Case Document 961 Filed in TXSB on 03/28/19 Page 1 of 15

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1 Case Document 961 Filed in TXSB on 03/28/19 Page 1 of 15 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: CHAPTER 11 LOCKWOOD HOLDINGS, INC., et al., 1 CASE NO (DRJ) DEBTORS JOINTLY ADMINISTERED LOUISIANA DEPARTMENT OF REVENUE S OPPOSITION TO DEBTORS FIRST OMNIBUS OBJECTION TO (I) AMENDED OR DUPLICATIVE CLAIMS, (II) LATE-FILED CLAIMS, (III) NON-COMPLIANT CLAIMS, (IV) NO LIABILITY CLAIMS AND (V) SATISFIED CLAIMS 2 The Secretary of the Louisiana Department of Revenue ( LDR ), through undersigned counsel appears herein to oppose the Debtors First Omnibus Objection to (1) Amended of Duplicative Claims, (II) Late-Filed Claims, (III) Non-Compliant Claims, (IV) No Liability Claims and (V) Satisfied Claims ( Objection ) and respectfully represents as follows: 1. An admission or denial is not required with respect to Paragraphs 1 and 3 through 5 of this Objection because LDR s Claim 105 is included only on Schedule The allegations of Paragraph 2 are denied; specifically, LDR denies that Claim 105 had to be filed by the June 4, 2018 or the August 6, 2018 bar date for the reasons that are further 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number are: Lockwood Holdings, Inc. (9726); LH Aviation, LLC (6984); Piping Components, Inc. (0197); Lockwood International, Inc. (8597(; LMG Manufacturing, Inc. (9468; Lockwood Enterprises, Inc. (6504); and 7807 Eagle Lane, LLC (7382). 2 See Document 909, Schedule 2. Schedule 2 alleges that Claim No. 105 filed on November 7, 2018 in the amount of $27, ( Claim 105 ) requests priority treatment for the total amount and is a Late-Filed Claim.

2 Case Document 961 Filed in TXSB on 03/28/19 Page 2 of 15 explained herein below, and LDR denies that the Debtor is entitled to an order disallowing and expunging Claim LDR denies the allegations of Paragraph 6 as written. LDR admits that this Honorable Court has jurisdiction to determine the amount of LDR s administrative tax expenses under 11 U.S.C. 503 and 505 under 28 U.S.C. 157 and 1334, and that these matters are core proceedings under 28 U.S.C. 157(b). 4. LDR admits the allegations of Paragraph 7 as written. 5. An admission or denial is not required with respect to paragraph 8 of the Objection at it is setting forth the statutes under which the Debtors are proceeding. However, out of an abundance of caution, the LDR avers that Sections 105 and 502(b) of title 11 of the United States Bankruptcy Code and Rules 3007 of the Federal Rules of Bankruptcy Procedure and Rule of the Local Rules of the Southern District of Texas are applicable to the determination of Administrative Tax Expenses for the reasons more fully set forth in the opposition below. 6. The allegations of Paragraphs 9 through 13 of the Objection are admitted. 7. The allegations of Paragraph 14 of the Objection are admitted except LDR expressly denies that either the bar date of June 4, 2018 or August 6, 2018 for governmental entities to file proof of claims for all claims that arose before the Petition Date are applicable to the claims included on Claim 105 to which the Debtors Object based on its inclusion on Schedule 2 attached to the Objection. The basis of LDR s denial of this fact is more fully set forth in its Opposition herein below. 8. The allegations of Paragraph 15 are denied and denied as applicable to LDR s Claim 105 included on Schedule 2 attached to the Objection.

3 Case Document 961 Filed in TXSB on 03/28/19 Page 3 of Except as expressly admitted, the LDR denies the allegations of paragraph 16 of the Objection. LDR admits that Section 502 reads as reflected threin, but denies that Section 502 of the Bankruptcy Code is applicable to administrative expense claims. Form 410 reflects that it is not for purposes of making an administrative expense claim and that Section 503 of the Bankruptcy Code is to be followed. LDR, as a governmental entity is not required to file a request for payment for an administrative tax expense claim pursuant to 11 U.S.C. 503(b)(1)(B)-(D). LDR does so on this form because it is not required to do so under 11 U.S.C. 503(b)(1)(D) and it places the Debtors on notice of outstanding tax liabilities which may require the filing of returns and the amounts that the accounts currently reflect as due in the event returns are filed. Further, in this case, the LDR still has time to file a separate request for payment, but the attachment to Claim 105 includes a Request for Payment, which need only include (i) the name of the holder of the Administrative Expense Claim; (ii) the amount of the Administrative Expense Claim; and (iii) the basis for the Administrative Expense Claim, all of which is included on the Attachment to Claim The LDR filed administrative expense request for payment which was accepted as Claim 105 on November 7, A copy of the Official Form 410 Proof of Claim sent to Omni Management Group for filing, complete with the attachment requesting payment of the administrative expense, is attached hereto as Exhibit An admission or denial of paragraph 17 is not required because the provisions of law reflected therein speak for themselves. 12. An admission or denial of paragraph 18 of the objection is not required because the provisions of law recited therein speak for themselves.

