Contact The 505 Project

The 505 Project is a nonprofit educational initiative focused on teaching bankruptcy and tax attorneys about the power of 11 U.S.C. § 505—a rarely used section of the bankruptcy code that allows courts to determine tax liabilities. Our goal is to help professionals understand and apply this tool to provide faster, fairer outcomes for their clients.

Everything shared on this site, including research, discussions, and educational materials, is completely free to access. Our mission is to spread awareness and encourage collaboration—not to monetize this information. But the information on this website is and will remain copyrighted material.

The timing is critical. Many bankruptcy and tax professionals are struggling to help clients find paths to tax resolution. Section 505 offers a potential solution that’s been hiding in plain sight. The 505 Project was formed to accelerate learning, collaboration, and early test cases because of the coming wave of restructurings due to tariffs, inflation, and other economic turmoil on the immediate horizon.

It’s one of the most underutilized sections in bankruptcy law. Few tax professionals know it even exists, and even fewer bankruptcy attorneys have used it. The 505 Project is working to prove its potential by identifying and documenting cases that can establish precedent and make it more ubiquitous in resolving tax disputes.

No. The 505 Project is a nonprofit. The goal is to educate, collaborate, and share knowledge freely with the legal community—not to profit from it. This ensures the information remains transparent, accessible, and unfiltered by commercial interests.

Possibly—and that’s part of the reason the nonprofit exists. We expect open debate and scrutiny. If the IRS challenges the approach, it will only help clarify how the law can and should be applied. That’s how progress is made.

Not necessarily. When done correctly, these cases can be handled under Subchapter V, which is designed to move quickly and minimize costs. The goal is to pre-package strong, well-supported cases that proceed efficiently and establish solid case law for others to follow.

Not at this time, not while the non-profit application is pending.

Yes, by seeking for and advocating for the coupling of 11 USC section 505 and section 553 we want to obtain offsets for borrowers on SBA, USDA and other government backed loans who may be entitled to seek and petition for refund of large dollar amounts that the IRS seems unwilling to pay or is reluctant to allow.

The Internal Revenue Service owes many taxpayers for a pandemic era tax relief program for which they applied and have not been paid. The pandemic was four years ago. The OBBBA gives the IRS six years to review these claims and extends the audit window in a most unreasonable manner (our math says that is a full 10 years over which a claimant must maintain its records). Most of the ERC claims upon which it may make sense to sue the IRS over start at $250,000. Applying an offset using 11 U.S.C. 553 could result in an immediate write-down of SBA or USDA or other government loans in 120 days or less.

We do not have an official position from the United States Trustee but prior to leaving his employment on September 30, 2025 James discussed the concepts and legal strategies of The 505 Project with key personnel at the USTP including its Chief Criminal Coordinator, fellow auditors and analysts nationwide who will be reviewing future Subchapter V cases as they are filed.

Bankruptcy judges have been granted discretion under 11 USC section 505(a) the ability to abstain from hearing such matters. The timing of any lawsuit brought against the IRS may be affected by a bankruptcy judge abstaining and deferring to a higher court such as District Court. The 505 Project exists to coach bankruptcy attorneys and bankruptcy judges and their staff through the less technical aspects of such cases in controversy that might be properly brought before the court using section 505 in the wake of the Loper Bright and other recent Supreme Court decisions rather than deferring, by default, to the IRS’s choice of venue when the matter is purely one that is an argument about the amount of any ERC claim that will be paid out to directly benefit creditors via offset including the SBA and/or offsetting tax liens.

The answer to this question is unknown, that is why the 505 project exists. The 505 project will coach and encourage the SBA and its partner banks to survey their borrowers, especially borrowers whose loans have gone into the banks’ special assets portfolio to determine if there is indeed an untapped (and unencumbered) source of capital that could quickly recapitalize the loan in the manner outlined on this website via offsets.

The 505 project is unaware of any subchapter V cases that have been filed as prepackaged (meaning the votes in favor of the debtors proposed plan of reorganization were gathered and counted prior to the filing of a voluntary petition).

A prepackaged subchapter V case could allow for a confirmation hearing to be happening on about the same day that the Internal Revenue Service is required to answer a complaint under section 505. A confirmation hearing could be held in which evidence is heard on a preliminary basis as to the strength of the lawsuit against the IRS. The timing and coincidence of both of those hearings is what may tee up the IRS  lawsuit a “Core Matter” as a (or rather “the”) central tenant to the Debtor’s plan of reorganization, removing the likelihood that a Bankruptcy judge would feel it appropriate to abstain from hearing the matter as long as the tax case does not dive too deeply into tax law.

Failure to obtain a forbearance agreement from the SBA or other government agency via the partner bank could potentially PERMANENTLY foreclose any future ability of the borrower to participate in government lending programs. SBA loans typically contain ipso post facto language which contain a prohibition against filing a voluntary bankruptcy petition.

Even if it is a creditor, the IRS and other Federal government agencies by definition, do not get to vote on a plan of reorganization in any chapter of bankruptcy including subchapter V.

This is a great question, and is very timely. The 505 Project believes that by bringing another creditor which is also the government into the plan as a voting party via its partner bank such as on an SBA loan and actively seeking for the government agency to surface and assert its offset right under section 553, the non voting party problem is solved because the government can be treated as one creditor under the unitary creditor theory ensconced in 553 (in re: Turner 1996 10th Circuit).

The IRS does not get to vote on any reorganization plans but it does have the right to object if it is a creditor.

A consensual plan is a plan of reorganization in Subchapter V in which NO creditor votes against a plan of reorganization. A nonconsensual plan is when at least one creditor (who is allowed to vote) votes against the confirmation.

It happens all the time.

In a consensual plan under subchapter V The debtor obtains its discharge upon the effective date of the plan meaning the date that the payments under the plan are first sent out. In other words at the beginning of the plan. This is a feature that is unique and special to subchapter V.

Not necessarily. Insolvency is when the value of a debtor’s assets are exceeded by its liabilities. If a loan goes into default, even technical default on one missed payment, the borrower is entitled to file bankruptcy to resolve such a default.

Yes. The outcome of the lawsuit that is material to the plan may prevent the plan from being granted confirmation in bankruptcy court. However, if the plan is crafted properly, the outcome of a lawsuit that might last six years (coincidentally, the IRS has been given six years to get through its ERC backlog) can still be drafted around by an experienced bankruptcy attorney. The dollar amounts at play within the plan can be left undetermined but percentages can be figured out based on best-estimates of the ultimate outcome of the lawsuit. An advantage to this is that while the lawsuit is pending deadlines and statutory or statute of limitation issues can be tolled so that rights (such as appeal rights on an ERC claim) that might be lost in the absence of litigation, will not expire or be forfeit absent litigation.