In In re Mallo, No. 13-98 (Sept. 11, 2013), and In re Martin, No. 12-3380 (Sept. 23, 2013), the District Court in Colorado was faced with determining under what circumstances a late-filed tax return, filed after the IRS had conducted its own assessment, could be deemed a “return” within the meaning of section 523(a)(1)(B)(i). [Read more…] about District Court in Colorado Declines to Adopt McCoy Approach to Late-Filed Tax Returns
McCoy: Are you out of your Vulcan mind?
No, we’re not talking about Spock and Dr. McCoy. We’re referring to the recent Fifth Circuit opinion in In re McCoy, 666 F.3d 924 (5th Cir. 2012), which held that a late-filed tax return is not a “return” for purposes of the Bankruptcy Code. The result is that a tax debt for which a late return was filed can never be discharged. This major departure from past practice is not warranted by either the plain language of the Code or the legislative history of BAPCPA, neither of which suggests that Congress intended to make tax debts related to late-filed returns non-dischargeable in all circumstances. Since McCoy was decided several bankruptcy courts have adopted a similar position.
NACBA member and tax expert Morgan King takes a closer look at this issue in his recent article “What’s Wrong with McCoy?” You can also follow the status of pending cases dealing with these issues at www.latefiledreturn.com.
NCBRC is interested in participating in cases dealing with this issue. To let us know about a pending case, please contact us at amicus.admin@nacba.org.
Post-Petition Tax Liability Not Incurred by Chapter 12 Estate
The Supreme Court found that debtors could not have their income tax liability resulting from the post-petition sale of their farm treated as a non-priority, dischargeable debt in their chapter 12 bankruptcy case. Hall v. United States, No. 10-875, 182 L. Ed. 2d 840, ___ U.S. ___ (May 14, 2012). The debtor relied on Section 1222(a)(2)(A), which permits certain tax liabilities, which would otherwise be priority debts under section 1222(a)(2), to be treated as non-priority, unsecured debts, if they are “incurred by the estate,” under section 503(b). Justice Sotomayor, joined by Justices Roberts, Thomas, Alito, and Scalia, found that post-petition income tax liability adheres to the debtors rather than the estate, and the debtors, therefore, could not avail themselves of the benefit of section 1222(a)(2)(A).
While this case forecloses a potential avenue of relief for the Chapter 12 debtor, it is likely to have little effect in the realm of Chapter 13 bankruptcy. In Chapter 13 taxes incurred post-petition are not incurred by the estate. 11 TX2 Collier on Bankruptcy ¶ TX2.03[2][a][ii] (16th ed.). However, under Section 1305, the taxing authority in Chapter 13 may file a proof of claim for post-petition tax liability if it so chooses. [Read more…] about Post-Petition Tax Liability Not Incurred by Chapter 12 Estate