To Caesar, Only What Is Due - An Opportunity under § 505(a)(2)(C) for Ad Valorem Taxes?

Jackson Walker

Plagued with financial uncertainty and inadequate resources, debtors often fail to take the steps that are needed to minimize property taxes in the period leading up to bankruptcy. Tax protests go unfiled and valuations go unchecked. Faced with large, priority, and secured tax claims, § 505 of the Bankruptcy Code provides both the authority and procedure for debtors to attempt to reduce their taxes or penalties, without regard to whether the tax has been assessed, paid, contested before, or previously adjudicated. Congress added § 505 (a) (2) (C) of the Bankruptcy Code as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to severely restrict the ability of a bankruptcy court to revisit valuation issues for ad valorem taxes. On its face, § 505 (a) (2) (C) appears to close the applicable window of opportunity for a debtor to request a determination of taxes with respect to ad valorem taxes, as it limits the court’s authority if the “applicable period for contesting or redetermining” an ad valorem tax has expired under nonbankruptcy law.

Section 505 (a) (2) (C) provides as follows: (a)(2) The court may not so determine — (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.

Originally published in American Bankruptcy Institute on September 10, 2014.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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