774 F.3d 1313 (10th Cir. 2014), 13-1464, Mallo v. Internal Revenue Service

Docket Nº:13-1464, 13-1488
Citation:774 F.3d 1313
Opinion Judge:McHUGH, Circuit Judge.
Party Name:In re: LIANA CAROL MALLO; EDSON PAMITTAN MALLO, Debtors. LIANA CAROL MALLO; EDSON PAMITTAN MALLO, Appellants, v. INTERNAL REVENUE SERVICE, Appellee. In re: PETER GEORGE MARTIN, Debtor. PETER GEORGE MARTIN, Plaintiff - Appellant, v. THE UNITED STATES OF AMERICA, Defendant - Appellee
Attorney:Charles S. Parnell, Wheat Ridge, Colorado, for Appellants. Ellen Page DelSole, United States Department of Justice Tax Division, Washington, D.C. (Kathryn Keneally, Assistant Attorney General, Gilbert S. Rothenberg, Tax Division Attorney, Christine D. Mason, Tax Division Attorney, Department of J...
Judge Panel:Before BRISCOE, Chief Judge, LUCERO, and McHUGH, Circuit Judges.
Case Date:December 29, 2014
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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774 F.3d 1313 (10th Cir. 2014)

In re: LIANA CAROL MALLO; EDSON PAMITTAN MALLO, Debtors. LIANA CAROL MALLO; EDSON PAMITTAN MALLO, Appellants,

v.

INTERNAL REVENUE SERVICE, Appellee. In re: PETER GEORGE MARTIN, Debtor. PETER GEORGE MARTIN, Plaintiff - Appellant,

v.

THE UNITED STATES OF AMERICA, Defendant - Appellee

Nos. 13-1464, 13-1488

United States Court of Appeals, Tenth Circuit

December 29, 2014

Page 1314

Appeal from the United States District Court for the District of Colorado. (D.C. Nos. 1:13-CV-00098-LTB and 1:12-CV-03380-LTB).

Charles S. Parnell, Wheat Ridge, Colorado, for Appellants.

Ellen Page DelSole, United States Department of Justice Tax Division, Washington, D.C. (Kathryn Keneally, Assistant Attorney General, Gilbert S. Rothenberg, Tax Division Attorney, Christine D. Mason, Tax Division Attorney, Department of Justice, Washington, D.C., and John F. Walsh, United States Attorney for the District of Colorado, Denver, Colorado, with her on the briefs) for Appellees.

Before BRISCOE, Chief Judge, LUCERO, and McHUGH, Circuit Judges.

OPINION

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McHUGH, Circuit Judge.

I. INTRODUCTION

These consolidated appeals require us to determine as a matter of first impression

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whether an untimely 1040 Form, filed after the Internal Revenue Service (IRS) has assessed the tax liability, is a tax return for purposes of the exceptions to discharge in § 523(a)(1)(B)(i) of the Bankruptcy Code. Exercising jurisdiction under 28 U.S.C. § 158(d)(1), we hold that it is not and affirm the district court's decisions excluding the debtors' tax liability from the general discharge orders of the bankruptcy courts.

II. BACKGROUND

A. Factual History

Edson Mallo and Liana Mallo are a married couple who did not file timely federal income tax returns for 2000 and 2001 as required by the Internal Revenue Code. As a result, the IRS issued statutory notices of deficiency pursuant to 26 U.S.C. § § 6212 and 6213 for those years. The Mallos did not challenge those determinations. The Internal Revenue Service (IRS) assessed $34,464 in taxes, including penalties and interest, against Mr. Mallo for the 2001 tax year on July 11, 2005, and $19,022 in taxes against Mrs. Mallo for the 2000 tax year on July 10, 2006. The IRS began collection efforts in 2006.

In 2007, the Mallos filed a joint Form 1040 for tax year 2000 and another joint Form 1040 for tax year 2001. Based on this information, the IRS assessed additional joint tax liability against the Mallos in the amount of $4,576 for 2000 and partially abated Mr. Mallo's 2001 tax liability by $3,330.

Peter Martin's history is similar. Mr. Martin did not file timely returns for tax years 2000 and 2001. The IRS issued statutory notices of deficiency, which Mr. Martin did not challenge. In 2004, the IRS assessed $15,677 in taxes against Mr. Martin for 2000 and $11,766 in taxes for 2001. It then began collection efforts. In May 2005, Mr. Martin filed a Form 1040 for 2000 and a Form 1040 for 2001. Based on his submissions, the IRS partially abated Mr. Martin's 2000 and 2001 tax liabilities by $5,629 and $5,340, respectively.