4 Case Document 961 Filed in TXSB on 03/28/19 Page 4 of The allegations of Paragraphs 19, 21, 22, and 23 do not require an admission or denial by the Louisiana Department of Revenue because no claims of the LDR are listed on Schedules 1, 3, 4 and 5 attached to the Objection. 14. The allegations of paragraph 20 are denied with respect to the LDR s Claim 105 as the deadlines set forth therein are not applicable to an Administrative Tax Expense Claims such as the ones set forth in Claim The allegations of paragraph 24 are denied. 16. The allegations of paragraph 25 are admitted. 17. The allegations of paragraph 26 are admitted. AND NOW FURTHER OPPOSING THE OBJECTION, the LDR represents as follows: 18. The Attachment to Claim 105 reflects in statement 2 that it is a request for payment of taxes and any interest and penalty penalties due and same is filed as Section 503(b)(1)(D) does not require governmental entities to file a request for payment for taxes incurred by the estate, and doing so places the Debtors on notice of the claims that LDR believes it has against the Debtors. 19. The attachment also states that it is an Administrative claims (taxes accrued subsequent to the original petition date) and is entitled to priority as an expense of administration by virtue of the Bankruptcy Code, Title 11 U.S.C. Section 507(a)(2) and must be paid in full in advance of distribution to creditors as and to the extent permitted by 1129(a)(9)(A). 20. The attachment also states that Payment of this Claim is mandated by Title 28 of the U.S. Code, Sections 959 and 960.

5 Case Document 961 Filed in TXSB on 03/28/19 Page 5 of Claim 105 includes a tax other than of a kind specified in section 507(a)(8) of this title and includes penalties relating to a tax of a kind specified in subparagraph (B) of [section 503(b)(1)] Claim 105 also reflects that [i]nterest and penalties continue to accrue according to Title 47 of the Louisiana Revised Statutes until the return(s) and/or payment in full is received. 23. The Objection erroneously implies that this is a tax claim entitled to PRIORITY treatment pursuant to Section 507(a)(8) because it implies that Claim 105 is subject to the established Governmental Bar Date of August 6, 2018 by inclusion on Schedule 2 of the Objection, when to the contrary Claim 105 clearly avers Administrative expense Priority treatment, by the checking the box labeled Other. Section of 11 U.S.C. 507(a)(2)., and NOT checking the box labeled Taxes or penalties owed to governmental units 11 U.S.C. 507(a)(8). 24. This Honorable Court issued a separate order with respect to Administrative Expenses and which order reflects that all holders of Administrative Expense Claims, other than Professional Persons holding Fee Claims, shall file with the Bankruptcy Court a request 3 LDR points out that there is an error on Claim 105 with respect to the dates. Claim 105 contains a clerical error it reflects that with respect to the Sales (Account Number or as reflected on the claim Sales (001 ) for the Tax Period 1/31/2018, the estimate [i]ncludes dates 1/18/2018 through 1/31/2018 when it should have reflected 1/24/2018 through 1/31/2018. The error was picked up on the filing date of some other affiliates on 01/01/2018. This claim is in the process of being amended to correct the clerical error regarding the time span covered on the bifurcated period (pre-petition and post-petition). However, there is a further error as this claim in relation to that account for the tax period Sales (001) for 1/31/2018 does not reflect the amounts due per the return that has been filed. The Claim will be amended to correct the amounts due for tax, interest, and penalty based on the returns filed and the date filed and paid (see below) because the time period for the filing of the Request for Payment or the Administrative Claims Bar Date has not elapsed as of this date. This portion of the Administrative Claim was underestimated.

