Third Circuit Applies Beard Test to Late-Filed Return Issue

Posted by NCBRC - May 12, 2017

The Third Circuit entered the late-filed tax return fray and applied the Beard test to the question of whether such return, filed post-IRS assessment, is a “return” for dischargeabilty purposes. It found that, at least in this case, it was not. Giacchi v. United States, No. 15-3761 (3rd. Cir. May 5, 2017).

Thomas Giacchi filed his income tax returns after the IRS had performed an independent assessment. The bankruptcy court found that his return was not a “return” within the meaning of section 523(a)(1)(B) and, therefore, the taxes were non-dischargeable. The district court affirmed.

On appeal to the Third Circuit, the court, declining to come down on either side of the “one day late” rule, instead applied the pre-BAPCPA analysis set forth in Beard v. Commissioner of Internal Revenue, 82 T.C. 766, 777 (T.C. 1984), aff’d, 793 F.2d 139 (6th Cir. 1986). The court specifically addressed the fourth prong of that test which looks to whether the debtor’s return represents an “honest and reasonable attempt to satisfy the requirements of the tax law.”

The court began with the premise that because a tax return is intended to provide information to the tax authority as to the taxpayer’s tax liability, a return filed after the IRS has already conducted its own assessment will rarely be an “honest and reasonable” attempt to comply with tax laws. The court went on to find that this case was no exception to that general rule.

In so holding, the court rejected Mr. Giacchi’s argument, supported by In re Colsen, 446 F.3d 836 (8th Cir. 2006), that the timing of the filing is not a relevant factor in whether the tax return meets the requirements for discharge, but that the court should look merely at the content of the filing to determine whether it is accurate and complete.

Calling it a self-serving attempt to reduce his liability, the court was also unpersuaded by Mr. Giacchi’s argument that because his late-filed return showed a smaller tax liability than that shown by the IRS assessment, his return was of value to the IRS.

Finally, Mr. Giacchi’s “passing” argument that his “emotional state” should excuse his delinquency likewise garnered no relief from the court. Acknowledging that circumstances could demonstrate a good faith attempt to comply with tax law, Mr. Giacchi’s claim did not provide that excuse.

Giacchi 3rd cir opinion May 2017


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