The function of the SPECIAL ACTIONS UNIT (SAU) is to ensure that the Texas Workforce Commission (TWC) Tax and Labor Law Department does not knowingly violate the Automatic Stay provision of Section 362 of the United States Bankruptcy Code (the Code). This will prevent the possible imposing of monetary sanctions on TWC in a bankruptcy proceeding. In addition, the SPECIAL ACTIONS UNIT plans, directs, and conducts activities to collect tax delinquencies through claims in bankruptcy and other fiduciary proceedings.

Actions taken or recommended by SAU are intended to be in accordance with the Code and relevant State statutes, but do not confer a right to any taxpayer or legally bind the TWC to take a particular course of conduct.

Sections of the U.S. Bankruptcy Code quoted or referred to herein are intended for clarification purposes only. Reference to legal counsel is recommended in appropriate circumstances.

Major tasks performed in support of this function are:

• Maintain contact and coordination with the Office of the Attorney General (OAG) in matters relating to interpretation of the Bankruptcy Code as it applies to the activities of the Collections Section.
  
  
• Verify correct entities are identified and that correct Fiduciary Records or comments are established on appropriate accounts;
  
  
• Verify that any collection action that would violate the Automatic Stay is ceased, released, rescinded, or prevented;
  
  
• Review bankruptcy and fiduciary notices and employer delinquent tax files to prepare and forward to the U.S. Bankruptcy Courts or the OAG those documents necessary to file fiduciary claims and any related suits, and to mail claims to various other judicial or non-judicial officials; and to maintain computer records documenting these actions;
  
  
• Contact trustees, attorneys, accountants, field examiners and others to secure data to prepare fiduciary claims; determine status of pending claims, and to record the results of fiduciary proceedings in the commission’s computer master files and controls;
  
  
• Confer and coordinate with the OAG regarding fiduciary proceedings and other matters;
  
  
• Audit and allocate delinquent tax payments or adjustments and do necessary computer input to correct the employer master file;
  
  
• Review bankruptcy court documents to help determine the appropriateness of entity acquisitions that involve bankruptcy;
  
  
• Review and file claims as necessary in probate, receivership, and assignment for the benefit of creditors situations;
  
  
• Conduct training in bankruptcy and other fiduciary actions;
  
  
• Train and evaluate unit staff.

There are certain creditor actions concerning bankrupt debtors that are prohibited by the Bankruptcy Code, and certain other actions that are allowed. The items noted do not necessarily represent a complete recitation of prohibited or allowed actions, nor is any of the following discussion intended to be a legal or binding precedent.

It should be noted that the Bankruptcy Code places specific requirements on bankrupts and their attorneys as well, foremost being notification of creditors. Other requirements include maintaining a current address with the court, compliance with applicable State laws, and other matters.

The Bankruptcy Code does not override State laws. For example, employers are still required to file reports reflecting on-going employment, provide wage information if requested for an audit or for a benefits claimant inquiry, and similar matters.

A debtor employer’s questions on any of these matters should be referred to its own bankruptcy attorney.

Further explanation and clarification of these matters will follow throughout this section.

The Special Actions Unit is responsible for reviewing debtor employers’ accounts for any collection actions that are prohibited when an employer has filed for bankruptcy. Upon notification of the filing, SAU reviews the Delinquency screens, "Stop" screen, Delinquency Action History screen, and Comments screens to ensure as thoroughly as possible that no knowing violation of the Automatic Stay has taken place. Inappropriate actions are terminated, and releases or cessation of actions are made accordingly.

Demand for payment of pre-petition amounts may not be made if TWC was notified and listed in the Creditor Matrix. It is the debtor’s responsibility to file a list of creditors and to acknowledge assets and liabilities.

Tax liens should not be filed on a known bankrupt entity for pre-petition amounts during the duration of the proceedings.

Tax liens unknowingly filed on a bankrupt after the petition date must be released.

Vendor Holds should not be placed on a known bankrupt entity for pre-petition amounts during the duration of the proceedings.

Vendor Holds unknowingly filed on a bankrupt after the petition date must be released.

