CCA 200924047: Bankruptcy stay continued for notice-of-deficiency deadlines

Plain-English summary

Chief Counsel considered whether the automatic stay ended under Bankruptcy Code section 362(c)(3)(A) for deadlines tied to a statutory notice of deficiency issued before a debtor's first Chapter 13 case. It explained that the provision applied when the IRS had taken collection action before the second bankruptcy filing. Issuing a notice of deficiency was part of the tax-determination process, not collection. The IRS therefore should not calculate the last day to petition the Tax Court or the assessment limitations deadline based on termination of the stay. It should keep the matter in bankruptcy suspense until discharge or dismissal of the Chapter 13 case.

Ruling snapshot

• Question: Did a serial filer's automatic stay end for deadlines arising from a pre-bankruptcy notice of deficiency?
• Outcome: Advice given, the IRS should keep the case in bankruptcy suspense
• Key authorities: Bankruptcy Code § 362(c)(3)(A); Chief Counsel Notice CC-2008-007

Full text (IRS public release)

ID: CCA_2009040910443725 Number: 200924047
Release Date: 6/12/2009
Office: --------------
UILC: 6502.00-00, 6213.01-00, 6501.00- 00

From: ----------------
Sent: Thursday, April 09, 2009 10:44:44 AM
To: -----------------
Cc: -----------------------------------------------------------
Subject: FW: Bankruptcy/Automatic Stay/LDP/ASED

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The Service should not calculate the LDP or the ASED based on the BC section 362(c)(3)(A) termination of the automatic stay. The Chief Counsel Bankruptcy Deskbook explains that section 362(c)(3)(A) should be interpreted as applying only in cases in which the Service is taking collection action prior to the filing of the second case. (2-28 to 2-29.) The relevant IRS action at issue in your case is the issuance of the statutory notice of deficiency prior to the debtor's first Chapter 13 case. Because the issuance of the statutory notice of deficiency was part of the tax determination process, and not a collection action, the stay would not have terminated pursuant to BC 363(c)(3)(A) as to stat. notice-related matters (e.g., the running of the periods for the LDP and ASED). The Service, therefore, will need to retain the case in bankruptcy suspense until the debtor receives a discharge or her Chapter 13 case is dismissed.

This conclusion is buttressed by the discussion in CC-2008-007. The heading of part II. reads "[u]nder B.C. [section] 362(c)(3)(A), the stay terminates with respect to all actions to collect a debt against the debtor personally…" (Emphasis added.)

I hope this answers your question. Feel free to contact me if you have any questions about or further wish to discuss this matter.