Federal Receivership Fairness Act
- Sponsor
- Sen. Young, Todd [R-IN]
- Committees
- Finance Committee (primary)
- Last action
- Sep 23, 2026
Bottom line
The Federal Receivership Fairness Act aims to streamline and clarify the process for resolving federal tax issues within receivership proceedings, providing greater certainty and efficiency for all parties involved.
What it actually does
This bill amends the Internal Revenue Code of 1986 to establish clear rules for federal courts in receivership proceedings to determine federal tax liabilities, including fines and penalties. It creates a process for receivers to request such determinations from the Internal Revenue Service (IRS), leading to a discharge of liability under specific conditions. Furthermore, it explicitly waives sovereign immunity for the IRS in these contexts and grants federal district courts exclusive jurisdiction over federal tax determinations arising in state or District of Columbia receivership cases.
Proponents argue
Proponents argue that this bill addresses a significant gap in federal law by providing a clear and efficient mechanism for resolving federal tax liabilities in receivership cases, similar to existing provisions in bankruptcy law. They contend that it will reduce administrative burdens and litigation costs, accelerate the distribution of assets to creditors, and provide much-needed certainty for receivers, the entities in receivership, and their successors regarding tax obligations.
Opponents contend
Critics, if any emerge, might raise concerns about the expansion of federal court jurisdiction into matters that could otherwise be handled at the state level, particularly regarding federal tax determinations in state receiverships. There could also be arguments about the potential for the IRS's ability to conduct thorough examinations to be constrained by the proposed deadlines, potentially leading to revenue losses or insufficient oversight in complex cases.
The bill is concise and clearly structured, making it accessible for an informed reader to understand its provisions within the time given.
Section 2(a), new Section 6874(a) of the Internal Revenue Code of 1986
General Authority for Courts to Determine Federal Tax Liability
This provision grants federal courts that appoint a receiver in any receivership proceeding the authority to determine the amount or legality of any federal tax, related fines, penalties, or additions to tax. This applies whether or not the tax was previously assessed, paid, or contested before another tribunal, providing a comprehensive power to resolve tax disputes within the receivership context.
Supporters argue
Supporters argue that this explicit grant of authority is crucial for efficient receivership administration, allowing a single court to resolve all claims, including federal tax claims, thereby preventing delays and reducing costs associated with navigating multiple forums.
Critics contend
No specific opposition is typically raised against the general grant of authority to courts for tax determination in receiverships, as it aligns with principles of judicial efficiency, though concerns might arise regarding the scope of this authority.
Tradeoffs
This provision balances the need for judicial efficiency in receivership proceedings with the specialized nature of tax law, centralizing resolution but requiring courts to handle complex tax issues.
Section 2(a), new Section 6874(b) of the Internal Revenue Code of 1986
Exceptions to Court's Tax Determination Authority
This subsection outlines specific situations where the court's authority to determine federal tax liability is limited. These exceptions include taxes previously adjudicated by a competent tribunal before the receivership began, federal tax refund requests before 120 days or an IRS determination, and ad valorem property taxes where the period for contesting the amount has expired. These exceptions aim to prevent re-litigation of settled matters and ensure proper administrative review for refunds.
Section 2(a), new Section 6874(c) of the Internal Revenue Code of 1986
Receiver's Request for Tax Determination and Discharge of Liability
This provision establishes a formal process for a receiver to request a determination of any unpaid federal tax liability incurred by the receivership estate. By submitting a tax return and a request to a designated IRS address, the receiver, the estate, and successors can be discharged from liability if the IRS does not notify the receiver of an examination within 60 days, or does not complete an examination and notify of tax due within 180 days (or court-permitted extension), or upon payment of the tax determined by the court or the Secretary.
Section 2(a), new Section 6874(f) of the Internal Revenue Code of 1986
Waiver of Sovereign Immunity for the Secretary of the Treasury
This subsection explicitly abrogates sovereign immunity for the Secretary of the Treasury (and thus the IRS) with respect to all matters concerning the determination of federal tax liability in receivership proceedings, as outlined in the bill. It allows courts to issue orders, processes, or judgments against the Secretary, including money recoveries (but not punitive damages), and deems sovereign immunity waived if the Secretary asserts a claim in a receivership case regarding a related transaction or occurrence.
Section 2(a), new Section 6874(g) of the Internal Revenue Code of 1986
Grant of Exclusive Federal Court Jurisdiction for State Receiverships
This subsection mandates that in any receivership proceeding in a state court or the District of Columbia, the determination of any federal tax shall be adjudicated exclusively by the United States District Court for the district where the proceeding is pending. This means state courts would not have jurisdiction to determine federal tax liabilities in such cases, centralizing federal tax adjudication in federal courts.
The bill amends existing federal statutes to align them with the new Section 6874. Specifically, it adds references to proceedings under Section 6874 to the Declaratory Judgment Act (28 U.S.C. 2201(a)) and modifies the federal priority statute (31 U.S.C. 3713) to clarify that its provisions regarding government claims priority do not apply to receivers exercising rights under the new Section 6874, similar to bankruptcy trustees.
Section 2(c), Conforming Amendments to 28 U.S.C. 2201(a) and 31 U.S.C. 3713
Why it matters:This is standard legislative practice for ensuring consistency across the U.S. Code when new provisions are enacted, rather than an attempt to conceal. However, their impact is significant for legal practitioners.
Case for: Supporters would argue these amendments are essential for legal clarity and consistency, ensuring that the new tax determination rules for receiverships integrate seamlessly with existing federal law regarding declaratory judgments and government claim priorities.
Case against: No specific case against these conforming amendments, as they are necessary technical adjustments to support the primary policy changes.
Estimated impact: These amendments ensure the legal framework for receiverships is coherent, preventing conflicts with other federal statutes and clarifying the scope of government priority in these specific cases.
This subsection explicitly excludes bankruptcy trustees appointed under Title 11 of the U.S. Code and executors of a decedent's estate from the definition of 'receiver' for the purposes of this new section. This clarifies that the new rules for tax determination in receiverships do not supersede or overlap with existing federal tax rules governing bankruptcy or estate administration.
Section 2(a), new Section 6874(e)(2) of the Internal Revenue Code of 1986
Why it matters:This is standard legislative practice to precisely define terms and avoid conflicts with existing legal frameworks, ensuring the new law applies only where intended.
Case for: Proponents would argue that these exclusions are critical for maintaining legal clarity and preventing confusion or conflicts with the well-established and distinct legal frameworks for bankruptcy and decedent's estates, which already have specific rules for federal tax matters.
Case against: No specific case against these exclusions, as they serve to prevent unintended consequences and maintain consistency with existing law.
Estimated impact: Ensures that the new rules apply specifically to non-bankruptcy receiverships, preventing disruption to established procedures for bankruptcy and estate tax matters.