Central District Consumer Bankruptcy Attorney's Association

I just wanted to share my research on this issue regarding whether a debt
for worker's compensation premiums are a nondischargeable debt and can be
construed as an "excise tax". It appears to depend on whether the state
requires that the insurance be purchased from the state, with no options
for private insurance.
*I**n re George*, 361 F. 3d 1157 - Court of Appeals, 9th Circuit 2004
(analyzing a California statute)
*In re Camilli*, 94 F. 3d 1330 - Court of Appeals, 9th Circuit 1996
(analyzing an Arizona statute)
*In re Carpenter*, 540 BR 691 - Bankr. Appellate Panel, 9th Circuit 2015
(analyzing a Montana statute)
North Dakota - my case - *North Dakota Workers Compensation Bureau v.
Voightman* (*In re Voightman* 239 B.R. 380, 381 (B.A.P. 8th Cir. 1999)
Bankruptcy Appellate Panel held a debtor's unpaid workers' compensation
premiums were entitled to priority under section 507(a)(8)(E) as excise
taxes, nondischargeable under section 523(a)(1)(A)) (When a state requires
all employers to purchase workers' compensation insurance from the state,
with no private insurance option, the premiums fairly consistently have
been classified as priority taxes. *Industrial Comm'n v. Camilli (In re
Camilli*), 94 F.3d 1330, 1335 (9th Cir.1996)).
*Ninth Circuit: **In re Lorber Industries of California,* 564 F. 3d 1098 -
Court of Appeals, 9th Circuit 2009: The Bankruptcy Code does not define
"excise tax," and federal courts do not rely on state law labels to
determine which obligations qualify. Instead, courts engage in a functional
examination to determine if a government exaction is an excise tax. See
Indus. Comm'n of Ariz. v. Camilli (In re Camilli), 94 F.3d 1330, 1331 (9th
Cir.1996);see additionally City of New York v. Feiring, 313 U.S. 283, 285,
61 S.Ct. 1028, 85 L.Ed. 1333 (1941)."
In order to effectuate the purposes of the Bankruptcy Code and limit the
number of governmental obligations entitled to priority, the court
established a four-part test to determine if a claim qualified as an excise
tax. Id. at 1066. The court held that an excise tax is: (a) an involuntary
pecuniary burden, regardless of name, laid upon individual or property; (b)
imposed by or under the authority of the legislature; (c) for public
purposes, including the purposes of defraying expenses of government or
undertakings authorized by it; and (d) under the police or taxing power of
the state.
"...In re Camilli favorably cited the Sixth Circuit's analysis in Suburban
I and II. 94 F.3dat 1334. A subsequent Ninth Circuit case drew on the Sixth
Circuit's reasoning, and added a fifth element to
the Lorber 1102 *1102 test. George v. Uninsured Employers Fund (In re
George), 361 F.3d 1157, 1162-63 (9th Cir.2004). In In re George, the court
found that the reimbursement claim of the California Uninsured Employers'
Fund ("Uninsured Fund") was not an excise tax. 361 F.3d at 1162-63. The
court noted that under the statutes governing the Uninsured Fund, if a
worker suffers a cumulative injury, both the subsequent employer and the
Uninsured Fund potentially have a claim against the uninsured employer for
a portion of the injury. Id. (citing Cal. Labor Code 5500.5). Because a
private creditor, the subsequent employer, can assert a claim against the
debtor similar to that of the Uninsured Fund, the court held that the
Fund's claim did not qualify as an excise tax."
In North Dakota (my case) there is a monopoly on workers comp
insurance and they don't accept private insurers. All premiums must be paid
to the North Dakota Workforce Safety and Insurance (WSI). Under current
9th circuit case law, if the debt to the government can be compared to a
hypothetical private insurer in the state then it's not an excise tax. For
example, if an employer could have hypothetically bought private work
comp insurance in the state but didn't, and now they owe the WSI for the
work comp premiums they didn't pay, then the debt owed to the WSI is not
considered an excise tax because it wouldn't be considered such with
respect to the private insurer. However, there is no such possibility of
having private work comp insurance in ND, so 9th Circuit case law seems to
hold this is a nondischargeable excise tax.
