UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

CORBIN DIVISION

IN RE:

EVERETT TRUMAN MAYS

BARBARA ANN MAYS

DEBTORS CASE NO. 86-60371

MEMORANDUM OPINION

This matter is before the Court on the United States Trustee's ("UST") proposal to pay in full taxes and interest owed to the United States of America, Internal Revenue Service ("IRS") and to the Commonwealth of Kentucky Revenue Cabinet. According to the Notice of Proposed Action filed herein on October 11, 1996, by the UST, the estate of the debtors owe the IRS $47,558.12, while the amount owed to the Commonwealth is $8,957.69 for the tax years 1987-1991 (in 1991 only a state return was filed). First & Farmers Bank, a creditor of the debtors, has objected to these proposed payments.

First & Farmers Bank filed a Renewed Objection to Payment of Interest on Claim of Internal Revenue Service and Kentucky Revenue Cabinet on December 3, 1996. Its argument in opposition to the payment of such interest is that 11 U.S.C. '503(b)(B)(1) provides that taxes incurred by the estate may be allowed as administrative expense, but does not provide for the allowance of interest on such taxes as an administrative expense. The IRS filed a Response to First & Farmers Bank's Renewed Objection on February 19, 1997. First & Farmers Bank cites several bankruptcy court cases in support of its position, as well as a Ninth Circuit B.A.P. case, In re Mark Anthony Construction, Inc. 78 B.R. 260 (1987), later overruled by the Ninth Circuit Court, as set out below.

The IRS takes the position that interest on post-petition taxes is allowed as an administrative expense pursuant to the ruling in In re Flo-Lizer, Inc., 916 F.2d 363 (6th Cir. 1990). The court held there that "interest on postpetition taxes should be given first priority status as an administrative expense under 11 U.S.C. '503(b)." At 366-367. In its opinion the Flo-Lizer court noted that three other circuits have made similar rulings: In re Mark Anthony Construction Co., 886 F.2d 1101 (9th Cir. 1989), In re Allied Mechanical, Inc., 885 F.2d 837 (11th Cir. 1989), and United States v. Friendship College, Inc., 737 F.2d 430 (4th Cir. 1984).

This Court is bound by the decision in In re Flo-Lizer, Inc. which remains the law in the Sixth Circuit. First & Farmers Bank has not provided any authority to contradict it. This Court therefore finds that First & Farmers Bank's Renewed Objection to Payment of Interest on Claim of Internal Revenue Service and Kentucky Revenue Cabinet should be overruled and that the United States Trustee should be directed to pay taxes and interest as set out in its Notice of Proposed Action. An order in conformity with this opinion will be entered separately.

Dated:

By the Court -

___________________________________

Judge

Copies to:

Debtors

United States Trustee

John T. Hamilton, Esq.

Charles H. Keen, Esq.