Briggs v. United States (In re Briggs)

• Decision Date: 10 June 2014
• Docket Number: Bankruptcy No. 13–56378.,Adversary No. 13–05247–WLH.
• Citation: 511 B.R. 707
• Parties: In re Kevin Jerome BRIGGS, Sr., Debtor. Kevin Jerome Briggs, Sr., Plaintiff, v. United States of America (Internal Revenue Service), Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

511 B.R. 707

In re Kevin Jerome BRIGGS, Sr., Debtor.

Kevin Jerome Briggs, Sr., Plaintiff,

v.United States of America (Internal Revenue Service), Defendant.

Bankruptcy No. 13–56378.

Adversary No. 13–05247–WLH.

United States Bankruptcy Court,

N.D. Georgia,

Atlanta Division.

Signed June 9, 2014.

Filed June 10, 2014.

Milton D. Jones, Milton D. Jones, Attorney, Morrow, GA, for Plaintiff.

James H. Brunson, Office of Chief Counsel, IRS, Atlanta, GA, Thomas F. Koelbl, U.S. Department of Justice, Washington, DC, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

WENDY L. HAGENAU, Bankruptcy Judge.

This matter is before the Court on a Motion for Summary Judgment [Doc. No. 10], brought by the Defendant in this adversary proceeding, the Internal Revenue Service (the “IRS”). The Debtor initiated this proceeding seeking a determination that his debts to the IRS, arising from personal income taxes for years 2002, 2007, 2010, and 2011 will be discharged in this chapter 7 case. The IRS seeks a determination that debts arising from the Debtor's personal income taxes for the years 2002, 2010, and 2011 ¹ are excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(1)(A), 507(a)(8) as taxes for which a return was due within the three years of the Debtor's petition date, and 11 U.S.C. § 523(a)(1)(B)(i) as taxes for which a required return was not filed. Specifically, the parties dispute whether a tax return filed after the IRS has assessed the debt for the year in question qualifies as a “return” as contemplated by 11 U.S.C. § 523(a)(1)(B)(i).

For the reasons explained below, the Court holds that the debts for 2010 and 2011, where the return was due within three years of the Debtor filing his bankruptcy petition, are excepted from discharge under 11 U.S.C. §§ 523(a)(1)(A), 507(a)(8). The Court further holds that a post-assessment late-filed return, such as that filed for 2002, may qualify as a “return” under 11 U.S.C. § 523(a)(1)(B)(i). The Court therefore grants in part and denies in part the Defendant's Motion for Summary Judgment.

As this matter arises in connection with a complaint to determine dischargeability of a debt, it constitutes a core proceeding over which this Court has subject matter jurisdiction and as to which this Court can enter a final judgment. See28 U.S.C. § 1334 and § 157(b)(2)(i).

FACTS

The parties agree that there are no genuine disputes of material fact relevant to this matter. The parties have not disputed the admissibility of any of the documents proffered by either party. As such, the Court takes into consideration all of the documents filed with the parties' pleadings.

The Debtor did not file his tax return for the 2002 taxable year when it became due on April 15, 2003 or on the date of the extension granted to him by the IRS, October 15, 2003. As a result, the IRS conducted an examination, calculated his income tax liability for 2002, and issued the Debtor a statutory notice of deficiency on December 20, 2004. This notice, or “90–day letter,” informs a taxpayer that he may file a petition with the U.S. Tax Court for a redetermination of the deficiency within 90 days of the mailing of the letter. The Debtor did not respond to this notice.

After giving notice and opportunity to contest the proposed deficiency in Tax Court, on August 22, 2005, the IRS assessed the Debtor's tax liability for 2002 in the amount of $226,536.78 plus related interest and penalties. Only after the IRS sent the Debtor a notice of its intent to levy the Debtor's assets to collect on his 2002 tax liabilities did the Debtor file his return for the 2002 tax year. The return, filed in November of 2006, showed a tax liability of $149,870.00. On March 17, 2008, the IRS abated $76,666.78 of the taxes, representing the difference between the amount calculated and assessed by the IRS and that provided by the Debtor's untimely 2002 tax return. The IRS later levied $43,012.27 and applied it to the 2002 tax debt as well as applying $81,627.83 in tax overpayments to the 2002 tax debt. [Doc. No. 10, Part 2 at 2].

