Gaetano Rizzo v. State of Mich. Dep't of Treasury
741 F.3d 703
| 6th Cir. | 2014Background
- Gaetano Rizzo filed Chapter 7 and received a general discharge in 2011.
- Michigan Department of Treasury sought $72,286.39 in unpaid Michigan Single Business Tax (SBT) assessed against Jefferson Beach Properties, LLC (the Company), where Rizzo had been a responsible officer.
- Under Mich. Comp. Laws § 205.27a(5), responsible corporate officers may be held personally liable for unpaid corporate taxes; Treasury invoked that provision to pursue Rizzo.
- Rizzo conceded (1) the SBT assessed against the Company is an "excise tax," and (2) he was derivatively liable under state law, but argued his personal obligation was dischargeable because it did not arise from his own taxable transaction.
- The bankruptcy court dismissed Rizzo’s adversary action as to nondischargeability; the district court affirmed. Rizzo appealed to the Sixth Circuit.
Issues
| Issue | Plaintiff's Argument (Rizzo) | Defendant's Argument (Treasury) | Held |
|---|---|---|---|
| Whether Rizzo’s derivative personal liability for the Company’s unpaid SBT is a nondischargeable "excise tax" debt under 11 U.S.C. §§ 523(a)(1)(A) and 507(a)(8)(E) | Rizzo: His liability is derivative (as a responsible officer) and did not arise from his own excise-taxable act, so it is not an "excise tax" debt for nondischargeability purposes | Treasury: The SBT is an excise tax; Michigan law simply makes Rizzo derivatively liable for the same excise-tax deficiency assessed against the Company, so the debt is nondischargeable | Court: Affirmed — derivative liability is for the same excise tax; nondischargeable under the cited Bankruptcy Code provisions |
Key Cases Cited
- United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213 (requires functional examination of statutory scheme to classify exactions)
- United States v. Galletti, 541 U.S. 114 (assessment attaches to the tax debt, not the particular taxpayer; derivative liability need not be separately assessed)
- United States v. Sotelo, 436 U.S. 268 (derivative liability for withheld taxes is nondischargeable)
- In re Suburban Motor Freight, Inc., 36 F.3d 484 (6th Cir.) (federal law governs whether state exaction is an excise tax)
- Livingstone v. Dep’t of Treasury, 456 N.W.2d 684 (Mich. 1990) (Michigan law: officer liability is derivative and not a separate, distinct tax assessment)