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Chapter 11 Transfer Tax Exemption Expanded by the Eleventh Circuit - page 5 / 8





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and it was "necessary to consummate and implement the plan." Based on these findings, the

bankruptcy court ruled that the Kissimmee refinancing qualified for the section 1146(c) transfer

tax exemption. The district court reversed on appeal, ruling that section 1146(c) does not apply

because the transaction involved two non-debtors.

The Eleventh Circuit's Opinion

The Eleventh Circuit reversed. Examining the language of section 1146(c), the Court of Appeals

concluded that a transfer "under a plan" refers to a transfer "authorized by a confirmed Chapter

11 plan," and "a plan authorizes any transfer that is necessary to the confirmation of the plan."

Because the bankruptcy court found that the Kissimmee refinancing was necessary to the

consummation of T.H. Orlando's chapter 11 plan, the Eleventh Circuit ruled that the refinancing

was exempt from Florida's stamp tax under the "plain language" of section 1146(c), "irrespective

of whether the transfer involved the debtor or property of the estate."

The Court rejected the taxing authority's contention that a bankruptcy court does not have

jurisdiction to determine whether a non-debtor third party is entitled to an exemption from state

stamp and intangible taxes, observing that "[t]he adjudication of substantive entitlements created

by bankruptcy law falls squarely within the core jurisdiction of bankruptcy courts." Divesting a

bankruptcy court of jurisdiction in any case involving a state's imposition of a stamp or similar

tax on a non-debtor, the Court of Appeals emphasized, would encourage states to shift the tax

burden entirely to third parties even in transactions involving the debtor.


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