                United States Bankruptcy Appellate Panel
                                FOR THE EIGHTH CIRCUIT


                                     No. 99-6031ND


In re:                                      *
                                            *
Steven L. Voightman                         *
                                            *
         Debtor.                            *
                                            *
                                            *
North Dakota Workers                        * Appeal from the United States
Compensation Bureau,                        * Bankruptcy Court for the
                                            * District of North Dakota
         Plaintiff-Appellee,                *
                                            *
                v.                          *
                                            *
Steven L. Voightman,                        *
                                            *
         Defendant-Appellant,               *
                                            *
Voightman Trucking and                      *
James River Dispatch,                       *
                                            *
         Defendants.                        *


                                Submitted: August 24, 1999
                                 Filed: September 24, 1999


Before KOGER, Chief Judge, SCHERMER, and DREHER, Bankruptcy Judges.


DREHER, Bankruptcy Judge
       Debtor Steven L. Voightman appeals the decision of the bankruptcy court,1 which
found that the Debtor’s unpaid workers’ compensation premiums were entitled to priority
under 11 U.S.C. § 507(a)(8)(E) and, thus, were nondischargeable pursuant to 11 U.S.C. §
523(a)(1)(A). We affirm.

I.     BACKGROUND

       The facts in this case are largely undisputed. Debtor Steven Voightman (“Debtor”)
operated a trucking business known as Voightman Trucking, which transported various
commodities for farmers and others. Debtor first hired employees to work in his business
in July of 1993, and at that time became subject to the provisions of the North Dakota
Workers Compensation Act (“Act”). Under the Act, farmers directly employing workers in
the same capacity as Debtor’s employees would not have to carry workers’ compensation
insurance because the Act excludes, inter alia, agricultural employment.

        The North Dakota Workers Compensation Bureau (“Bureau”) assessed Debtor with
premiums totaling $19,180.33. The parties agree that the unpaid portion of the assessments
totals $15,130.04. After the Debtor filed for bankruptcy relief on August 21, 1998, the
Bureau brought an adversary proceeding seeking to have the unpaid premiums declared
nondischargeable excise taxes pursuant to Bankruptcy Code §§ 523(a)(1)(A) and
507(a)(8)(E) . The parties stipulated that if the unpaid premiums were nondischargeable,
penalties and interest totaling $6,367.88 would also be nondischargeable as compensation
for actual pecuniary loss pursuant to Bankruptcy Code § 507(a)(8)(G).

       The bankruptcy court, applying a four-part test announced by the Ninth Circuit in
County Sanitation Dist. No. 2 v. Lorber Indus. of Cal., Inc. (In re Lorber Indus. of Cal., Inc.),
675 F.2d 1062 (9th Cir. 1982), found that the workers’ compensation premiums were entitled
to priority as excise taxes under Bankruptcy Code § 507(a)(8)(E) and, accordingly, were
nondischargeable pursuant to § 523(a)(1)(A). In this appeal, the Debtor argues that the
bankruptcy court applied an outdated test and that, using a more recent test adopted by the

       1
       The Honorable William A. Hill, United States Bankruptcy Judge for the District
of North Dakota.

                                               2
Sixth Circuit in Ohio Bureau of Workers’ Compensation v. Yoder (In re Suburban Motor
Freight, Inc.), 36 F.3d 484 (6th Cir. 1994) (“Suburban II”), the workers’ compensation
premiums would be dischargeable. The Bureau contends that the bankruptcy court did not
apply the improper test and, even if the bankruptcy court used the more recent Suburban II
test, the outcome would not change.

II.    STANDARD OF REVIEW

       The bankruptcy court’s decision that the workers’ compensation premiums qualify as
excise taxes under the Bankruptcy Code is a conclusion of law over which we exercise de
novo review. Sacred Heart Hosp. v. Pennsylvania Dept. of Labor & Industry (In re Sacred
Heart Hosp.), 209 B.R. 650, 653 (E.D. Pa. 1997); Oregon Fryer Comm’n v. Robert K.
Morrow, Inc. (In re Belozer Farms, Inc.), 199 B.R. 720, 723 (B.A.P. 9th Cir. 1996); see
Mosbrucker v. United States (In re Mosbrucker), 227 B.R. 434, 436 (B.A.P. 8th Cir. 1998)
(exercising de novo review over a similar conclusion under § 507(a)(8)(C) of the Bankruptcy
Code).

III.   DISCUSSION

       Bankruptcy Code § 523(a)(1)(A) provides that any debt for a tax “of the kind and for
the periods specified in section . . . 507(a)(8)” is not dischargeable. 11 U.S.C. §
523(a)(1)(A) (1994). The relevant portion of § 507(a)(8) provides priority for
             an excise tax on –
                    (i) a transaction occurring before the date of the filing of the petition
                    for which a return, if required, is last due, under applicable law or
                    under any extension, after three years before the date of the filing of the
                    petition; or
                    (ii) if a return is not required, a transaction occurring during the three
                    years immediately preceding the date of the filing of the petition. . . .

