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Supreme Court hears arguments in bankruptcy, tax cases

[JURIST] The US Supreme Court [official website; JURIST news archive] heard oral arguments [day call, PDF; merit briefs] Monday in two cases. In Hamilton, Chapter 13 Trustee v. Lanning [oral arguments transcript, PDF; JURIST report], the court heard arguments on whether, in calculating a debtor's "projected disposable income," a bankruptcy court may consider evidence suggesting that the debtor's income or expenses will differ from her prior income or expenses. The US Court of Appeals for the Tenth Circuit found [opinion, PDF] that a debtor's current monthly income is the appropriate income to use in this analysis. Counsel for the petitioner, the bankruptcy trustee, argued:

The Tenth Circuit and Stephanie Lanning were wrong in ignoring the new Chapter 13 means test contained in the 2005 amendments to the Bankruptcy Code. The amendments to the 2005 Bankruptcy Code were intended to reduce judicial discretion by inserting a formula rather than the judicial discretion that had previously been accorded to judges and to the litigants.

Counsel for the debtor argued that, "the word "projected" tells us to get a realistic estimation of what that amount of money's going to be." Counsel for the US government argued as amicus curiae on behalf of the respondent.

In Levin v. Commerce Energy, Inc. [oral arguments transcript, PDF], the court heard arguments on whether a challenge to state tax exemptions can occur in federal court when the suit does not involve the challenger's own tax assessment, but rather others that are similarly situated. The court will review whether the Tax Injunction Act [28 USC § 1341] or comity principles bar federal court jurisdiction. The US Court of Appeals for the Sixth Circuit reversed [opinion, PDF] the district court's decision, which granted a motion to dismiss for lack of subject matter jurisdiction. The court found that neither the Tax Injunction Act nor the general principles of comity barred the plaintiff's claim. Counsel for the petitioner, Ohio Tax Commissioner Richard Levin, argued:

Respondents are natural gas suppliers who object to the way Ohio taxes them. Their suit belongs in State court rather than Federal court for two independent reasons. First, principles of comity and federalism dictate that the State court should resolve challenges to the validity of their own tax laws. And second, the Tax Injunction Act squarely prohibits Federal courts from issuing declaratory judgments holding State tax laws unconstitutional.

Counsel for Commerce Energy argued that federal courts have jurisdiction over the claim.

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