Justice v. United States, Treasury Department, 817 F.3d 738

Background

Christopher M. Justice filed Forms 1040 for tax years 2000–2003 only after the IRS issued notices of deficiency and made Substitute for Return (SFR) assessments; the forms were 3–6 years late.
The IRS reviewed Justice’s late returns, abated some assessed amounts, but assessed deficiencies on August 28, 2006 after he did not contest the notices in Tax Court.
Justice filed Chapter 7 bankruptcy in July 2011 and sought discharge of the 2000–2003 tax liabilities; the IRS denied administrative relief.
The bankruptcy and district courts held Justice’s late-filed Forms 1040 did not qualify as “returns” for discharge purposes and granted summary judgment for the United States.
The legal question centers on whether the late Forms 1040 satisfy the Beard test (particularly the fourth prong: an honest and reasonable attempt to comply) and thus qualify as "returns" under 11 U.S.C. § 523(a) and the BAPCPA “hanging paragraph.”

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Justice’s belated Forms 1040 constitute “returns” under § 523(a)	Belated Forms 1040 can be returns if the form on its face shows an honest, genuine attempt to comply (Eighth Circuit approach)	Delinquency is relevant to the Beard fourth prong; filing only after IRS assessment shows lack of honest/reasonable effort	Court held the late filings did not evince an honest and reasonable effort and therefore are not “returns”
Whether BAPCPA’s “applicable filing requirements” bars any late filing (the one-day-late rule)	Justice argued the phrase shouldn’t be read to automatically include filing deadlines (i.e., some late filings can be returns)	The IRS suggested late filings after IRS assessment are not returns for assessed portions	Court assumed arguendo that the one-day-late rule is wrong but still found Justice’s filings non-returns under the Beard test (no per se rule adopted)
Proper scope of Beard’s fourth prong (“honest and reasonable”): time frame to assess compliance	Justice urged evaluating only the form’s face and the time of filing (subjective intent irrelevant)	U.S. argued the entire conduct/timeframe is relevant, including delinquency and reasons for it	Court adopted the majority view: evaluate the entire relevant time frame; delinquency without excuse undermines honesty/reasonableness
Whether adopting the majority approach renders § 523(a)(1)(C) superfluous (fraud provision)	Argued majority approach makes fraud provision redundant because dishonest filings would not be “returns” anyway	Government argued honest/reasonable and fraud are distinct; Congress intended both to deny discharge in different circumstances	Court rejected the redundancy argument: categories differ and both provisions can be given effect

Key Cases Cited

Beard v. Comm’r of Internal Revenue, 82 T.C. 766 (T.C. 1984) (articulating the four-part test for what qualifies as a tax return)
Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (U.S. 1934) (earlier articulation of return requirements)
Germantown Trust Co. v. Comm’r, 309 U.S. 304 (U.S. 1940) (Supreme Court guidance on return elements)
In re Hindenlang, 164 F.3d 1029 (6th Cir. 1999) (applies Beard; delinquency relevant to fourth prong)
In re Moroney, 352 F.3d 902 (4th Cir. 2003) (delinquency undermines self-reporting and honest effort)
In re Payne, 431 F.3d 1055 (7th Cir. 2005) (majority endorsing delinquency relevance under Beard)
In re Hatton, 220 F.3d 1057 (9th Cir. 2000) (similar reasoning on delinquency and return status)
In re Colsen, 446 F.3d 836 (8th Cir. 2006) (contrary view: evaluate only face of the form)
In re Mallo, 774 F.3d 1313 (10th Cir. 2014) (one-day-late rule adopting filing deadlines as applicable requirements)
In re McCoy, 666 F.3d 924 (5th Cir. 2012) (late filing not a return unless within narrow exceptions)
In re Fahey, 779 F.3d 1 (1st Cir. 2015) (one-day-late rule: timely filing is an applicable filing requirement)
In re Mitchell, 633 F.3d 1319 (11th Cir. 2011) (context on bankruptcy discharge policy favoring honest debtors)