11 U.S.C. § 507(a)(8)(E).

       Pursuant to this statutory scheme, if the obligation is a tax, it must fit within the
specific definition of an “excise tax” in order to be excepted from the Debtor’s discharge.

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An excise tax is an indirect tax, one not directly imposed upon persons or property but
imposed on the performance of an act, the engaging in an occupation, or the enjoyment of
a privilege. New Neighborhoods, Inc. v. West Virginia Workers’ Compensation Fund, 886
F.2d 714, 719 (4th Cir. 1989); In re Payne, 27 B.R. 809, 813 (Bankr. D. Kan. 1983). The
obligation in question here, if it is a tax, would qualify as an excise tax because it is an
indirect assessment that arises through the transaction or act of employing. New
Neighborhoods, 886 F.2d at 719; see Ohio Bureau of Workers’ Compensation v. Yoder (In
re Suburban Motor Freight, Inc.) (“Suburban II”), 36 F.3d 484, 488 n.2 (6th Cir. 1994);
Yoder v. Ohio Bureau of Workers’ Compensation (In re Suburban Motor Freight, Inc.)
(“Suburban I”), 998 F.2d 338, 340 n.3 (6th Cir. 1993). We, therefore, turn to the more
fundamental question of whether the Debtor’s obligation to the Bureau can be classified as
a tax.

       The term “tax” is not defined by the Bankruptcy Code. In re Sacred Heart Hosp., 212
B.R. 467, 471 (E.D. Pa. 1997); In re Park, 212 B.R. 430, 432 (Bankr. D. Mass. 1997).
Whether an obligation owed to the government constitutes a tax is a question of federal law.
Suburban II, 36 F.3d at 487 (citing New York v. Feiring, 313 U.S. 283, 285 (1941)); New
Neighborhoods, 886 F.2d at 718; Sacred Heart Hosp., 212 B.R. at 471; Park, 212 B.R. at
432. The statute’s characterization of the obligation is not controlling. United States v.
Juvenile Shoe Corp. (In re Juvenile Shoe Corp.), 99 F.3d 898, 901 (8th Cir. 1996); New
Neighborhoods, 886 F.2d at 718; Park, 212 B.R. at 432-33; In re Metro Transp. Co., 117
B.R. 143, 151 (Bankr. E.D. Pa. 1990). Thus, the fact that the Act refers to premiums instead
of taxes is not dispositive. Rather, the court must look to the substance of the statute to
determine whether the obligation bears the characteristics of a tax. Feiring, 313 U.S. at 285;
Juvenile Shoe Corp., 99 F.3d at 900; Metro Transp., 117 B.R. at 151.

        The Supreme Court has defined taxes as “those pecuniary burdens laid upon
individuals or their property, regardless of their consent, for the purpose of defraying the
expenses of government or of undertakings authorized by it.” Feiring, 313 U.S. at 285. See
also United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U.S. 213, 224 (1996);
Juvenile Shoe Corp., 99 F.3d at 900. In short, a payment may be classified as a tax if the
state has compelled the payment and if the payment serves a public purpose. Metro Transp.,
117 B.R. at 152 (quoting New Neighborhoods, 886 F.2d at 718). In contrast to taxes, fees

                                              4
are monies paid to the government incident to a voluntary act that bestows a benefit on the
applicant, not shared by other members of society. National Cable Television Ass’n v.
United States, 415 U.S. 336, 340-41 (1974); Suburban I, 998 F.2d at 339-40; Sacred Heart
Hosp. v. Pennsylvania Dept. of Labor and Indus. (In re Sacred Heart Hosp.), 209 B.R. 650,
654 (E.D. Pa. 1997) (“[A] government’s claim looks less like a tax and more like a
commercial charge when it involves a fee in exchange for the privilege of engaging in a
certain regulated activity not available to the public generally or for the provision of a service
which a person may obtain lawfully from others or may provide himself.”). Such fees are
meant to restore to the government the costs of the benefits supplied, rather than to produce
general revenues. Park, 212 B.R. at 433. Several courts have summarized the distinction
between taxes and fees by noting that taxes are involuntary exactions for a public purpose
and non-taxes are voluntary payments for a private benefit. Park, 212 B.R. at 433 (citing In
re S.N.A. Nut Co., 188 B.R. 392, 394 (Bankr. N.D. Ill. 1995); In re Jenny Lynn Mining Co.,
780 F.2d 585, 589 (6th Cir. 1986)).

        Based upon the Supreme Court’s definition, the Ninth Circuit outlined the four
elements necessary for classifying an obligation as a tax: (1) an involuntary pecuniary
burden, regardless of name, laid upon individuals or property; (2) imposed by, or under
authority of the legislature; (3) for public purposes, including the purposes of defraying
expenses of government or undertakings authorized by it; and (4) under the police or taxing
power of the state. County Sanitation Dist. No. 2 v. Lorber Indus. of Cal., Inc. (In re Lorber
Indus. of Cal., Inc.), 675 F.2d 1062, 1066 (9th Cir. 1982). Most government assessments
satisfy the second and fourth prongs of the test, Park, 212 B.R. at 433, which is indisputably
the case here. Furthermore, the Debtor does not dispute that the workers’compensation
premiums satisfy the remaining elements. The premiums are involuntary exactions on
employers to serve the public purpose of upholding the prosperity of the state by ensuring
the well-being of workers through sure and certain relief to those injured on the job. See
N.D. Cent. Code § 65-01-01. Based on the Lorber test and its interpretation of the Supreme
Court’s definition of taxes, Debtor’s unpaid workers’ compensation premiums are
nondischargeable excise taxes.

