In Re McLean Industries, Inc.
This case concerns U.S. Lines, Inc. (now Janus Industries), along with Mclean Industries, Inc. and First Colony Farms, Inc. (collectively, the "Debtors"), and the Unsecured Creditors’ Committee (collectively, the "Movants"). They filed for Chapter 11 bankruptcy in 1986 and had a plan of reorganization confirmed in 1989, which relied on the preservation of net operating losses (NOLs). After the IRS announced proposed regulations in 1990 that could challenge the use of NOLs if a plan's principal purpose was tax evasion, the Movants sought a court order declaring that tax evasion was not the principal purpose of their plan. The Internal Revenue Service (IRS) opposed, arguing a lack of subject matter jurisdiction and the applicability of the Declaratory Judgment Act. The court denied the Movants' motion, holding that under 11 U.S.C. § 1129(d), only a governmental unit can initiate a tax avoidance motion, and the issue of tax liability based on proposed regulations was not a concrete controversy.