Holly Roark
Certified Bankruptcy Specialist*
*and Sports Lawyer*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
*Central District of California & District of Idaho* - Consumer Bankruptcy
Attorney
1875 Century Park East, Suite 600 Los Angeles, CA 90067
T (310) 553-2600; F (310) 553-2601
*By State Bar of California Board of Legal Specialization
On Tue, Jul 19, 2016 at 1:33 PM, John Faucher j.d.faucher@sbcglobal.net
[cdcbaa] wrote:
>
>
> 9th Circuit will apply ND law to determine what kind of liability the debt
> is - excise tax, wages, etc. Then it will apply federal law to determine
> whether it's dischargeable. 8th Circuit rulings will be persuasive but not
> precedential.
> John D. Faucher
> 818/889-8080
>
>
> On Monday, July 18, 2016 11:16 PM, "pnnzegge@yahoo.com [cdcbaa]" cdcbaa@yahoogroups.com> wrote:
>
>
>
> I will get your file ready for filing. We can always convert your case to
> chapter 13 if we can't do this in Chapter 7. Call me tomorrow to schedule
> when u can meet.
>
> Sent from my iPad
>
> On Jul 18, 2016, at 7:11 PM, Holly Roark hollyroark22@gmail.com [cdcbaa] cdcbaa@yahoogroups.com> wrote:
>
>
> A North Dakota state statute (8th Circuit) says "The personal liability of
> any person as provided in this section survives dissolution,reorganization,
> bankruptcy, receivership, or assignment for the benefit of creditors. For
> the purposes of this section, all wages paid by the corporation or limited
> liability company must be considered earned from any person determined to
> be personally liable."
>
> The 8th Circuit has held such debts subject to this statute (such as work
> comp insurance premiums) to be nondischargeable under this statute as
> "excise taxes".
>
> The 9th Circuit holds the opposite with respect to such work comp premium
> debts and does not hold them to be "excise taxes" or nondischargeable.
>
> If a Debtor living in the 9th Circuit incurs such a debt in the 8th
> Circuit because they have a business there (work comp premiums), will the
> 9th Circuit bk court apply the ND statute and find the debt
> nondischargeable in accord with the 8th Circuit's interpretation? Or will
> they apply their own rules? Does BK law in the 9th Circuit preempt this
> state statute? Is there such thing as an "ipso facto statute" that is
> unenforceable in bankruptcy?
>
>
> Holly Roark
> Certified Bankruptcy Specialist*
> *and Sports Lawyer*
> holly@roarklawoffices.com **primary email address**
> www.roarklawoffices.com
> *Central District of California & District of Idaho* - Consumer
> Bankruptcy Attorney
> 1875 Century Park East, Suite 600 Los Angeles, CA 90067
> T (310) 553-2600; F (310) 553-2601
> *By State Bar of California Board of Legal Specialization
>
>
>
>
>
I just wanted to share my research on this
issue regarding whether a debt for worker's compensation premiums are a
nondischargeable debt and can be construed as an "excise tax".
be
purchased from the state, with no options for private insurance.In re George, 361 F. 3d 1157 - Court of Appeals, 9th Circuit 2004 (analyzing
a California statute)In re Camilli, 94 F. 3d 1330 - Court of Appeals, 9th
Circuit 1996 (analyzing an Arizona statute)In re Carpenter, 540 BR 691 - Bankr. Appellate Panel, 9th
Circuit 2015 (analyzing a Montana statute)North Dakota - my case -North Dakota
Workers Compensation Bureau v. Voightman(In re VoightmanB.R. 380, 381 (B.A.P. 8th Cir. 1999) Bankruptcy Appellate Panel held a debtor's
unpaid workers' compensation premiums were entitled to priority under section
507(a)(8)(E) as excise taxes, nondischargeable under section 523(a)(1)(A))
(When a state requires all employers to purchase workers' compensation
insurance from the state, with no private insurance option, the premiums fairly
consistently have been classified as priority taxes.Industrial Comm'n
v. Camilli (In re Camilli), 94 F.3d 1330, 1335 (9th Cir.1996)).
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