Karrie L. Bercik, JD, LLM

The Original Bankruptcy Commission and its Legacy

The Commission was modeled after, and its work will undoubtedly be measured against that of, the original Bankruptcy Commission (the "1970 commission"). In 1970, Congress passed a resolution creating a special commission to study the bankruptcy laws of the United States for the purpose of adopting a comprehensive new legislative scheme (fn. 10). The 1970 commission hired as one of its consultants William T. Plumb, Jr., a prominent tax lawyer from Washington, D.C., whose books and articles on tax law subjects remain classics today.

The 1970 commission reported three years after its birth a two volume product consisting of a new comprehensive bankruptcy statute (fn. 11) and a report consisting of 12 well annotated chapters (fn. 12), each setting forth the 1970 commission's deliberations and reasoning as the basis for its proposed statute. Mr. Plumb went beyond the report. Not only did he contribute a chapter to the 1970 commission's report explaining the few tax provisions included in the bill (fn. 13); he produced a series of four law review articles published during a one year span that stretched 600 pages (fn. 14). These articles remain today a gold mine of legislative history. They set forth the tax treatment of every major bankruptcy transaction relevant at the time, together with an explanation of the 1970 commission's proposals. There is no doubt that the Plumb articles informed every change in the legislative product that developed in the ensuing five years.

Many of Plumb's proposals, or variants thereof, were enacted as part of either the Bankruptcy Reform Act of 1978 or the Bankruptcy Tax Act of 1980. The success of the Plumb initiative is clearly attributable to the balance they reflected. Plumb's tax proposals can be said to be neither pro-government nor pro-taxpayer/debtor. Every one of them could be justified on the basis that it meshed the sometimes competing objectives of the tax laws and the bankruptcy laws. Transactions legitimately undertaken in bankruptcy did not have to be abandoned because of user-unfriendly tax code provisions not sensitive to the peculiar needs of the bankruptcy process and the government's legitimate claims as a creditor were recognized.

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fn. 10: See S.J. Res. 88, 84 Stat. 468, 91st Cong., 2d Sess. (1970); see also S. Rep. 91-240, 91st Cong., 1st Sess. (1969); H. Rep. 91-927, 91st Cong., 2d Sess. (1970).

fn. 11: See Report of the Comm. on the Bankruptcy Laws of the United States, H.R. Doc. No. 93-137, Part II, 93d Cong., 1st Sess. (1973).

fn. 12: See Report of the Comm. on the Bankruptcy Laws of the United States, H.R. Doc. 93-137, Part I, 93d Cong., 1s Sess. (1973). A third volume included selected papers prepared for the Commission's study.

fn. 13: See id. ch. 12.

fn. 14: See Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws-Tax Procedurs, 88 Harv. L. Rev. 1360 (1975); Plubm, The Tax Recommendations of the Commission on the Bankruptcy Laws-Reorganization, Carryovers and the Effects of Debt Reduction, 29 Tax L. Rev. 229 (1974); Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws-Income Tax Liabilities of the Estate and the Debtor, 72 Mich. L. Rev. 935 (1974); Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws-Priority and Dischargeability of Tax Claims, 59 Cornell L. Rev. 991 (1974).

Questions, comments or suggestions? kbercik@taxcounsellor.com

Last updated March 30, 1998

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