Berkovich v. Cal. Franchise Tax Bd. (In re Berkovich)
| Decision Date | 14 October 2021 |
| Docket Number | No. 20-60046,20-60046 |
| Citation | 15 F.4th 997 (Mem) |
| Parties | IN RE Dennis BERKOVICH; Marina Voloshin, Debtors, Dennis Berkovich, Appellant, v. California Franchise Tax Board, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Andrew E. Smyth (argued), SW Smyth LLP, Los Angeles, California; Robert L. Goldstein, San Francisco, California; for Appellant.
Donny P. Le (argued), Deputy Attorney General; Lisa W. Chao, Supervising Deputy Attorney General; Tamar Pachter, Senior Assistant Attorney General; Office of the Attorney General, Los Angeles, California; for Appellee.
Before: Susan P. Graber and John B. Owens, Circuit Judges, and Charles R. Breyer,* District Judge.
Dennis Berkovich appeals the Ninth Circuit Bankruptcy Appellate Panel's ("BAP") published decision affirming a grant of summary judgment to the California Franchise Tax Board. The BAP held that Berkovich's tax debt had not been discharged in bankruptcy because it derived from a "report or notice" "equivalent" to a tax return that he had failed to submit as required by California law. 11 U.S.C. § 523(a)(1)(B) ; see also Cal. Rev. & Tax. Code § 18622(a).
We affirm and adopt as our own, with one exception, the well-reasoned BAP opinion, In re Berkovich , 619 B.R. 397 (B.A.P. 9th Cir. 2020), which we attach as an appendix. We decline to adopt footnote 6 of the BAP's opinion, as that passage concerns a case not before us; we express no view on the substance of the footnote. In adopting the BAP's opinion, we note that our prior decision In re Jackson , 184 F.3d 1046, 1051 (9th Cir. 1999), has been superseded by the 2005 amendments to 11 U.S.C. § 523(a). Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8 § 714, 119 Stat. 23, 128–29; cf. Miller v. Gammie , 335 F.3d 889, 893 (9th Cir. 2003) (en banc).
AFFIRMED.
APPENDIX
ORDERED PUBLISHED
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: DENNIS BERKOVICH and MARINA VOLOSHIN, Debtors.
DENNIS BERKOVICH, Appellant,
v.
CALIFORNIA FRANCHISE TAX BOARD, Appellee.
FILED October 5, 2021
Appeal from the United States Bankruptcy Court for the Central District of California, Maureen A. Tighe, Bankruptcy Judge, Presiding
APPEARANCES:
Andrew E. Smyth argued for appellant; Donny P. Le argued for appellee.
Before: FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges.
INTRODUCTION
In this appeal (and another appeal which we are deciding concurrently), we consider the interplay between the Bankruptcy Code and a state statute relating to tax returns. A California statute (Revenue and Taxation Code ("RTC") section 18622(a) ) requires a taxpayer to make a "report" to the California Franchise Tax Board ("FTB") if the Internal Revenue Service ("IRS") changes the taxpayer's federal income tax liability. Section 523(a)(1)(B)1 of the Bankruptcy Code provides that, if a taxpayer fails to file a required "return, or equivalent report or notice," the relevant tax debt is not discharged.
Chapter 13 debtor Dennis Berkovich filed his state tax returns but failed to inform the FTB of increased federal tax assessments. The FTB argued that the taxes were nondischargeable under § 523(a)(1)(B) because Mr. Berkovich had failed to file the required "reports" of the increased tax assessments with the FTB. The bankruptcy court granted the FTB summary judgment and denied discharge of the tax debts.
We hold that the report required under RTC section 18622(a) is an "equivalent report" within the meaning of § 523(a)(1)(B). Therefore, we AFFIRM. We publish this decision because the interplay between § 523(a)(1)(B), RTC section 18622(a), and other applicable California statutes presents questions of first impression at the appellate level in this circuit.
Mr. Berkovich filed California state tax returns as required for the 2003, 2004, and 2005 tax years.