On October 17, 2011, the Debtor filed a tax return for the 2010 tax year, showing a tax liability of $28,171.00. On May 29, 2012, the Debtor filed a tax return for the 2011 tax year, showing no tax liability. The returns for both of these years are currently under examination by the IRS. [Doc. No. 10, Part 2 at 2]. The Debtor filed his bankruptcy petition on March 23, 2013.

LEGAL CONCLUSIONS

Standard for Summary Judgment

Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “The substantive law [applicable to the case] will identify which facts are material.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

The party moving for summary judgment has “the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any’ which it believes demonstrate the absence of a genuine issue of material fact.” United States v. Four Parcels of Real Prop., 941 F.2d 1428, 1437 (11th Cir.1991) (citing Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548). When reviewing a motion for summary judgment, a court must examine the evidence in the light most favorable to the nonmoving party and all reasonable doubts and inferences should be resolved in favor of the nonmoving party. Hairston v. Gainesville Sun Pub., Co., 9 F.3d 913, 918 (11th Cir.1993).

Dischargeability of debt for 2010 and 2011 taxes

The IRS argues that the Debtor's tax liabilities for the 2010 and 2011 returns are excepted from discharge under 11 U.S.C. §§ 523(a)(1)(A) and 507(a)(8). Section 523(a)(1)(A) excepts from discharge debt from taxes of a kind described in Section 507(a)(8). Section 507(a)(8), in turn, gives priority to income taxes “for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition.” The combined effect of these two provisions is to except from discharge any income taxes for which a return was due within the three years prior to the bankruptcy filing. Console v. C.I.R., 291 Fed.Appx. 234, 237 (11th Cir.2008).

Under 26 U.S.C. § 6072(a), a taxpayer must file a tax return for a given taxable year on or before the fifteenth day of April of the following year, unless he obtains an extension of the time to file pursuant to 26 U.S.C. § 6081. The Debtor's tax returns for 2010 and 2011 were due on April 15 of 2011 and 2012, respectively, but the Debtor obtained extensions until October 15th of each year. The Debtor filed his bankruptcy petition on March 23, 2013. ² Because the returns for these two years were due within the three year period prior to the date of the Debtor's petition filing, the debt from these income tax returns is excepted from discharge by 11 U.S.C. § 523(a)(1)(A). The IRS is thus entitled to summary judgment as to the dischargeability of these returns.

Dischargeability of debt for 2002 taxes

The IRS argues that the debt arising from the Debtor's 2002 tax liability is excepted from discharge by 11 U.S.C. § 523(a)(1)(B)(i). Section 523(a)(1)(B) provides:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from 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; ...

The IRS bases its position that Section 523(a)(1)(B)(i) excepts the debt from discharge on two primary arguments. The first argument is that the tax “debt” arose from the IRS assessment, rather than the late-filed return, making the debt one for which a return was not filed at the time it arose. The IRS's second argument is that the late-filed, post-assessment return does not qualify as a “return” under applicable non-bankruptcy law.

Whether the debt arose from the assessment or the late-filed return

The IRS's first argument is that the debt in question “arose and became enforceable by virtue of the assessment” of the tax liability, not the Debtor's late-filed return. [Doc. No. 10 at 5]. Because the debt for the 2002 tax year arose before the late return for that year was filed, the IRS argues it was tax debt “with respect to which a return ... if required ... was not filed or given” at the time it became enforceable.This argument attempts to draw a distinction between debt arising from an assessment made before a return is filed and debt arising from a filed return. This distinction runs contrary to the inclusive definition of “debt” under the Bankruptcy Code.

The definitions of “debt” and “claim” under the Bankruptcy Code “focus on the nature and source of debt ..., not the mechanism to determine the debt.” Rhodes v. United States (In re Rhodes), 498 B.R. 357, 362 (Bankr.N.D.Ga.2013) (Bonapfel, J.). Debt is defined as “liability on a claim.” 11 U.S.C. § 101(12). Claim is broadly defined to include “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 105(5)(A). Thus, the “debt” exists...