Federal Receivership Fairness Act

Bill Number

H.R. 5146

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-09-04: Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

Last Updated

2025-09-16T08:06:30Z

AI-Generated Summary

Purpose of the Legislation

The Federal Receivership Fairness Act (H.R. 5146) aims to clarify and streamline how federal, state, and local tax liabilities are handled in receivership proceedings (court-supervised processes where a receiver manages assets of a distressed individual or entity, excluding bankruptcy or estate administration). It empowers courts to resolve tax disputes efficiently, ensuring receivers can finalize tax obligations without undue delays, while protecting governmental tax collection rights.

Key Provisions

• Court Authority to Determine Taxes: Courts appointing receivers in U.S. federal, state, or District of Columbia proceedings can decide the amount or legality of any federal tax, related fines, penalties, or additions—whether assessed, paid, or contested previously—unless exceptions apply.
• Exceptions to Court Determination:
• Taxes already adjudicated (decided) by a court or administrative body before the receivership began.
• Rights to federal tax refunds, unless 120 days pass after a proper request or the government responds.
• Ad valorem taxes (property taxes based on value) on receivership assets if the contest period has expired.
• Request Process for Tax Determination:
• Receivers file a tax return and request with the governmental tax authority (e.g., IRS or state agency) at a designated address.
• The estate and parties are discharged from liability upon payment of the reported or determined tax, if the government does not examine the return within 60 days or complete an exam (with notice of any additional tax due) within 180 days (or court-extended time).
• Courts can determine taxes after a hearing if needed.
• Assessment and Enforcement: After court determination, taxes can be assessed against the estate, original entity, successors, or new entities from the receivership.
• Definitions:
• Receiver: A court-appointed person or entity managing the receivership (excludes bankruptcy trustees under U.S. bankruptcy law and executors of deceased estates).
• Appropriate Governmental Unit: Any federal, state, or local entity responsible for tax collection.
• Sovereign Immunity Waiver: Governments waive immunity (legal protection from lawsuits) for matters under this law, allowing courts to issue orders, judgments, or money recoveries (no punitive damages). If a government files a claim in the receivership, it waives immunity for related counterclaims by the estate. Government claims can be offset by estate counterclaims.
• Federal Court Option: If a governmental unit objects to state court handling, the case can move to federal district court.
• Effective Date: Applies to tax returns with open assessment, audit, or review periods as of enactment, and all returns filed afterward.

Significant Changes to Existing Law

• Adds a new section (6874) to the Internal Revenue Code (1986), which previously lacked specific rules for tax determinations in non-bankruptcy receiverships.
• Amends U.S. Code Title 28 (judiciary) to include these proceedings under declaratory judgment authority (court rulings on legal rights without full trials).
• Modifies U.S. Code Title 31 (money and finance) to exempt receivers under this act from certain federal priority claim rules in insolvency cases, treating them similarly to bankruptcy trustees (previously, only bankruptcy cases had such protections).
• Introduces time limits for government examinations and discharges of liability, which were not explicitly available before, promoting faster resolutions.

Potential Impacts

• On Government Agencies: Tax authorities (e.g., IRS, state revenue departments) may face quicker court scrutiny of claims, potential offsets against their interests, and mandatory response timelines, which could streamline collections but increase administrative burdens and litigation in receiverships.
• On Citizens and Entities: Individuals or businesses in receivership gain clearer paths to resolve pre- and post-receivership taxes, reducing prolonged uncertainty and enabling asset distribution to creditors or successors more efficiently. This could lower costs for distressed parties but might limit challenges to settled taxes.
• On Courts and Receivers: Empowers state and federal courts to handle tax issues directly, potentially reducing overlaps with administrative tax processes and speeding up proceedings.
• International Relations: No direct impacts, as the bill focuses on domestic U.S. tax and receivership laws.

Main Stakeholders Affected

• Receivers and Courts: Gain authority and tools to resolve taxes, affecting how they manage estates.
• Entities in Receivership: Distressed individuals, businesses, or their successors benefit from liability discharges but must comply with filing requirements.
• Governmental Tax Units: Federal (IRS), state, and local agencies face waived immunities and timelines, altering how they pursue claims.
• Creditors and Successors: Indirectly affected through faster asset liquidation and clearer tax priorities.

Notable Legal, Constitutional, or Political Implications

• Legal: Bridges a gap between receivership and bankruptcy procedures by providing similar tax resolution mechanisms, potentially reducing forum-shopping (choosing favorable courts). The sovereign immunity waiver is limited to procedural matters and aligns with existing laws (e.g., no new causes of action created), ensuring enforceability under the Federal Rules of Civil Procedure.
• Constitutional: The partial abrogation of sovereign immunity respects the 11th Amendment (protecting states from federal suits) by applying only to consenting or related claims, and federal payments follow standard judgment processes—avoiding broader constitutional challenges.
• Political: Promotes "fairness" in receiverships by balancing debtor relief with government rights, potentially appealing to business interests seeking efficient insolvency tools. Bipartisan introduction (by Reps. LaHood and Beyer) suggests broad support, but implementation may spark debates on federal overreach into state tax matters.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. LaHood, Darin [R-IL-16]

Cosponsors (2)

Rep. Beyer, Donald S. [D-VA-8], Rep. Vindman, Eugene Simon [D-VA-7]

Recent Actions

• 2025-09-04: Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-09-04: Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-09-04: Introduced in House
• 2025-09-04: Introduced in House

Bill Versions

• Federal Receivership Fairness Act — issued 2025-09-04 — PDF (10 pages)