State of Maryland v. Ciotti
638 F.3d 276
| 4th Cir. | 2011Background
- Ciotti filed Maryland state income tax returns for 1992–1996.
- Ciotti later filed Chapter 7 bankruptcy on April 9, 2007; discharge granted and case closed.
- IRS issued 1998 adjustments increasing federal adjusted income for 1992–1996; Maryland taxable income follows federal adjusted income.
- Maryland required reporting changes under Md. Code Ann., Tax-Gen. § 13-409(b); Ciotti did not report changes to Maryland authorities.
- IRS forwarded its determination to the Maryland Comptroller; Comptroller assessed over $500,000 in taxes, penalties, and interest.
- In February 2009 Ciotti moved to reopen bankruptcy and sought declaration that 1992–1996 Maryland tax liabilities were discharged; Comptroller argued § 523(a)(1)(B) exception applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §523(a)(1)(B) discharges Ciotti's Maryland tax debt. | Ciotti—likely argues discharge should apply. | Ciotti's tax obligations fall under §523(a)(1)(B) because the required report was not filed. | Yes; debt nondischargeable under §523(a)(1)(B). |
| Whether the §13-409 report is an equivalent report for §523(a)(1)(B) purposes. | Ciotti contends §13-409 is not equivalent to a return. | The §13-409 report is sufficiently similar to a return and triggers nondischargeability. | Yes; §13-409 report is sufficiently similar to a return to fall within §523(a)(1)(B). |
| Whether the §13-409 report was “given” to the Comptroller by the IRS, satisfying §13-409(b). | IRS forwarding the determination could satisfy the “given” requirement. | Report must be filed or given by the taxpayer, not merely provided by the IRS. | No; IRS transmission does not satisfy the statutory obligation to file or give the report. |
Key Cases Cited
- Moroney v. United States (In re Moroney), 352 F.3d 902 (4th Cir. 2003) (definition of a return for §523(a) purposes)
- Foley & Lardner v. Biondo (In re Biondo), 180 F.3d 126 (4th Cir. 1999) (de novo review of dischargeability conclusions)
- In re Price, 562 F.3d 618 (4th Cir. 2009) (interpretation of §523(a)(1)(B) surrounding dischargeability)
- Brown v. Comptroller of the Treasury, 747 A.2d 232 (Md. Ct. Spec. App. 2000) (Maryland implementation of reporting requirements under §13-409)