In re Turner

Decision Date02 April 1996
Docket NumberBankruptcy Case No. 94-02405-BGC-7. Adv. No. 94-00198.
Citation195 BR 476
PartiesIn re Jimmy R. TURNER, Debtor. Jimmy R. TURNER, Plaintiff, v. UNITED STATES of America; Internal Revenue Service, Defendants.
CourtU.S. Bankruptcy Court — Northern District of Alabama


M. Richard Hughes, Birmingham, Alabama, for Plaintiff-Debtor.

Richard O'Neal, Assistant United States Attorney, Birmingham, Alabama, for Defendants.

Thomas Reynolds, Trustee.



BENJAMIN COHEN, Bankruptcy Judge.

I. Procedure

In its Memorandum Opinion and Order of January 9, 1995 this Court considered whether the Internal Revenue Service should be allowed additional time to collect past due taxes from this debtor. The Court began its consideration with the general rule that income taxes due more than three years before the filing of a bankruptcy petition, and assessed more than 240 days before that filing, are dischargeable by way of 11 U.S.C. § 523(a)(1)(A).1 The debtor contended that all of the taxes he owed were in fact more than three years old and consequently were dischargeable. The Service contended that the issue of dischargeability was never reached because the income tax three-year dischargeability period was interrupted by the debtor's filing of three prior bankruptcy cases, and when interrupted, was tolled by 26 U.S.C. § 6503(h), a non-bankruptcy provision of the Internal Revenue Code. The Service concluded that the tolling caused a delay in the discharge of the debtor's past due taxes, which delay, plus six months for each bankruptcy case filed, was then equal to the additional time the Service sought for collecting the past due taxes.2 On January 9, 1995 this Court held that a section 523(a)(1)(A) dischargeability is not tolled by the Internal Revenue Code and that the additional time sought by the Service was not allowed by the Bankruptcy Code. In addition this Court held that the debtor's past due income taxes were due more than three years before the instant bankruptcy petition was filed, were assessed more than 240 days before the petition was filed and were dischargeable pursuant to 11 U.S.C. § 727(a). Turner v. United States (In re Turner), 182 B.R. 317 (Bankr. N.D.Ala.1995).3

On the other hand, in its ruling this Court recognized certain equitable considerations that must be afforded the Service and the debtor in this matter, such considerations this Court believed it could consider pursuant to 11 U.S.C. § 105(a), the broad equitable powers conferred on bankruptcy courts by the Bankruptcy Code.4 The Court invited the Service to seek a determination of the equitable impact of a discharge of the debtor's obligation for certain taxes.5 On January 18, 1995 in response to this invitation, the Service file both a Motion for Reconsideration of the January 9, 1995 memorandum opinion and order and a Request for Evidentiary Hearing on All Equitable Issues.6 Pre-trial conferences and status conferences were held on the motion and the request.7 The Motion for Reconsideration was granted by order of the Court on April 28, 1995, and although a specific ruling was not made on the request for an evidentiary hearing, the Court scheduled a trial on the evidentiary issues. A hearing was held on both the reconsideration and on all equitable issues. No testimony was presented although the parties agreed that the Court should consider certain information from the debtor's three prior case files. The files from those cases, Jimmy R. Turner & Kelly C. Turner, No. 88-00085-RCF-7; Jimmy R. Turner, No. 90-03657-WEJ-13; and Jimmy R. Turner & Dee Turner, No. 92-08814-TOM-13, are before the Court.

On September 1, 1995, the Service filed a memorandum of law in support of its Request for Evidentiary Hearing on All Equitable Issues, after which both matters were taken under advisement. The parties agree that all evidence necessary to determine the matters is before the Court.8 In Section II of this opinion the Court addresses the Service's request for reconsideration of this Court's January 9, 1995 order and in Section III, addresses the Service's arguments on equitable issues relating to the debtor's tax liability.9

II. Reconsideration of Memorandum Opinion and Order

This Court's opinion is unpopular not only with the Internal Revenue Service, but is also unpopular with most of the bankruptcy courts, district courts and courts of appeals considering the issue.10 And although this Court's position in Turner has been described as a "myopic and out-of-context reading of the Bankruptcy Code. . . .", Waugh v. United States (In re Waugh), 1995 WL 714457 at *2 (D.Minn. Sept. 12, 1995), this Court continues to believe that its opinion, holding and position are not only correct but are also required by Burns v. United States (In re Burns), 887 F.2d 1541 (11th Cir.1989) and Quenzer v. United States (In re Quenzer), 19 F.3d 163 (5th Cir.1993) and Haas v. Internal Revenue Service (In re Haas), 48 F.3d 1153 (11th Cir.1995); consequently, for the reasons expressed below, the Court finds that the memorandum opinion and order entered in Turner should not be modified.