6 Case Document 961 Filed in TXSB on 03/28/19 Page 6 of 15 for payment of such Administrative Claims within thirty (30) days after the Effective Date of the Plan Section 507(a)(2) refers to Section 503(b) of Title 11 of the United States Code. 26. Section 503(b) is subject to the exception contained within Subsection 503(b)(1)(D), which provides that notwithstanding the requirements of subsection (a), a governmental unit shall not be required to file a request for the payment of an expense described in subparagraph (B) or (C), as a condition of its being an allowed administrative expense. (Emphasis added). Accordingly, there is no true bar date for governmental units to file a request for payment of an administrative expense for a tax incurred by the estate as there is no requirement under the Bankruptcy Code to do so; therefore timely filing cannot be a condition of an administrative expense taxes being an allowed and paid administrative expense by the estate. 27. The Claim Objection Process is inapplicable to requests for payment of administrative expenses, and the 2005 Amendments amended Code 503(b)(1)(D) to eliminate the requirement that taxing authorities to have to request payment of administrative expenses U.S.C. 959 and 960 require Debtors in Possession to abide by state laws which include filing requirements for tax returns and payment of taxes. 4 See Document 883 Notice of (I) Entry of Confirmation Order, (II) Last Date to File Claims for Rejection Damages, (III) Last Date to File Motions to Allow 506(b) Claims and (Iv) Last Date to File Requests for Payment of Fee Claims. This Notice is ambiguous and misleading as the title does not in any way mention the last date to file claims or request for payment of 503(b)(1)(B)-(C) claims in the title. However, the body reflects as stated above, refers to all administrative expense claims other than for professional fees. 5 Post-petition taxes are taxes incurred by the estate after the debtor has filed the petition for reorganization. Hall v. United States, U.S., 132 S.Ct. 1882, 1886, 182 L.Ed.2d 840 (2012).

7 Case Document 961 Filed in TXSB on 03/28/19 Page 7 of The filing of the Administrative Expense claim requesting payment despite the provisions of law which exempt the taxing authority from this serves to place the debtor in possession on notice of the liability owed to the LDR. 29. Alternatively, the filing of the document with Omni that is identified as LDR s Claim 105 constitutes a request for payment of an administrative expense based on the language on the attachment to the claim; pursuant to the Bankruptcy Code, taxing authorities should not have to file a claim or comply with 11 U.S.C. 503(a) and (b) to have an allowed administrative expense claim for taxes incurred by the estate as they are required to pay such taxes when they are become due. 30. The Corporate Tax Period ending 1/31/2018 included on Claim 105 is a tax incurred by the estate for purposes of 11 U.S.C. 503(b)(1)(B)-(D) because the tax is incurred on the last date of the tax period, which was 1/31/2018. See 11 U.S.C. 101(5). 31. The Sales Tax Periods on Claim 105 for the tax periods ending 1/31/2018 and 2/28/2018 were also incurred pursuant to the Bankruptcy Code when the right to payment arose pursuant to 11 U.S.C. 101(5) All that is required for the payment of Administrative Tax Expenses, since the enactment of the exemption from the requirement for filing a request for payment by governmental units for administrative tax expenses, is that the debtor in possession is required to ensure that there is notice to creditors and a hearing as required by 503(b) before paying any taxes. 6 6 See In re Cloobeck, 788 F.3d 1243, 1246 (9th Cir.2015) ( Subject to limited exceptions, a Trustee must pay the taxes of the estate on or before the date they come due, 28 U.S.C. 960(b), even if no request for administrative expenses is filed by the tax authorities, 11 U.S.C. 503(b)(1)(D), and the Trustee must insure that notice and a hearing have been provided before doing so, see id. 503(b)(1)(B). )

8 Case Document 961 Filed in TXSB on 03/28/19 Page 8 of However, in the event this Honorable Court finds that a request for payment is required based on the provisions of the confirmed plan or separate order entered for certain Administrative Claims, then LDR avers that Claim 105 constitutes or should be deemed a request for the payment based on the language on the attachment and the United States Bankruptcy Code s exemption from the provisions in subsection (a) of Section Alternatively, in the event this Honorable Court finds that Claim 105 is not a request for payment, the LDR avers that the Debtor s Objection is PREMATURE as to timeliness because this Honorable Court set a different bar date for certain Administrative Expenses. 35. The Administrative Claims Bar Date, assuming that the bar date was intended to limit administrative tax claims which were not mentioned in the title of the document, would be thirty (30) days after the Effective Date of the Confirmed Plan. There is no way the Debtor reasonably could believe that LDR s claims reflected on Claim 105 were subject to the August 6, 2018 bar date simply because LDR is a governmental unit; the tax periods included were all post-petition administrative claims, and the plan was not confirmed until February 6, 2019 and still has not become Effective as of this date, and if the governmental unit claims for administrative taxes had the same bar date, this would bar more than five months of post-petition administrative expenses by the estate. 36. The condition precedent to the Effective Date of the Confirmation of the Plan have not occurred based on information and belief. a. The Confirmed Plan requires that [w]ithin five (5) Business Days of the Effective Date, the Debtors shall file a notice of the occurrence of the Effective Date and serve same on all creditors and parties in interest. See Article X of Document 824 at Section 10.2, in the non-lettered concluding paragraph following 10.2(c) but