In 2008, the IRS assessed about $145,000 of additional federal income taxes against Mr. Berkovich for those years. He did not notify the FTB of the increased federal assessments as required under state law.
The FTB learned of the federal assessments from the IRS. It assessed Mr. Berkovich additional state income taxes totaling approximately $45,000 plus penalties and interest for the relevant tax years. Mr. Berkovich did not challenge the assessments and did not pay the additional state taxes.
In August 2012, Mr. Berkovich and his wife, Marina Voloshin, filed a chapter 13 petition. They scheduled approximately $773,000 in secured and unsecured debt, including $100,000 in tax debt due to the FTB.
The debtors filed a proposed chapter 13 plan that treated the state tax debt as a general unsecured claim to be paid pro rata with other unsecured claims. They proposed paying 0.9% of the allowed nonpriority unsecured claims.
The bankruptcy court confirmed the plan. Over the next five years, the debtors completed all required plan payments, less than $1,000 of which was distributed to the FTB. They received a discharge under § 1328(a).
The following year, the FTB filed a nondischargeability complaint against Mr. Berkovich. It alleged that the state tax debts were nondischargeable under § 523(a)(1)(B)(i) because Mr. Berkovich failed to report the increased federal tax assessments to the FTB and failed to challenge the FTB's notices of proposed tax assessment.
The bankruptcy court granted summary judgment in favor of the FTB, holding that the report required by RTC section 18622(a) is an "equivalent report" under § 523(a)(1)(B)(i), such that the increased state taxes are not dischargeable. Mr. Berkovich timely appealed.
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
Whether the bankruptcy court erred in granting the FTB summary judgment to except from discharge Mr. Berkovich's state tax debts.
We review de novo the bankruptcy court's decision to grant or deny summary judgment. Boyajian v. New Falls Corp. (In re Boyajian) , 564 F.3d 1088, 1090 (9th Cir. 2009). "De novo review requires that we consider a matter anew, as if no decision had been made previously." Francis v. Wallace (In re Francis) , 505 B.R. 914, 917 (9th Cir. BAP 2014) (citations omitted).
We employ the same summary judgment standards as the bankruptcy court. Summary judgment should be granted "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Wank v. Gordon (In re Wank) , 505 B.R. 878, 886 (9th Cir. BAP 2014) (). Pure questions of law are appropriate for summary judgment. See Schrader v. Idaho Dep't of Health & Welfare , 768 F.2d 1107, 1110 (9th Cir. 1985).
Mr. Berkovich primarily argues on appeal that the reports required under RTC section 18622(a) are not "returns," so his failure to file them did not render his tax debts nondischargeable. He is wrong.
We begin with the statutory language. Satterfield v. Simon & Schuster, Inc. , 569 F.3d 946, 951 (9th Cir. 2009) (citation omitted).
Mr. Berkovich received his discharge under § 1328(a) upon completion of the plan payments. A discharge under § 1328(a) explicitly excludes the discharge of any debt "of the kind specified in ... paragraph (1)(B) ... of section 523(a) [.]" § 1328(a). Section 523(a)(1)(B) pertains, in relevant part, to a debt:
§ 523(a)(1)(B). Section 523(a) also provides, in the "hanging paragraph" at the end of the subsection:
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.
§ 523(a). In other words, a tax debt is nondischargeable if the debtor failed to file a required return or "equivalent report or notice[,]" where "return" is defined by "applicable nonbankruptcy law."
The only question on appeal is whether the report required by RTC section 18622(a) that Mr. Berkovich failed to file is a "a return, or equivalent report or notice" within the meaning of § 523(a)(1)(B). RTC section 18622(a) provides:
(a) If any item required to be shown on a federal tax return, including any gross income , deduction, penalty, credit, or tax for any year of any taxpayer is changed or corrected by the Commissioner of Internal Revenue or other officer of the United States or other competent authority, or where a renegotiation of a contract or...
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