651 F.3d 1049
9th Cir.2011Background
- Board seeks personal liability against Ilko for EAS unpaid California sales taxes following EAS dissolution; liability determined after discharge and asserted as non-dischargeable under 523(a)(1) and 507(a)(8)(A)(iii); Ilko reopened his case in 2008 and filed an adversary complaint to discharge the liability; bankruptcy court granted summary judgment for Ilko; Board appeals arguing liability not discharged and is non-dischargeable; panel aligns with prior rulings that such liability is a tax and not discharged under 523/507.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ilko’s responsible person liability is a tax under §523(a)(1). | Board—liability for EAS taxes is a tax under Lorber/George line. | Ilko—liability is not a tax under §523(a)(1). | Yes; liability is a tax. |
| Whether the tax is ‘of the kind’ specified in §507(a)(8). | Board—tax is on or measured by gross receipts (A). | Ilko—Raiman test rejects universal gross-receipts framing. | Tax falls within §507(a)(8)(A) (gross receipts). |
| Whether the tax was assessed or assessable after commencement of the case. | Board—assessed after dissolution; not assessed pre-petition; assessable post-petition. | Ilko—limitations/assessability tied to dissolution; cannot bootstrap to earlier period. | Tax was assessable after commencement but within §507(a)(8)(A)(iii). |
| Whether California excise tax characterization affects dischargeability. | Board—sales tax may be excise tax under §507(a)(8)(E). | Ilko—look to §507(a)(8)(A) dominance; Shank/George guide not override. | §507(a)(8)(A) governs; no safe harbor from discharge. |
Key Cases Cited
- Lorber Indus. of Cal. v. County Sanitation Dist., 675 F.2d 1062 (9th Cir. 1982) (defined ‘tax’ test for nondischargeability)
- George v. Cal. State Bd. of Equalization (In re George), 95 B.R. 718 (9th Cir. BAP 1989) (adopted Lorber test for §523 nondischargeability)
- Raiman v. State Bd. of Equalization (In re Raiman), 172 B.R. 933 (9th Cir. BAP 1994) (held California sales tax is ‘on or measured by gross receipts’)
- Sotelo v. United States, 436 U.S. 268 (198, 1978) (persuasive authority comparing tax types under dischargeability)
- Shank v. State Dep’t of Revenue (In re Shank), 792 F.2d 829 (9th Cir. 1986) (category overlap for excise vs other §507(a)(8) categories)
- Wirick v. State Bd. of Equalization, 93 Cal.App.4th 411 (Cal. Ct. App. 2001) (California rule on 6829 timing and liability)
- George v. Uninsured Employers Fund (In re George), 361 F.3d 1157 (9th Cir. 2004) ( Fifth Lorber element; government claim priority)