A. Opposing View

The majority of courts considering the issue of dischargeability of taxes, where debtors have filed previous bankruptcy petitions have not only held that the prior bankruptcy petitions stopped the Service from collecting taxes but have also held that the prior petitions stopped the running of the debtor's three-year period for dischargeability of the taxes. But of the courts disagreeing with this Court, most if not all, find that taxes that fall into the category in question are excepted from discharge under 11 U.S.C. § 523(a)(1)(A), not because section 523(a)(1)(A) does not provide for the discharge of the taxes but because section 523(a)(1)(A) should not provide for the discharge of the taxes. A recently reported, well reasoned decision is exemplary. It reads in part:

While the Court recognizes the apparent validity of the above Turner v. United States "plain language" approach, the majority of courts have determined that incorporation of the suspension provisions of the IRC through § 108(c) 11 U.S.C. § 108(c) is appropriate to protect the government\'s interests, rather than adopting the plain language approach which would frustrate the Bankruptcy Code\'s intricate scheme for the payment of tax claims. See In re West, 5 F.3d 423, 427 n. 9 (9th Cir.1993) (collecting cases); see also, Turner, 182 B.R. at 325 n. 4 (collecting cases) (recognizing that a majority of courts have incorporated the suspension provisions of the IRC through § 108(c)); In re Brickley, supra 70 B.R. 113 (9th Cir. BAP1986) (incorporating IRC § 6503 through § 108(c)).

In re DiCamillo, 186 B.R. 59, 61 (Bankr. E.D.Pa.1995) (parentheticals added).11

The note accompanying the above reads, "It is well-settled that `in rare cases in which the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters . . ., the intention of the drafters, rather than the strict language controls.' United States v. Ron Pair Enters., 489 U.S. 235, 242, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982))." Id. at 61 n. 3.

B. Plain Meaning, Legislative History and Congressional Action

How the meaning of a statute, plain on its face and presumably written originally by its drafters in the "bill and act" language that later appears in its codified form, can undergo a metamorphosis that transforms the meaning from something intended by its drafters to something contrary to the intent of those same drafters, is difficult to understand. Such a change would require courts interpreting the now statutory language to consider individual legislators' opinions on what the composite body intended when it enacted the statute. This raises the question, can statutory language ever be both plain on its face and contrary to the intent of its drafters. Presumably so, but this Court does not find that to be true in this case.12

Before 1966 Congress prohibited the discharge of income taxes in bankruptcy. Section 17(a)(1) of the Bankruptcy Act of 1898 provided, "A discharge in bankruptcy shall release a bankrupt from all his provable debts, whether allowable in full or in part, except as such . . . are due as a tax levied by the United States, or the State, county, district or municipality. . . ." Bankruptcy Act of 1898, ch. 541, § 17(a)(1), 30 Stat. 544, 550 (1898). But in 1966 Congress amended the Bankruptcy Act of 1898 to allow for, with certain considerations, the discharge of "taxes which became due and owing by the bankrupt to the United States or to any state or any subdivision thereof within three years preceding bankruptcy." Act of July 5, 1966, Pub.L. No. 89-496, § 2, 80 Stat. 270 (1966) (amending the Bankruptcy Act of 1898, ch. 541, § 17(a)(1), 30 Stat. 544, 550 (1898) (presently codified as amended at 11 U.S.C. § 507(a)(8)(A)(i) and 11 U.S.C. § 523(a)(7))). When the Bankruptcy Code was enacted in 1978, Congress continued to recognize the right to discharge three-year old taxes. Hence for the almost 30 years since July 1966, Congress has continued to recognized a debtor's right to a discharge of tax debts that become legally due and owing more than three years preceding bankruptcy, while at the same time recognizing that other taxes and other debts should be excluded from discharge. This is evident from the inclusion of certain discharge exceptions when the Bankruptcy Code was enacted and the inclusion of others during the time since.

At the time the Bankruptcy Code was enacted, section 523 included nine exceptions to discharge. Since 1978, Congress has added seven new exceptions to...

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