9 Case Document 961 Filed in TXSB on 03/28/19 Page 9 of 15 before Section This Plan also states that it is of no force and effect unless the Effective Date occurs. b. Additionally, as of March 12, 2019, the Debtor/Reorganized Debtors, through its authorized representative, Jason S. Brookner stated that the plan was not effective yet. 7 c. There is nothing in the Court record to indicate that the Effective Date has occurred or that the thirty days for filing Administrative Claims has elapsed. 37. Even should this Honorable Court find for whatever reason that a separate Request for Payment is required, it is not past due at this time; the Effective Date has not occurred and therefore the bar date set for the 30 th day thereafter, would not have elapsed as of the date the Objection was filed, or even by the date this opposition is being filed. 38. Tax liabilities incurred by the estate are treated very specifically within the bankruptcy code under 11 U.S.C. 503(b)(1)(B)-(D) and 505(B), and no other process should be applicable with respect to Administrative Tax Expenses. 39. Additionally, at the present time, there are at least two tax periods on Claim 105 (as well as other pre-petition periods) for which returns have not been filed and the liabilities are therefore based on estimates which need to be filed before the Court sets this matter for a hearing. 40. Specifically: a. The Corporate Tax Return for Lockwood International Inc. for the tax period 1/31/2018 has not been filed to date; Lockwood International Inc. did not file a 7 See from Jason S. Brookner dated March 12, 2019 at 1:37 PM attached hereto and labeled as Exhibit 2.

10 Case Document 961 Filed in TXSB on 03/28/19 Page 10 of 15 request for an extension of time to file the return due 1/31/2018 with the LDR; LDR estimated the amount of tax due at $20,000.00, interest in the amount of $ and the penalties in the amount of $7, based on the best information in LDR s possession from prior tax periods. 8 Taxes are estimated based on the prior filing history of the debtor, and the interest and penalties are based on estimations based on La. Rev. Stat. 47:1601, et seq 9 b. Claim 105 contains a clerical error. Claim 105 erroneously reflects that the Sales Tax Return (for Account Number ) 10 for the tax period 1/31/2018 was not filed (Indicated by E under the column labeled Estimate, Return or Audit ); 11 however, this claim was filed late on May 16, 2018 and the return reflects: (i) tax due in the amount of $942.00; (ii) an erroneous interest amount of $17.00 rather than $17.55; 8 The tax estimation is based on the prior filed tax returns of the Debtors. 9 Additionally, the Debtor has failed to file the Corporation Tax Return (Corporation Income Tax and Corporation Franchise Tax) for the filing period 12/31/2017, and the extension of time requested for filing the return lapsed on January 16, The address linked to this Sales Tax Account IS LOCKWOOD INTERNATIONAL, INC at Wallisville Rd. Houston, TX As mentioned hereinabove, Claim 105 erroneously reflects that Sales Tax Period 1/31/2018 includes the period 1/18/2018 through 1/31/2018, when it should reflect that it includes the period 1/24/2018 through 1/31/2018. This is in the process of being amended as it was unintended, and also for this same period, the return was actually filed and the tax was paid but only interest and penalty remain outstanding.

11 Case Document 961 Filed in TXSB on 03/28/19 Page 11 of 15 (iii) no penalty being due despite the return being filed 3 months late (See Exhibit 3 ) when pursuant to statutes there are penalties due; 12 (iv) a payment in the amount of $ was received with the tax return at issue a. LDR s administrative claim for this period was underestimated estimated at only $ b. But assuming the court requires the filing of a request for administrative expense, even for administrative taxes owed to a governmental unit despite 11 U.S.C. 503(b)(1)(D), the time period for filing same has not elapsed pursuant to the terms of this Honorable Court s Order regarding requests for payment of particular Administrative Expense Claim, so Claim 105 is capable of being amended because the Effective Date of the Plan has not occurred and therefore there is still time to file same, whether Claim 105 is amended or otherwise Presently the account reflects aggregate penalties in the amount of $ for this tax period. See La. Rev. Stat. 47:1602, et seq. 13 Additionally, the debtor has failed to file the Sales Tax Returns for the filing periods 11/30/2017 and 12/31/2017. A proof of claim for these tax periods have not been filed to date. A motion to allow a late filed claim would be necessary to allow the claims.

