In re Harrison

• Decision Date: 14 August 1997
• Docket Number: No. CIV.A. 96-12227-DPW.,CIV.A. 96-12227-DPW.
• Parties: George H. HARRISON, Debtor. George H. HARRISON, Appellant, v. UNITED STATES DEPARTMENT OF INTERNAL REVENUE, Appellee.
• Court: U.S. District Court — District of Massachusetts

226 B.R. 285 (1997)

George H. HARRISON, Debtor.

George H. HARRISON, Appellant, v. UNITED STATES DEPARTMENT OF INTERNAL REVENUE, Appellee.

No. CIV.A. 96-12227-DPW.

United States District Court, D. Massachusetts.

August 14, 1997.

Timothy J. Burke, Cohen & Burke, Braintree, MA, for Appellant.

Henry J. Riordan, U.S. Department of Justice, Washington, DC, for Appellee.

MEMORANDUM AND ORDER

WOODLOCK, District Judge.

Debtor-Appellant, George Harrison appeals a determination of the Bankruptcy Court that a debt owing to the Internal Revenue Service was not dischargeable pursuant to § 523(a)(1)(B)(ii) of the Bankruptcy Code because the operative tax return was filed more than two years before Harrison filed his bankruptcy petition. Harrison contends that the Internal Revenue Service should be equitably estopped from opposing the discharge of Harrison's 1987 income tax because an IRS employee allegedly instructed Harrison to file his return through the mail. The United States, to the contrary, contends the Bankruptcy Court correctly determined any estoppel theory to be unavailing and that evidence concerning it would be, consequently, inadmissible.

Reviewing the Bankruptcy Court's determination de novo, I find that the decision was not an error and did not constitute an abuse of discretion.

I

The underlying facts leading up to this case are essentially undisputed and are as follows.

Harrison failed to file his 1987 federal income tax return by April 15, 1988, the date upon which he was required to make his return. (Appellant's Memo, at 3.) Harrison's failure to file was apparently due to lack of available funds. (Id.) Accordingly, the Internal Revenue Service ("IRS") prepared a substitute return pursuant to 26 U.S.C. § 6020(b) and determined that there was a tax deficiency in the amount of $30,524.00 in respect to Harrison's 1987 tax year. (Appellee's Memo, at 3.) The taxes were assessed on August 12, 1991. (Id.)

After the assessment, Harrison was instructed by an unidentified IRS employee to mail his Form 1040 tax return ("return" or "Form 1040") to the Automated Collection System ("ACS") of the IRS's Collection Division. (Appellant's Memo, at 4.) Following this instruction, Harrison mailed his 1987 return to the ACS on May 25, 1992. (Id. at 5.) Although there is no independent proof that Harrison actually mailed the return on that day, the form is dated May 25th and the United States does not contest that it was mailed that day. The ACS, however, did not receive the delinquent Form 1040 until June 2, 1992 at which time it date-stamped the form as received. (Appellee's Memo, at 3.)

On May 25, 1994, Harrison commenced a bankruptcy case under Chapter 7 of the Bankruptcy Code and received a discharge under 11 U.S.C. § 727 on September 7, 1994. (Id. at 4.) On November 8, 1995, Harrison commenced an adversary proceeding against the United States in order to determine the dischargeability of his 1987 federal income tax liability. (Id.) In his amended complaint Harrison alleged that the IRS should be equitably estopped from opposing the dischargeability of the taxes because the IRS employee had represented to Harrison that "mailing his return to ACS was filing his tax return." (Id.) (quoting Amended Complaint ¶ 46.)

Judge Kenner in the Bankruptcy Court held a trial on the adversary complaint on October 16, 1996. At the trial, and now, there was no dispute that Harrison commenced his bankruptcy case on May 25, 1994 or that the IRS received the Form 1040 from Harrison dated May 25, 1992 on June 2, 1992. (Id.) Harrison, through counsel, contended at the trial that the IRS represented to him that the act of sending the Form 1040 through the mail was sufficient to deem the form filed. Harrison argued that because of this representation the IRS should be estopped from arguing that the Form 1040 was filed the day it was received rather than the day it was mailed. After receiving Harrison's offer of proof on the estoppel theory, Judge Kenner rejected it and judgment was entered for the United States on October 17, 1996.

II

"A district court reviews a bankruptcy court's judgment in the same manner in which a court of appeals reviews lower court proceedings. . . . Applications of law are reviewed de novo and are set aside only when they are made in error or constitute an abuse of discretion." Casco Northern Bank. N.A. v. DN Associates, 3 F.3d 512, 515 (1st Cir.1993) (internal citations and quotations omitted). Accordingly, I will review Judge Kenner's judgment de novo.