       While Debtor does not dispute the result under the Lorber test, he maintains that the
court must apply a refined version of the test developed by the Sixth Circuit. See Suburban

                                                5
II, 36 F.3d at 488-89. Citing concern that the public purpose portion of the Lorber test would
lead to classifying all government debts as taxes, the Sixth Circuit refined the third element
to include two additional requirements: (1) that the pecuniary obligation be universally
applicable to similarly situated entities; and (2) that according priority treatment to the
government claim not disadvantage private creditors with like claims. Suburban II, 36 F.3d
at 488.

        Debtor argues that the Act is not universally applicable to all similarly situated
entities. Debtor’s argument stems from the fact that farmers are not required to pay
premiums under the Act although they employ workers in the same capacity as Debtor’s
employees. That argument is unpersuasive. Many taxes are imposed on a subclass of
taxpayers and do not lose their identity as taxes merely because they are not imposed beyond
the confines of that class. New Neighborhoods, 886 F.2d at 719 n.4; Sacred Heart Hosp.,
212 B.R. at 474. The Act applies to a certain subclass of employers. While agricultural
employees may perform the same duties as Debtor’s employees, the North Dakota Supreme
Court has specifically held that the exclusion of agricultural employers from the Act has a
rational basis. Haney v. North Dakota Workers Compensation Bureau, 518 N.W.2d 195, 202
(N.D. 1994).2 Accordingly, agricultural employers are not similarly situated with the Debtor
because they occupy a protected position in North Dakota. Thus, they permissibly lie
outside the subclass of employers covered by the Act.

        Debtor also argues that granting priority to the Bureau could disadvantage private
entities with like claims. Debtor speculates that if he employed workers in Minnesota and
obtained workers’ compensation insurance, the private insurance provider in Minnesota
would not receive the same treatment as the Bureau. Debtor’s argument in this respect is
also unpersuasive. Numerous courts, including the court that announced the test that Debtor
relies upon, have granted priority to workers’ compensation premiums in monopolistic states
despite the fact that many other states have the option of private insurance. See, e.g.,


       2
        Debtor cites Benson v. North Dakota Workmen’s Compensation Bureau, 283
N.W.2d 96 (N.D. 1979) as authority that the exclusion of agricultural employment from
the Act is an unconstitutional denial of equal protection. However, the Haney court
expressly overruled the Benson decision. Haney, 518 N.W.2d at 199.

                                              6
Suburban I, 998 F.2d at 341-42. Debtor’s argument would prevent every state’s workers’
compensation premiums from being classified as taxes merely because other states’ systems
allow for private insurance.

       In sum, even if the refined Suburban II test is the proper standard, Debtor’s unpaid
workers’ compensation premiums still qualify as taxes. The Act is universally applicable to
all similarly situated entities and according priority treatment to the Bureau does not
disadvantage any private creditors with like claims.

       This result also conforms to the general trend of cases involving workers’
compensation premiums. Generally, courts determining whether premiums under a state’s
workers’ compensation scheme should be classified as excise taxes have looked at whether
the scheme requires an employer to subscribe to a state-administered insurance plan or
whether the employer may purchase private insurance. Workers’ Compensation Trust Fund
v. Saunders, 234 B.R. 555, 562 (Bankr. D. Mass. 1999). When a state requires all employers
to purchase workers’ compensation insurance from the state, with no private insurance
option, the premiums fairly consistently have been classified as priority taxes. Industrial
Comm’n v. Camilli (In re Camilli), 94 F.3d 1330, 1335 (9th Cir. 1996); Suburban I, 998 F.2d
at 340 (“The theory goes that where the State has intended to supplant all private forms of
workers’ compensation insurance, to centralize the system and to force all employers to
participate on pain of legal sanctions, the coercive and universal nature of the state program
makes payments it collects more akin to taxes than to fees or insurance premiums, which are
paid voluntarily.”); Saunders, 234 B.R. at 562; Park, 212 B.R. at 435; Waldo v. Montana
Dept. of Labor & Indus., 186 B.R. 118, 122 (Bankr. D. Mont. 1995). The North Dakota
system is monopolistic. All employers must pay premiums into the state fund, with no
option of private insurance. See N.D. Cent. Code § 65-04-04. Therefore, the prevailing rule
regarding the classification of workers’ compensation premiums also supports the conclusion
that Debtor’s unpaid premiums are nondischargeable priority excise taxes.

                                      CONCLUSION

       Based on the foregoing, we hereby affirm the decision of the bankruptcy court.


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A true copy.

      Attest:

                CLERK, U.S. BANKRUPTCY APPELLATE PANEL
                FOR THE EIGHTH CIRCUIT




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