ORDER RE DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
The matter before the court is defendant’s motion for summary judgment filed February 9, 2004. The United States asks the court to determine that plaintiffs income tax liability for tax years 1992-1996 is nondischargeable as a matter of law.
The court held a telephonic hearing on the matter March 30, 2004. Appearing for movant was Assistant United States Attorney Phyllis Jo Gervasio. Attorney Judith O’Donohoe represented plaintiff Gary Wayne Colsen. The parties have filed post-hearing briefs, and the court deems the matter fully submitted. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
Standard for Summary Judgment
A party is entitled to summary judgment if the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c), incorporated by Fed.R.Bankr.P. 7056.
Factual Background
Plaintiff Gary Wayne Colsen filed a Chapter 7 bankruptcy petition in this court on February 10, 2003 and received a general discharge of debts on May 28, 2003.
On May 15, 2003, Colsen commenced this adversary proceeding to determine the dischargeability of federal income tax liability for tax years 1992-1998. As grounds for the discharge of this debt, Colsen stated that tax returns for tax years 1992-1998 were filed more than three years before the date of the filing of his bankruptcy petition. Complaint, ¶ 5.
Colsen did not file timely tax returns for tax years 1992 through 1996. As authorized by 26 U.S.C. § 6020(b), the Internal Revenue Service (“IRS”) prepared substitutes for returns (“SFRs”) for those tax years. The SFRs for tax years 1992 through 1995 were prepared August 8, 1997. The SFR for tax year 1996 was prepared December 2, 1997. The IRS issued notices of deficiency on April 28, 1998 for tax years 1992 through 1995 and on February 11, 1999 for tax year 1996. The notices, also called “ninety-day letters,” gave Colsen ninety days to file a petition with the United States Tax Court for a redetermination of the deficiency. See Doc. 10, United States Memorandum in Support of Motion, Exhibit B (Notice of Deficiency for tax years 1992 and 1993). The notices showed that Colsen owed the following amounts:
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The notices also showed amounts added for penalties for failure to file timely returns, as authorized by 26 U.S.C. § 6651(a)(1), and for underpayment of estimated taxes, as authorized by 26 U.S.C. § 6654. Colsen did not file a petition with the Tax Court.
In November 1998, the IRS assessed the taxes, with interest and penalties, for tax years 1992 through 1995. Assessment was made for tax year 1996 on July 12, 1999.
In September and October 1999, Colsen filed Forms 1040 for each of the tax years 1992-1996. For tax year 1992, Colsen reported a refund due in the amount of $506.
The IRS examined each of the Forms 1040 as an audit reconsideration. On June 12, 2000, the IRS abated the assessments as follows:
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On February 7, 2000, prior to the abatement in June, the IRS abated $17,284 of tax and $2,095.64 of interest of the amount originally assessed for tax year 1996.
The United States admits that Colsen filed tax returns for tax years 1997 and 1998 and that it has made assessments against Colsen for tax, interest and penalties for those years. Answer, ¶ 3f-k. The United States admits that Colsen’s tax liability for tax years 1997 and 1998 is dis-chargeable. Id., ¶ 5. It denies that Colsen filed tax returns for tax years 1992-1996. Id., ¶ 3a-e.
Discussion
The government’s position is that the debt for the 1992-1996 tax years is nondischargeable pursuant to Bankruptcy Code § 523(a)(1)(B) for Colsen’s failure to file “returns” within the meaning of the statute. The creditor bears the burden of proof by a preponderance of the evidence that debt is nondischargeable.
Grogan v. Garner,
The statutory exceptions to discharge are to be narrowly construed.
Werner v. Hofmann,
Bankruptcy Code § 523(a)(1) provides that a Chapter 7 discharge does not discharge a debtor from any debt for a tax — ■
(A) of the kind and for the periods specified in section 507(a)(2) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, if required—
(i) was not filed; or
(ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.
11 U.S.C. § 523(a)(1).
Colsen filed Forms 1040 for each of the tax years at issue. The United States does not claim that the tax forms were irregular in any respect or that Colsen failed to supply the information required by the forms. Nor does the United States claim that Colsen has made a fraudulent return or has attempted to evade his tax liability with respect to any of the subject tax years. The IRS accepted the forms and, on the basis of the information reported on the forms, abated taxes and interest assessed against Colsen. The critical fact, the government argues, is that the Forms 1040 for 1992-1996 were filed after the IRS had assessed Colsen’s tax liability for those years. The government contends that a Form 1040 filed after assessment has no tax consequence and, therefore,
The United States urges the court to follow a line of cases adopting the analysis of
United States v. Hindenlang (In re Hindenlang),
The Sixth Circuit framed the issue as “whether Forms 1040 filed after the IRS has made an assessment can constitute returns for purposes of § 523(a)(1)(B).”
Hindenlang,
The Sixth Circuit concluded that “when the debtor has failed to respond to both the thirty-day and the ninety-day deficiency letters sent by the IRS, and the government has assessed the deficiency, then the [debtor’s] Forms 1040 serve no tax purpose, and the government thereby has met its burden of showing that the debtor’s actions were not an honest and reasonable effort to satisfy the tax law.” Id. at 1034-35. The court held as a matter of law that the debtor’s forms were not returns within the meaning of § 523(a)(1)(B).
The case of
United States v. Nunez (In re Nunez),
The United States argued in
Nunez
that a Form 1040 filed post-assessment cannot qualify as a return, because it does not serve the purpose of providing the information necessary to calculate the tax. The court rejected this argument as reading into § 523(a)(1)(B) a requirement that is not in the text of the statute. Congress did not condition the discharge of tax debt on whether a return was filed prior to assessment.