In a Chapter 7 case, an individual generally receives a discharge from all debts that arose before the commencement of a case. See 11 U.S.C. § 727(b).¹ Section 523(a)(1)(B), however, provides an exception for such discharge for taxes with respect to which a return was not filed or was filed late and after two years before the date of the filing of the bankruptcy petition. See 11 U.S.C. § 523(a)(1)(B). Section 523 provides, in pertinent part:

(a) A discharge under section 727 . . . of this title . . . does not discharge an individual debtor from any debt —

(1) for a tax or customs duty —

(B) with respect to which a return, if required —

(i) was not filed; or

(ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition.

11 U.S.C. § 523(a)(1)(B)(i), (ii). In this case, Harrison contends that he mailed his Form 1040 on May 25, 1992, exactly two years before he filed his Chapter 7 petition and that therefore his 1987 income tax liability should be discharged pursuant to section 523. The United States, to the contrary, argues that Harrison's Form 1040 was filed on June 2, 1992, the date it was received and that therefore, under § 523(a)(1)(B)(ii) it was filed "after two years before the date of the filing of the petition" and is not dischargeable.

It is well-settled law that generally, a tax return is "filed" on the date that it is received by the United States. Smith v. United States, 96 F.3d 800, 801 (6th Cir. 1996). An exception to this rule applies to tax returns mailed with the U.S. Postal Service which are considered received and so "filed" on the date that they are postmarked. Id. at 802 (citing Surowka v. United States, 909 F.2d 148, 149 (6th Cir.1990)). The "mailbox rule," however, applies only to tax returns that are timely filed. Id. (citing Emmons v. Commissioner, 898 F.2d 50, 51 (5th Cir.1990)). Because it is undisputed that Harrison's 1987 tax return was filed late, the "mailbox rule" does not apply. I therefore find that Harrison's Form 1040 was filed on June 2, 1992, the date it was received by the ACS. Accord Pitre v. I.R.S., 938 F.Supp. 95, 98 (D.N.H.1996); Becker v. Dep't of Treasury, 823 F.Supp. 231, 233 (S.D.N.Y.1993); United States v. D'Avanza, 132 B.R. 462, 463-64 (M.D.Fla.1991). Consequently, the tax return was filed less than two years before Harrison filed the Chapter 7 petition and so is not under the general rules dischargeable.

III

Despite the seemingly straightforward analysis under the general rules regarding the filing of tax returns, however, Harrison contends that the IRS should be estopped from opposing the dischargeability of his 1987 tax liability. Harrison bases this argument on the contention that the unidentified IRS employee represented to him that his Form 1040 would be filed by mailing it to the ACS at the Collection Division of the IRS. Harrison further contends that this information led him to believe that the return was filed when he sent it on May 25, 1992. At the trial, Judge Kenner requested an offer of proof with respect to what Harrison would offer if he were permitted to pursue his estoppel theory. The following colloquy ensued:

MR. BURKE: He was contacted by the Internal Revenue Service. They had levied his paycheck. They entered into negotiations to put him on a payment agreement, and they also told him to file the tax return with them. Mr. Lamie, who\'s here, who\'s Chief of Automated Collection System, will tell the Court, as he has in his deposition, that that is the way returns are filed with ACS. That\'s the exact term that he used. The return is filed by ACS by the mailing.

So the whole issue before the Court is whether the IRS by telling taxpayers to file the returns with ACS through the mail is collaterally estopped from maintaining before this Court that Section 523 and all other subsections precludes the IRS — precludes Mr. Harrison from getting a discharge.

THE COURT: No. From getting — not from getting the discharge; from having his 1987 tax liability discharged under Section 523.

MR. BURKE: Thank you.

THE COURT: He got his discharge under 717, I assume.

MR. BURKE: I\'m not a bankruptcy attorney, Your Honor.

THE COURT: Okay. Okay. He got his discharge, though, didn\'t he?

MR. BURKE: Yes, he did.

THE COURT: Yeah, okay. All right. Okay. Based on your representation that that\'s going to be your offer of proof, I\'m rejecting your argument, your theory of collateral sic estoppel. It — it\'s not — it doesn\'t make sense in the context of this dispute. The — based on what you\'ve told me, there\'s no — the United States didn\'t give erroneous information or mislead the debtor. There was simply — he was told, as most taxpayers do, you file your return, you put it in the mail. The issue here, as I see it, at least as a threshold, is whether the tax return was filed within the meaning of Section 523(a)(1)(B)(ii) within two years or beyond two years. So am I correct that there are no disputes on these facts? There\'s no dispute that the debtor filed — failed to file his 1987 tax return on time, correct?

MR. BURKE. No, there\'s not.

(Tr. 15-17) (Appellant's App., at 95-97) (Docket No. 4.) After this colloquy² Judge Kenner rejected Harrison's estoppel argument determining that at most Harrison was told to file his tax return by putting it in the mail. (Id. at 17.) This statement is...