Daniel Patrick Fischer (J.D. 2012, Iowa) has posted Solving the Chapter 12 Tax Conundrum: How Congress Should Clarify the Bankruptcy Code on SSRN. Here is the abstract:

Before the BAPCPA amendments, many farm-debtors struggled to have bankruptcy plans confirmed due to significant tax claims arising from proposed Chapter 12 reorganizations. Therefore, in 2005, Congress amended the Bankruptcy Code, making “claims owed to government units” unsecured. However, as debtors attempted to use this provision to reduce tax liabilities in bankruptcy plans, the ambiguities and shortcomings of the amendment came to light. The IRS objected to debtor’s classification of taxes arising from ordinary operations and post-petition sales as unsecured, as well as the debtor’s method of allocation between secured and unsecured claims. The legal battles over these objections have created a split of authority between the Eighth and Ninth Circuits, and the Tenth Circuit is in the process of addressing the same issue. The debate of the proper interpretation is based on how the Internal Revenue Code should influence this bankruptcy provision and how courts should use the Bankruptcy Code’s plain language and Congress’s legislative history. Congress should clarify the Bankruptcy Code and effectuate the original legislative intent by classifying taxes arising from dispositions associated with reorganization from both pre-petition and post-petition sales as unsecured, while officially adopting the “proration method” in allocating secured and unsecured claims.