In re Nunez,
The government argued alternatively that the debtor’s Forms 1040 did not represent an honest and reasonable attempt to comply with the tax laws, and thus did not meet the fourth prong of the
Beard
test. The court concluded, however, that good faith in the context of the
Beard
test should be construed narrowly. The question is whether the tax form appears “on its face to constitute an honest and genuine endeavor to satisfy the law.”
Id.
at 783 (citing
Savage v. Internal Revenue Service (In re Savage),
The United States alleged in
In re Nunez
that the debtor had filed a bankruptcy petition solely to avoid paying his tax liability. It argued that certain facts, including the number of years the debtor had failed to file a timely return, were indicia of bad faith. The essence of the government’s claim was that the debtor had attempted to evade his taxes.
In re Nunez,
This court recognizes that perhaps the weight of bankruptcy authority views the debtor’s course of conduct as relevant to whether the debtor has filed a tax return for purposes of § 523(a)(1)(B).
See, e.g., Moroney v. United States (In re Moroney),
The court’s analysis of § 523(a)(1)(B) must begin “with the language of the statute itself.”
United States v. Ron Pair Enterprises, Inc.,
The court finds no reason to believe this to be the “rare case” that would allow the court to depart from the text of the statute. The word “return” is an unambiguous term in common usage. A return is “a formal statement on a required legal form showing taxable income, allowable deductions and exemptions and the computation of the tax due.”
United States v. Hatton (In re Hatton),
The
Hindenlang
analysis has been criticized as ignoring the plain language of § 523(a)(1)(B).
Crawley v. United States (In re Crawley),
The drafters of the 1978 Bankruptcy Code recognized a tension between three constituencies: (1) taxing authorities, who must be given a reasonable time to collect taxes, (2) general unsecured creditors, who compete with the taxing authorities for distributions from the estate, and (3) the debtor, whose “fresh start” should not be burdened with an excessive accumulation of past-due taxes.
Waugh v. Internal Revenue Service (In re Waugh),
Congress contemplated that late-filing of tax returns would not be sufficient in itself to bar dischargeability of tax debts. 11 U.S.C. § 523(a)(l)(B)(ii). Filing a tax return prior to assessment is not made a condition of dischargeability.
In re Nunez,
The word “return” is unambiguous. There should be little need for a technical definition. However, the term should be construed under bankruptcy law in a manner consistent with tax law. Be
Although neither the Bankruptcy Code nor the Tax Code provide a formal definition of the term “return,” the general requirements of an individual federal income tax return are found in Tax Code § 6011(a).
Beard v. Commissioner of Internal Revenue,
When required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations.
26 U.S.C. § 6011(a). The implementing regulations require a taxpayer to make the return according to the prescribed forms and to include the information required by those forms. 26 C.F.R. § 1.6011-1. Tax returns must be signed under penalty of perjury. 26 U.S.C. § 6065. Tax Code § 6012(a)(1) defines when an income tax return is required. “Every individual having for the taxable year gross income which equals or exceeds the exemption amount” shall make a return. 26 U.S.C. § 6012(a)(1)(A).
In most cases, there will be no question as ho whether a debtor has filed the appropriate form and provided the information required by the form. The case of
Beard v. Commissioner
is an example of when the issue arises under tax law. The taxpayer in
Beard
had deleted several captions on a Form 1040 and replaced them with his own language. The court could not determine whether the form contained sufficient information to calculate the tax liability.
Beard,
The issue of whether a return has been filed may arise when the taxpayer has altered the prescribed tax form, as in
Beard,
or has failed to verify the tax form, or has failed to provide enough information to calculate the tax.
See Ledbetter v. Commissioner of Internal Revenue,
The tax question, at bottom, is whether the taxpayer sufficiently complied with the requirements of § 6011 to file the prescribed form and to provide the information required by the form. “Substantial compliance” is generally thought to be sufficient.
In re Hindenlang,
164 F.3d at
In
Walsh v. United States (In re Walsh),
The
Hindenlang
analysis is inconsistent with the principle of statutory construction that the exceptions to discharge are to be construed narrowly.
In re Crawley,
Congress provided for nondischargeability on the basis of bad intent in § 523(a)(1)(C).
In re Payne,
The
Hindenlang
analysis further expands § 523(a)(1)(B) in favor of the government by finding that a Form 1040 filed post-petition serves no tax purpose.
Hindenlang,
Decisions following the
Hindenlang
approach assume that a tax form at some point will no longer qualify as a return because it is untimely.
See In re Hindenlang,
This court believes that the
Hindenlang
reading of § 523(a)(1)(B) would lead to an absurd result. By reading into the statute a requirement that is not in the text, the
Hindenlang
line of cases would find tax liabilities nondischargeable regardless of their age and regardless of the debtor’s subjective intent when the tax returns were filed.
In re Nunez,
The parties agree that Colsen filed Forms 1040 that were regular in form and that supplied the information requested by the forms. The IRS accepted them, examined each of them as an audit reconsideration, and abated taxes and interest on the basis of the information provided in the filed documents. The government’s objection is based solely on the timing of the filing of the tax forms. Thus, the court finds as a matter of law that Colsen filed returns for the subject years within the meaning of § 523(a)(1)(B). Because the government has identified no other basis for denying dischargeability of the tax liability, the court concludes that judgment should enter for Colsen.
IT IS ORDERED that the motion for summary judgment filed by the United States is denied.
IT IS FURTHER ORDERED that the income tax liability of plaintiff Gary Wayne Colsen owed to the United States for tax years 1992, 1993, 1994, 1995 and 1996 is discharged.
Notes
. The Fourth Circuit in
Moroney v. United States (In re Moroney),