US Supreme Court Limits Bankruptcy Trustees' Power to Recover Tax Payments

The U.S. Supreme Court ruled on Wednesday, March 26, that bankruptcy trustees cannot reclaim allegedly fraudulent federal tax payments made more than two years before a company files for bankruptcy. The 8-1 decision reverses a ruling from the 10th U.S. Circuit Court of Appeals, which had allowed a trustee to recover $145,000 from All Resort Group executives used for personal tax debts. Justice Ketanji Brown Jackson stated the federal government's sovereign immunity protects it from such lawsuits when state laws with longer statutes of limitations are used. The ruling resolves a split among U.S. appeals courts on applying state fraudulent transfer laws to federal tax payments.