Bank freezes and levies should not be filed on a bankrupt entity for pre-petition amounts.

Bank freezes and levies issued after the petition date must be released.

Assessments should not be issued on known bankrupt entities.

Assessments unknowingly issued after the petition date must be released.

If the debtor, debtor’s attorney, or bank contacts TWC concerning a freeze on a debtor’s account, inform him/her that SAU will verify the bankruptcy information, and will request release of the bank freeze as appropriate

When the freeze has attached before the petition date, the OAG may contact Debtor’s attorney that TWC considers the funds to be cash collateral. Upon receipt of a copy of the OAG response, AAU may issue a freeze withdrawal.

In those cases where the freeze has attached after the bankruptcy filing date, AAU will issue a withdrawal of the freeze.

When a bank account is levied before the petition, the TWC will keep the amount levied even if mailed from the bank and received by TWC after the petition date. In this event, TWC is deemed to have taken possession of the affected funds prior to the filing.

When a bank account is levied after the filing of a petition, the levy will be released, and funds returned as appropriate, upon advice received from the OAG.

When notification of bankruptcy filing is received, SAU will review the account for any assessment action that is pending. If the assessment was issued after the petition date, it must be released whether it is in "pending" or "final" status.

If the assessment has become final or has been abstracted prior to the filing of the petition, it is valid, and can be included in any claim filed if it has been abstracted.

While the Bankruptcy Code controls many aspects of a case, it does not, in and of itself, pre-empt or override State Laws. For example, the Code, in Section 362, specifically states that the filing of a petition does not operate as a stay of an audit by a governmental entity to determine tax liability, issuance of a notice of tax deficiency, [or] a demand for tax returns.

With appropriate exceptions related to the discharge provisions of the Bankruptcy Code (Section 524), and dependent upon the time period(s) of any delinquency, "…the time period for commencing or continuing a civil action…" may not have expired (Section 108). The Texas Unemployment Compensation Act (TUCA) in effect at specified time period(s) will determine the appropriate course of collection action.

Employers should continue to file post-petition quarterly reports and make payments on those reports as part of the normal operation of that business. Demand for payment for post-petition debt may be made under certain circumstances - this requires SAU to evaluate the situation and consult with legal counsel as appropriate

The Bankruptcy code requires that the debtor maintain a current address with the court. Likewise, the TUCA requires that all employers maintain a current address with TWC.

SAU can change the address of record for an employer account only if the Bankruptcy Court records confirm the new address. Other addresses may be noted on the Comment screen for an account, and may be used, but address changes would have to be officially changed by a motion filed with the Bankruptcy Court by the debtor employer’s attorney.

The address of record of a business will not be changed to a trustee’s address unless the trustee has been authorized by the Court to run the business.

Non-attorney personnel should not discuss any matters of bankruptcy law or other legal matters with debtor’s counsel, nor offer or imply any sort of legal advice on any matter.

Discussions with attorneys concerning bankruptcy law will be referred to the OAG, who will handle such matters as appropriate.

SAU personnel and others can discuss factual and informational matters such as claim amounts, basis for delinquency, and so on, with debtor’s counsel. Likewise, we can discuss factual matters with Trustees and their staffs, debtors, authorized representatives for debtors or Trustees, such as Servicing Agents and a debtor’s CPA or accountant.

A record will be made on the Delinquency Comments screen of any such inquiries and disposition thereof. Detailed information will be filed in the SAU file folder for the case.

It is absolutely vital that all personnel of the Tax and Labor Law Department notify SAU immediately at the first mention or hint of bankruptcy by an employer, or employer’s representative. Comments of such mention or hint are appropriate, but do not alert SAU of the bankruptcy. Notification should be by e-mail to RED.taxbankrupcy@twc.state.tx.us, or by telephone to the primary SAU telephone number so that the situation at hand can be addressed promptly.

Under no circumstances should personnel wait for further information from the employer or their representative, but should contact SAU. SAU, in turn, will verify the existence of a filing for the entity, and will give appropriate guidance.