Martin v. United States (In re Martin)

• Decision Date: 14 November 2012
• Docket Number: Bankruptcy No. 10–37360 ABC.,Adversary No. 11–1536 ABC.
• Parties: In re Peter George MARTIN, Debtor. Peter George Martin, Plaintiff, v. The United States of America, Defendants.
• Court: U.S. Bankruptcy Court — District of Colorado

482 B.R. 635

In re Peter George MARTIN, Debtor.

Peter George Martin, Plaintiff,

v.The United States of America, Defendants.

Bankruptcy No. 10–37360 ABC.

Adversary No. 11–1536 ABC.

United States Bankruptcy Court,

D. Colorado.

Nov. 14, 2012.

Charles S. Parnell, Wheat Ridge, CO, for Debtor/Plaintiff.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

A. BRUCE CAMPBELL, Bankruptcy Judge.

THIS MATTER comes before the Court on the Cross Motions for Summary Judgment filed by Plaintiff, Peter George Martin (“Plaintiff” or “Debtor”), and by the United States of America (“Defendant” or “United States”). The Court, having reviewed the file and being otherwise advised in the premises, finds as follows.

Background

In this adversary proceeding, Debtor seeks a declaration that the debt he owes the United States for his 2000 and 2001 federal income taxes was discharged in his Chapter 7 bankruptcy. The United States asserts that this tax debt is non-dischargeable under 11 U.S.C. § 523(a)(1)(B)(i). This outcome of this case turns on the Court's interpretation of this section's exception from discharge of debts for taxes “with respect to which a return ... was not filed.”

This issue was addressed by another division of this Bankruptcy Court in Wogoman v. Internal Revenue Service (In re Wogoman), 2011 WL 3652281 (Bankr.D.Colo.2011). Pending the appeal of the Wogoman decision to the Bankruptcy Appellate Panel for the Tenth Circuit, the parties' cross-motions for summary judgmentin this case were held in abeyance. The Tenth Circuit BAP's opinion affirming Judge Brooks' decision was recently issued. See, Wogoman v. Internal Revenue Service (In re Wogoman), 475 B.R. 239 (10th Cir. BAP 2012).¹ The time for appeal of the BAP's decision has passed without further appeal. The parties cross-motions for summary judgment in this case are now ripe for consideration.

Undisputed Facts

The parties have stipulated to the following material undisputed facts. ²

1. Debtor filed his voluntary Chapter 7 case on October 28, 2010. The Court issued a discharge to Debtor on February 18, 2011.

2. At the time the petition was filed, Debtor owed tax liabilities for 2000 and 2001.

3. The Internal Revenue Service (“IRS”) made an assessment of Debtor's tax debt for the 2000 and 2001 periods after conclusion of an examination and issuance of statutory notices of deficiency pursuant to 26 U.S.C. §§ 6212–13. The assessment was made on November 8, 2004.

4. Debtor submitted Forms 1040 signed under penally of perjury to the IRS for his 2000 and 2001 federal income tax liability on or about May 5, 2005.

5. The IRS partially abated Debtor's 2000 and 2001 liabilities in September 2005. After abatement, the amount of the tax liabilities for 2000 and 2001 are equal to the amounts reported on the Forms 1040 submitted by Debtor in May 2005.

6. Debtor does not dispute the amount of his 2000 and 2001 federal income tax liabilities currently outstanding.

Arguments of the Parties

The dispute in this adversary proceeding concerns whether the Debtor's 2000 and 2001 Forms 1040, filed some 5 months after his tax liability for these years was assessed by the IRS, were “returns” such that the taxes owed by Debtor for 2000 and 2001, after the IRS abated a portion of its assessment, are dischargeable.

Debtor relies on a literal reading of § 523(a)(1)(B)(i). He notes that it is not disputed that all other requirements for discharge of tax debt are met in this case.³ Debtor argues that whether a “return” was filed should depend on an objective analysis of the document filed, not a subjective test of the taxpayer's motivation for filing the return. Finally, he asserts that the United States' position—that a return filed after a tax debt is assessed is not a “return”—is not logical. Debtor contends that the BAPCPA amendment to § 523(a) does not change the analysis in this case.

