472 B.R. 434
E.D. Mich.2012Background
- Quiroz was sole owner and corporate officer of Industrial Waste Cleanup, Inc. (IWC) with responsibility for tax filings and payments.
- IWC ceased operations in 2006 and owed Michigan approximately $25,450 in unpaid single business tax (SBT) for 2005–2006.
- Quiroz and his wife filed Chapter 7 in 2008 and received a discharge.
- Michigan Department of Treasury sought to collect IWC’s unpaid SBT from Quiroz personally under Mich. Comp. Laws § 205.27a(5).
- The Bankruptcy Court granted Treasury’s motion to dismiss, holding SBT non-dischargeable under 11 U.S.C. § 507(a)(8)(E) and § 523(a)(1)(A); Quiroz appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SBT is an excise tax 'on a transaction' under §507(a)(8)(E). | Quiroz argues SBT is not tied to a specific transaction and thus cannot be non-dischargeable. | Treasury contends SBT is an excise tax broadly linked to business activity and falls within §507(a)(8)(E). | SBT qualifies as an excise tax 'on a transaction' for purposes of §507(a)(8)(E); non-dischargeable. |
| Whether the phrase 'on a transaction' requires a discrete transaction to tie the tax to the debtor. | Interpretation should tie the tax to a specific transaction. | Define 'transaction' broadly to cover a series of business activities. | Broad interpretation is correct; need not tie to a discrete transaction. |
| Whether derivative corporate-officer liability can be discharged when the SBT is non-dischargeable for IWC. | Derivative liability should be dischargeable if not primarily liable. | § 507(a)(8)(E) non-dischargeability does not require principal liability; derivative liability remains non-dischargeable. | Derivative liability does not defeat non-dischargeability under §507(a)(8)(E); debt remains non-dischargeable. |
Key Cases Cited
- National Steel Corp., 321 B.R. 901 (Bankr.N.D.Ill.2005) (broadly defined 'transaction' for excise tax non-dischargeability)
- Albion Health Services, 339 B.R. 171 (Bankr.W.D.Mich.2006) (unrelated to a transaction does not support dischargeability)
- DeRoche, 287 F.3d 751 (9th Cir.2001) (broadly defined 'transaction' in excise tax context; disfavored by Quiroz)
- Templar, 170 B.R. 562 (Bankr.M.D.Pa.1994) (occupation tax excise tax; distinction based on 'transaction' relevance)
- Mueller, 243 B.R. 346 (Bankr.W.D.Wis.1999) (derivative liability theory rejected; corporate-officer liability under §507(a)(8))
- Sotelo, 436 U.S. 268 ((U.S. 1978)) (legislative history guiding priority of tax claims)
- Suburban Motor Freight, Inc., 998 F.2d 338 (6th Cir.1993) (priority terms must be narrowly construed but correctly applied)
- Groetken, 843 F.2d 1007 (7th Cir.1988) (expansive interpretation of 'transaction' for excise taxes)
- In re DeRoche, 287 F.3d 757 (9th Cir.2001) (definition of 'transaction' relevant to employment-related taxes)
- In re Groetken, 843 F.2d 1007 (7th Cir.1988) (transaction broad definition for excise taxes)