High Court Curb on Clawbacks a Surprise to Bankruptcy Pros (1)

The US Supreme Court’s decision to reverse a liquidating trustee’s power to claw back personal tax payments paid to the IRS surprised many in the bankruptcy world, though its practical effects will likely be limited.

The high court in an 8-1 ruling Wednesday concluded the Internal Revenue Service’s sovereign immunity outweighs the US Bankruptcy Code and state fraudulent transfer laws over how far back a trustee can go to recover money or property.

The United States v. Miller decision provided the government preferential treatment outside the standard lookback window under the bankruptcy code, but it didn’t prohibit a trustee from ...