johnston, 484 B.R. at 715.

268See id. at 715–16.

269Id.

270See 9 Am. Jur. 2d Bankruptcy § 5.

271See Weller, supra note 196.

272See id.

273See id.

274In re Luongo, 259 F.3d at 327.

275Id.

276Id. at 336.

277See 11 U.S.C. § 505(a)(1) (2012); 28 U.S.C. § 157(b)(1) (2012).

278 28 U.S.C. §§ 157, 1334 (2012).

279In re Luongo, 259 F.3d at 332.

280Id.

281In re Fyfe, 186 B.R. 290, 291 (Bankr. N.D. Ga. 1995).

282Id.

283See 11 U.S.C. § 505 (2012).

284See id. § 505(a)(1); 28 U.S.C. § 157(b)(1) (2012).

285In re Johnston, 484 B.R. 698 (Bankr. S.D. Ohio 2012).

286Id. at 702.

287Id. at 704.

288Id. at 714–19.

289Id. at 714–18.

290Id. at 718–19.

291See id. at 714–19.

292In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *1 (S.D. Ind. Aug. 12, 2016).

293Id. at *6–8.

294Id. at *11.

295In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987).

296In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *11.

297See 11 U.S.C. § 505 (2012); 28 U.S.C. § 157 (2012).

298In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867; see Part C(6).

299In re Bush, No. 1:15-CV-1318-WTL-DKL, 2016 WL 4261867 at *8.

300Id. at *2.

301Id.

302Id.

303See id.

304Id. at *9.

305Id. at *8–9.

306Id. at *1.

307See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015); Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014); Stern v. Marshall, 564 U.S. 462 (2011).

308 N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 59–60 (1982).

309 Stern, 564 U.S. at 469; N. Pipeline Constr. Co., 458 U.S. at 87; Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA), Pub. L. 98–353, 98 Stat. 333.

310 Exec. Benefits Ins. Agency, 134 S. Ct. 2165; Wellness Int’l Network, Ltd., 135 S. Ct. at 1944.

* J.D., Emory University School of Law (2018); B.S., Indiana University (2015). I would like to thank my Notes and Comments Editor, Holland Stewart, and my faculty advisor, Professor Jennifer Mathews, for their advice and suggestions.