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800 Fifth Avenue, Suite 2000
Seattle, WA 98104
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Overview
The Bankruptcy and Collections Unit (BCU) is comprised of three attorneys and four professional staff. The unit encourages voluntary compliance with the state’s tax laws by supporting the efforts of state agencies to aggressively pursue money owed to the state. Most of the money is owed for delinquent sales and business and occupation taxes, industrial insurance premiums and unemployment fund contributions. The BCU gives priority to representing the departments of Revenue, Labor & Industries and Employment Security in bankruptcy cases.
Legal Services Provided
The BCU’s principal legal activity involves representing the state tax agencies in federal bankruptcy courts nationwide. The BCU also files a significant number of collection actions against the bonds of contractors who are delinquent in tax payments. The BCU appears in superior court to defend the priority of state liens and to assert claims against funds retained by government entities under public works contracts. The BCU also devotes substantial resources to training tax agency personnel who handle bankruptcy and collections claims.
Numbers/Trends
The BCU has handled a total of 23,001 bankruptcy and collection cases on behalf of the state since the unit was created in 1993, collecting more than $193.9 million, including $139.3 million in cash received, $14.7 million in claims successfully defended and $39.8 million in future payments to be made to the state under court orders. As of June 2015, the BCU had 276 active cases with more than $3.4 million in pending agency claims.
Significant Cases
Contractor Bond Cases: Contractors engaging in business in this state must obtain a surety bond or open an assigned savings account to protect the homeowner. The state tax agencies can collect unpaid taxes against a portion of this bond by filing a lawsuit against the surety company or the contractor’s bank account. The BCU opened 397 contractor bond files during FY2015 and recovered $1.8 million.
W.R. Grace, a manufacturer of asbestos, filed for bankruptcy in 2001 primarily to resolve numerous claims for its asbestos contained in fireproofing, acoustical and decorative texture materials used and installed in public buildings. The AGO contracted with the MotleyRice law firm to work with the BCU and serve as a special state attorney to assert state claims based on the presence of asbestos in state-owned buildings. The firm’s expertise was needed because product identification was required to assert a claim. The debtor objected to the State’s claims. A settlement was negotiated on the claims filed by Washington State University, Edmonds Community College, and General Administration which resulted in a payment of $1,471,516.