B. Procedural History

In 2010, the Mallos filed a Chapter 13 bankruptcy petition for adjustment of debts with the United States Bankruptcy Court for the District of Colorado. See 11 U.S.C. § § 1301-1330. Their case was converted to a liquidation proceeding under Chapter 7 in early 2011. See id. § § 701-784. After the bankruptcy court issued a general order discharging the Mallos' debts, the Mallos filed an adversary proceeding against the IRS, seeking a determination that their income tax liabilities for 2000 and 2001 had been discharged. The IRS answered, denying the debts had been discharged. The parties agreed there were no issues of material fact in dispute and filed cross motions for summary judgment on the legal question whether the Mallos' tax debt was excepted from discharge under § 523(a)(1)(B) of the Bankruptcy Code. See 11 U.S.C. § 523(a)(1)(B)(i) (providing that a debtor's tax liabilities " with respect to which a return . . . was not filed" are excepted from discharge). The bankruptcy court denied the Mallos' motion for summary judgment and granted the IRS's motion based on the court's conclusion that the Mallos had not filed a return, and therefore, Mrs. Mallo's 2000 tax debt and Mr. Mallo's 2001 tax debt were not dischargeable. The Mallos appealed to the district court of Colorado.

The legal question was the same in Mr. Martin's bankruptcy, but he obtained a more favorable result. Mr. Martin filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of Colorado and received a general discharge order. Like the Mallos, Mr.

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Martin then filed an adversary proceeding against the IRS, seeking a determination that his 2000 and 2001 tax debts had been discharged. The parties filed cross motions for summary judgment, making substantially the same arguments as advanced in the Mallos' case. Contrary to the decision of his colleague who presided over the Mallos' bankruptcy proceeding, the bankruptcy judge in Mr. Martin's case determined the tardy Form 1040s were tax returns and therefore Mr. Martin's tax debt was not excepted from the order of discharge. The IRS appealed to the district court of Colorado.

The district court consolidated the Martin and Mallo cases for briefing purposes. After considering and rejecting the other positions advanced by the parties, the district court concluded the postassessment 1040s were not " returns" for purposes of § 523(a)(1)(B) because they served no tax purpose. As a result, the district court affirmed the decision of the bankruptcy court in the Mallos' case and reversed the order entered in Mr. Martin's bankruptcy proceedings.

The Mallos and Mr. Martin (collectively, the Taxpayers) filed separate appeals, which we have consolidated.

III. DISCUSSION

A. Standard of Review

" In reviewing a bankruptcy court decision under 28 U.S.C. § 158(a) and (d), the district court and the court of appeals apply the same standards of review that govern appellate review in other cases." In re Troff, 488 F.3d 1237, 1238-39 (10th Cir. 2007) (quoting In re Hodes, 402 F.3d 1005, 1008 (10th Cir. 2005)). Thus, " [w]e review the bankruptcy court's interpretation of a statute de novo." Okla. Dept. of Sec. ex rel. Faught v. Wilcox, 691 F.3d 1171, 1173 (10th Cir. 2012).

B. Governing Law

1. Rules of Statutory Construction

The sole issue in this appeal is the proper interpretation of § 523(a) of the Bankruptcy Code. Our primary task in construing a statute is to " determine congressional intent, using traditional tools of statutory interpretation." N.M. Cattle Growers Ass'n v. U.S. Fish & Wildlife Serv., 248 F.3d 1277, 1281 (10th Cir. 2001) (internal quotation marks omitted). We begin our analysis by examining the statute's plain language. United States v. Manatau, 647 F.3d 1048, 1050 (10th Cir. 2011). We also look to the structure and context of the statute to ascertain its meaning. See id. at 1051. In particular, we construe statutes " so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant." Id. (quoting Hibbs v. Winn, 542 U.S. 88, 101, 124 S.Ct. 2276, 159 L.Ed.2d 172 (2004)). If, after engaging in this textual analysis, " the terms of the statute are clear and unambiguous, they are controlling absent rare and exceptional circumstances." S. Ute Indian Tribe v. Sebelius, 657 F.3d 1071, 1078 (10th Cir. 2011).

Applying this methodology, we begin our analysis with a review of the plain language of § 523(a) of the Bankruptcy Code. Because we conclude the language is plain, we enforce it as written. Ultimately, we hold the Taxpayers' late Form 1040s are not returns for purposes of § 523(a) and therefore their tax liabilities were excepted from the general orders of discharge issued by the bankruptcy courts. Accordingly, we affirm the decision of the district court.

2. Section 523(a) of the Bankruptcy Code

The statute at issue here is 11 U.S.C. § 523(a)(1), which governs the exceptions

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to a general discharge entered by a bankruptcy court. See 11 U.S.C. § 727(b) (providing for the discharge of all debts that arose before the date of the discharge order, except as provided in § 523). Section 523(a)(1) excludes from discharge " any debt"

(1) for a tax or a customs duty--

. . . (B) with respect to which a return, or equivalent report or notice, if required-- (i) was not filed or given; or (ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax; [(*)] For purposes of this subsection, the term " return" means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.1

11 U.S.C. § 523(a) (emphasis added). Thus, a general order of discharge from the bankruptcy court " does not discharge an individual debtor from any debt . . . for a tax . . . with respect to which a return . . . was not filed." Id.

Of significance here is the...

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