The United States argues that tax returns filed after assessment of a tax liability are not “returns” under § 523(a)(1)(B)(i). It contends that such a return does not “satisf[y] the requirements of applicable nonbankruptcy law,” as required by the BAPCPA amendment, because the purpose of the filing—to generate a self-assessment of tax—has been made moot by the prior IRS tax assessment. The taxpayer, by post-assessment filing, “cannot alter the fact that the tax debt was not self-assessed [and is, therefore,] a tax debt ‘for which no return was filed.’ ” United States' Motion for Summary Judgment [Docket # 20] at p. 5–6. The United States notes that this was also the majority view of cases that considered this issue prior to BAPCPA.

Discussion

1. Summary Judgment Standards

Fed.R.Civ.P. 56(a), made applicable in this adversary proceeding Fed. R. Bankr.P. 7056, provides that summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Both Debtor and the United States contend that the undisputed facts of this case entitle them to judgment as a matter of law.

2. Section 523 of the Bankruptcy Code

This section provides in relevant part that:

(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 ...—

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

(i) was not filed....

3. The BAPCPA Amendment

Prior to October, 2005, the Bankruptcy Code had no definition of the term “return.” ⁴ BAPCPA added the following definition of “return” in an unnumbered section at the end of § 523(a) (the “BAPCPA Amendment”):

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.

Neither Debtor nor the United States argues that this case involves returns prepared pursuant to section 6020(a) or 6020(b) of the Tax Code. See, United States' Motion for Summary Judgment at p. 6. Nor does it involve a written stipulation to a judgment or a final order of a nonbankruptcy tribunal. Thus, the only sentence of the BAPCPA Amendment that impacts the analysis in this case is the first—which defines a return as something that “satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements).”

Some courts have interpreted “applicable filing requirements” in the BAPCPA Amendment to encompass the time for filing a tax return. Under this reading any late-filed return, other than one prepared pursuant to section 6020(a) of the Tax Code, or a similar provision in a State or local law, does not meet the BAPCPA definition of a “return,” and all taxes relating to late-filed returns are non-dischargeable under § 523(a)(1)(B)(i). See, McCoy v. Miss. State Tax. Comm (In re McCoy), 666 F.3d 924, 932 (5th Cir.2012). This interpretation says too much, however, essentially rendering § 523(a)(1)(B)(ii) superfluous. Section 523(a)(1)(B)(ii) provides that taxes for which a return was filed “after such return was last due” and less than 2 years prior to the date of bankruptcy are not discharged. This section refers specifically to late-filed tax returns, and is the only place in § 523(a) where late filing is specifically referenced. To read “return” in § 523(a)(1)(B)(i) as meaning “timely-filed return” would make the discharge exception of § 523(a)(1)(B)(ii) entirely coincidental with that of § 523(a)(1)(B)(i), except in the case of tax returns prepared under section 6020(a) of the Tax Code more than 2 years prior to bankruptcy.

A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.

Hibbs v. Winn, 542 U.S. 88, 101, 124 S.Ct. 2276, 159 L.Ed.2d 172 (2004)(quoting 2A N. Singer, Statutes and Statutory Construction § 4606, pp. 181–186 (rev. 6th ed. 2000)).

Such an interpretation also requires the use of a different definition of the term “return” in § 523(a)(1)(B)(i) and in § 523(a)(1)(B)(ii), because § 523(a)(1)(B)(ii) speaks of “returns” filed “after the date on which such return ... was last due.” This contravenes

the normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning.

Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 570, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995). There is nothing in the legislative history to the BAPCPA Amendment that indicates it was intended to have such an effect on § 523(a)(1)(B)(ii). The legislative history says only that the amendment was intended

to provide that a return prepared pursuant to section 6020(a) of the Internal Revenue Code, or similar State or local law, constitutes filing a return (and the debt can be discharged), but that a return filed on behalf of a taxpayer pursuant to section 6020(b) of the Internal Revenue Code, or similar State or local law, does not constitute filing a return (and the debt cannot be discharged).

H.R.Rep. No. 109–31(I) (2005), reprinted in 2005 U.S.C.C.A.N. 88, 167.

For all these reasons, the Court rejects the interpretation of the BAPCPA Amendment in which timeliness of a return is deemed an “applicable filing requirement.” “Applicable filing requirements” must refer to considerations other than timeliness, such as the form and contents of a return, the place and manner of filing, and the types of taxpayers that are required to file returns. These “applicable filing requirements” are found in statutes, e.g.26 U.S.C. § 6011, regulations, and in case law. Pre–BAPCPA case...