465 B.R. 472
Bankr. E.D. Mich.2012Background
- Debtors filed a joint Chapter 7 petition on April 14, 2010; they received a discharge on November 17, 2010 and case closed December 7, 2010.
- Schedule E listed two debts to the Michigan Department of Treasury: one for delinquent withholding taxes from a business Julie Fagan officersed; and about $80,190.19 for IFTA fuel tax, use tax, withholding tax and Michigan business tax.
- Debtors reopened their case on October 27, 2011; they filed an adversary to determine whether the IFTA debt was discharged; a lien notice dated August 22, 2011 stated IFTA and withholding taxes totaling $65,378.29.
- Defendant asserts IFTA taxes are nondischargeable under § 523(a)(1)(A) as taxes of the kind specified in § 507(a)(8)(E), based on Julie Fagan's corporate officer role and unpaid quarters totaling around $65,943.52.
- Court treats motion to dismiss under Rule 12(b)(6); examines whether the international fuel tax is a tax under federal bankruptcy law, an excise tax under § 507(a)(8)(E), and a tax on a transaction; concludes all three are satisfied and grants dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the IFTA tax a 'tax' under federal bankruptcy law? | Fagan argues IFTA is not a tax, but an interstate agreement. | State contends IFTA qualifies as a tax under federal law per Suburban II factors. | Yes, the international fuel tax is a tax under federal bankruptcy law. |
| Is the international fuel tax an 'excise tax' under § 507(a)(8)(E)? | Fagan disputes excise-tax characterization under dictionary definitions. | State argues the tax is an excise tax on the use of motor fuel for the privilege of road use. | Yes, the international fuel tax is an excise tax. |
| Is the international fuel tax a tax on 'a transaction' under § 507(a)(8)(E)? | Fagan contends the tax is not tied to a discrete transaction. | State asserts the tax constitutes a transaction—operation of a motor carrier on state roads consuming fuel. | Yes, the tax is a tax on a transaction. |
Key Cases Cited
- In re Suburban Motor Freight, Inc. (Suburban II), 36 F.3d 484 (6th Cir. 1994) (defines the four-factor (and refined) test for 'tax' under bankruptcy law)
- In re Suburban Motor Freight, Inc. (Suburban I), 998 F.2d 338 (6th Cir. 1993) (establishes initial four-factor test for tax classification)
- In re Trism, Inc., 311 B.R. 509 (8th Cir. BAP 2004) (treats IRS obligation as an excise tax on a transaction)
- In re Quiroz, 450 B.R. 699 (Bankr. E.D. Mich. 2011) (addressed excise tax on a transaction concept in Michigan context)
- In re Dawson, 98 B.R. 519 (Bankr. D. Oregon 1989) (motor carrier tax excise-tax characterization relied upon)
- New York v. Feiring, 313 U.S. 283 (1941) (definitional baseline for what constitutes a tax under federal law)