The bipartisan Family Farmer Bankruptcy Clarification Act of 2017 (Sen 1237) was signed by President Trump on October 26 as part of the Additional Supplemental Appropriations for Disaster Relief Requirements Act of 2017 (HR 2266 ). The package passed the Senate on October 24 by an 82-to-17 vote.
The farmer bankruptcy measure, sponsored by Senate Judiciary Committee Chairman Charles E. Grassley, R-Iowa, and Sen. Al Franken, D-Minn., aims to rectify a 2012 U.S. Supreme Court ruling (Hall , SCt.) on a previous amendment to Chapter 12 of the Bankruptcy Code that went against Congress’s intent, according to Grassley and Franken.
Congress believed it had addressed the issue of priority claims by the IRS in farm bankruptcy situations when it amended the Bankruptcy Code in 2005. However, the Supreme Court read the change narrowly to fail to include the collection of any tax liability relating to any post-petition sale of farm assets as placing the IRS within the category of general creditor. “Years ago Congress took specific steps to address these disadvantages, but the Supreme Court failed to recognize Congress’ intent when evaluating the law,” Grassley said in a statement. “I look forward to the president signing this bill into law,” he added.
The measure allows family farms to sell off part of their assets—often with a low tax basis—to fund their Chapter 12 bankruptcy reorganization without having to treat the resulting capital gain as a priority claim of the IRS. “This is a commonsense fix that will give farmers in Minnesota and across the country a fairer shake when they fall on hard times, and I’m glad to see that it’s set to become law,” Franken said in an October 26 statement.
By Jessica Jeane, Wolters Kluwer News Staff
Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017, Enrolled, as Signed by the President on October 26, 2017, HR 2266