Fahey v. Massachusetts Department of Revenue
779 F.3d 1
| 1st Cir. | 2015Background
- Four bankruptcy appeals address whether a Massachusetts tax return filed after its due date is a “return” under 11 U.S.C. § 523(a)(*) for dischargeability.
- Debtors Brown, Fahey, Gonzalez, and Perkins filed late Massachusetts tax returns for multiple years and did not fully pay taxes, interest, or penalties.
- Each debtor filed for Chapter 7 bankruptcy more than two years after the late filing, seeking discharge of the tax liability.
- The Department of Revenue argues late-filed taxes fall outside the discharge exception because they were not filed in accordance with applicable filing requirements.
- The hanging paragraph of § 523(a)(*) defines “return” to mean a return that satisfies applicable nonbankruptcy filing requirements, including state deadlines.
- Massachusetts law requires timely filing; the courts below split, with the BAP favoring debtors in some cases and district courts in others, before the First Circuit resolved the issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a late Massachusetts return qualifies as a 'return' under § 523(a)(*) | Debtors argue late returns can be 'returns' under the hanging paragraph. | Department contends late returns do not satisfy 'applicable filing requirements' and thus are not 'returns'. | Late Massachusetts returns are not 'returns' for § 523(a)(*) purposes. |
Key Cases Cited
- Beard v. Commissioner, 82 T.C. 766 (T.C. 1984) (Beard test for determining what constitutes a tax return)
- In re Moroney, 352 F.3d 902 (4th Cir. 2003) (Beard test applied to late federal returns)
- In re Payne, 431 F.3d 1055 (7th Cir. 2005) (late filings and honest effort considerations under Beard framework)
- In re Hindenlang, 164 F.3d 1029 (6th Cir. 1999) (late Form 1040s and tax return utility for IRS purposes)
- In re Colsen, 446 F.3d 836 (8th Cir. 2006) (contents versus timeliness in determining 'return')
- In re Mallo, 774 F.3d 1313 (10th Cir. 2014) (interpretation of 'including applicable filing requirements')
- In re McCoy, 666 F.3d 924 (5th Cir. 2012) (late returns under state law deadlines and dischargeability)
- In re Weinstein, 272 F.3d 39 (1st Cir. 2001) (context for interpreting interplay of provisions in Subsection (ii))
- Dewsnup v. Timm, 502 U.S. 410 (U.S. 1992) (principle that amending statutes do not reset preexisting practice absent clear signal)