12 Case Document 961 Filed in TXSB on 03/28/19 Page 12 of 15 c. the Sales Tax Return (for Account Number ) 14 for the tax period 02/28/2018 was not filed at the time the claim was filed on November 07, 2018, and this return remains outstanding to date; the LDR has estimated the claim at a minimal $100.00, plus applicable interest and penalty while awaiting the filing of the Sales Tax Return. 15 d. the Sales Tax Return (for Account Number ) for the tax period 2/28/2017 was filed on May 25, 2018 (See Exhibit 4 ); the return reflected tax due in the amount of $702.00, $8.00 in interest due; and no penalty for the two month delinquency; pursuant to La. Rev. Stat. 47:1601, 2t seq., there are interest and penalties due totaling $ (interest in the amount of $8.77 and penalties in the amount of $193.94) because a payment of only $ was remitted with the aforesaid return. 41. If the outstanding tax returns are filed for the Corporation Tax for 2018 and the Sales Tax (for Account Number or Sales (002) ), LDR can amend Claim 105 based on actual amounts determined to be due after processing and examination if necessary, and would then be able to amend Claim 105 (or even file any other separate request for payment of Administrative Claim) before the Effective Date and/or the Bar Date for Requests for Payment of Administrative Expenses. 42. LDR avers that it is not required to file a request for payment of the Administrative Tax Expenses for the taxes reflected on Claim 105, but nevertheless, the Attachment thereto 14 The address linked to this Sales Tax Account is LOCKWOOD INTERNATIONAL, INC. at INDUSTRIPLEX AVE GONZALES LA Additionally, the debtor has failed to file the Sales Tax Returns for the filing periods 11/30/2017 and 12/31/2017.

13 Case Document 961 Filed in TXSB on 03/28/19 Page 13 of 15 contains such a request, and all that is required is for the Debtor in Possession to request authority to make the requisite payments (and in fact the Debtor in Possession did make payments with the return filed for the Sales 1/31/2018 tax period for the Sales (001) account, and also for the 2/28/2018 tax period for the same account already, but has not paid the tax and interest due in accordance with applicable non-bankruptcy law, and the Debtor should not require anything different in relation to the Corporate Tax 1/31/2018 period or the Sales (002) Tax Period for the Sales (002) account and should pay the interest and penalties due under the applicable non bankruptcy law for these periods, and file the returns for all included tax periods -Corporate Tax 1/31/2018 and Sales (002) for 1/31/2018- for which returns are still outstanding and follow the procedures of 505). 43. LDR avers the basis of the Debtors objection is inapplicable for the reasons set forth hereinabove. 44. Alternatively, LDR avers the Debtor s Objection is premature on the basis of the as the bar date has not elapsed for making requests for payment of administrative tax expense claims has not been set or if included within Document 883, it has not elapsed as of this date. 45. Additionally, the LDR avers that the Debtor should be required to file the outstanding returns before this Honorable Court hears this matter in relation to LDR s Claim 105, and then be required to follow the procedure set forth in Section 505 of the Bankruptcy Code as governmental entities are not required to file requests for payment of administrative tax expenses pursuant to 11 U.S.C. 503(b)(1)(D) and Document 883 does not address this type

14 Case Document 961 Filed in TXSB on 03/28/19 Page 14 of 15 of claim in its heading and is ambiguous at best and potentially misleading in its applicability LDR further avers that the Debtor s inclusion of LDR s Claim 105 in this Omnibus Objection on the basis of untimeliness for failure to file it by August 6, 2018 (the prepetition claim deadline) is without merit, and LDR s administrative expense claims set forth in Claim 105 cannot be disallowed even if the Claim is expunged from the Claims registry and LDR is required to file a request for payment of an administrative expense claim pursuant to the order issued as Document No The Debtor s Objection should be dismissed because it is prematurely asserting that the tax periods included on Claim 105 are barred by the deadlines set forth for governmental units but the tax periods included thereon are for Administrative Tax Expenses, the bar date for which has not elapsed. WHEREFORE, the LDR prays that after all due legal proceedings are had that this Honorable Court will deny the Debtors Objection in relation to LDR s Claim 105 and for all other relief that may be just in the premises. Respectfully submitted, LOUISIANA DEPARTMENT OF REVENUE /s/ Florence Bonaccorso-Saenz Florence Bonaccorso-Saenz (La. Bar No ) Senior Bankruptcy Counsel Litigation Division 617 N. Third St., Office 780 Post Office Box 4064 (Zip Code ) Baton Rouge, LA Tele: (225) , Fax: (225) The failure to file post-petition returns can subject the debtor s case to dismissal pursuant to 11 U.S.C. 521(j). No time period is included for this provision.

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