When did California staff conclude the automatic stay ended for a corporate debtor with a confirmed Chapter 11 liquidation plan?

Plain-English summary

California legal staff concluded that the automatic stay protecting a corporate debtor ended on February 20, 1996, when the bankruptcy court entered the order confirming its Third Amended Plan of Liquidation.

The corporation had filed Chapter 11 on December 28, 1994 while tax petitions were pending. Its plan said confirmation lifted the stay as to estate property and that the remaining stay would end when the confirmation order was entered because the liquidating corporation was not seeking and was not entitled to a discharge.

The memorandum quoted 11 U.S.C. section 1141(d)(3), which says plan confirmation does not discharge a debtor when the plan liquidates all or substantially all estate property under the stated conditions. Staff therefore recommended scheduling related Board hearings in the same session because both cases concerned taxation of the same contracted transaction.

Common questions

Did the stay end when the court approved the plan or when the order was entered?

The memorandum used February 20, 1996, the date the confirmation order was entered.

Why was the corporate debtor not receiving a discharge?

Its plan was a liquidation plan, and the source quoted section 1141(d)(3) on when confirmation does not discharge a debtor.

What did staff recommend after the stay ended?

Scheduling the two related tax cases for the same Board session.

Citations and references

• 11 U.S.C. section 1141(d)(3) — discharge limitation for the liquidation plan discussed
• Third Amended Plan of Liquidation, paragraph VI(a) — plan language on termination of the stay quoted in the memorandum

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0001-150.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

Memorandum
170.0001.150

To :

Mr. Vic Anderson
Supervisor, Petitions Section

From :

Thomas J. Cooke
Tax Counsel

Subject:

A--- S--- and M--- Company, Inc.
Account No. SZ --- XX-XXXXXX-010/020

Date:

Telephone:

August 1, 1996

(916) 445-6496
CalNet 485-6496

T--- A--- S--- and M--- Company
Account No. SN -- XX-XXXXXX
Gary Jugum has requested that I respond to your memorandum to him dated July 29, 1996 concerning the above taxpayer. You ask that the Legal Section provide guidance on action to be taken on the taxpayer’s petitions. In your memorandum, you state that Notices of Determination for the periods October 1, 1986 to March 31, 1987 and April 1, 1987 to December 31, 1989 were issued to A--- S--- and M--- Company on February 14, 1991, with timely petitions for redeterminations filed by this taxpayer for those periods. On December 28, 1994, the taxpayer filed Chapter 11 bankruptcy. This taxpayer’s Third Amended Plan of Liquidation was ordered confirmed by the bankruptcy court on February 16, 1996, with the order entered on February 20, 1996 (see attached). Paragraph VI(a) of the Third Amended Plan of Liquidation provides, in part: “Upon confirmation of the Plan the automatic stay is lifted as to property of the estate. However, the stay continues to prohibit collection or enforcement of pre-petition claims against the debtor or the debtor’s property until the date the debtor receives a discharge, if any. Here, because the debtor is a corporation it does not seek and is not entitled to receive a discharge pursuant to Section 1141(d). Therefore, a discharge of the Debtor will be deemed denied, and the stay as to the Debtor and the Debtor’s property will terminate upon entry of the order confirming the Plan.”

Mr. Vic Anderson

-2-

August 1, 1996
170.0001.150

11 U.S.C. section 1141(d)(3) provides, in part:
“The confirmation of a plan does not discharge a debtor if“(A) the plan provides for the liquidation of all or substantially all of the property of the estate . . . .” It is our opinion that the bankruptcy automatic stay was lifted as to A--- S--- and M--Company on February 20, 1996, the date that the order confirming the Third Amended Plan of Liquidation was entered. It is our recommendation that a hearing before the Board be scheduled in both the A--S--- and M--- Company and the T--- A--- S--- and M--- cases for the same Board session as these cases involve application of the tax to a transaction which is the subject of a contract between these parties. TJC/cmm Attachment cc:

Mr. Rick A. Slater - w/attachment (MIC:55)
Rancho Mirage District Administrator (EHC)
Out-of-State District Administrator (OH)