The issue in this case is whether the Forms 1040 belatedly filed by Plaintiff-Appellant Christopher Michael Justice (“Justice”) for the tax years 2000 through 2003 constitute “returns” for purposes of 11 U.S.C. § 523(a) relating to the dis-chargeability vel non of tax debts. Justice declared bankruptcy in 2011 and sought to discharge his federal income tax liability for tax years 2000 through 2003. Justice had filed Forms 1040 for those tax years many years late, and only after the Internal Revenue Service (“IRS”) had issued notices of deficiency and had assessed the amount of taxes he owed. The United States Bankruptcy Court for the Middle District of Florida determined that Justice’s tax debts were non-dischargeable and granted the United States of America’s motion for summary judgment. Justice appealed to the district court, which affirmed.
The criteria for a document to qualify as a tax return are set out in the
Beard
test articulated by the United States Tax Court in 1984.
Beard v. Comm’r of Internal Revenue,
At least three
2
other circuit courts have held that delinquency in filing is relevant to the fourth
Beard
factor.
See In re Payne,
In-this case, Justice failed to file timely tax returns for tax years 2000 through 2003. As a result, the IRS attempted to determine Justice’s liability for those years using third-party information. The' IRS’s estimates of tax liability for a taxpayer who has failed to file a return are known as Substitute for Return (“SFR”) tax assessments. Once it had prepared the SFRs, .the IRS issued Justice notices of deficiency for all four tax years. Justice did not challenge the notices of deficiency in the Tax Court, so on August 28, 2006, the IRS assessed tax deficiencies against Justice in the amounts it had determined through the SFRs.
On October 22, 2007, after the IRS had issued notices of deficiency to him and assessed his liability, Justice prepared Forms 1040 for all four tax years and delivered them to the IRS. The forms were
Justice filed a voluntary petition for Chapter 7 bankruptcy, on July 22, 2011. He received a Discharge of Debtor , on November 4, 2011. On January. 10, 2012, his attorney filed an administrative claim with the IRS requesting a write-off for Justice’s tax debts for years 2000 through 2003. The IRS denied the request, and this lawsuit -followed.
The law restricts the circumstances under which tax debts may be discharged in bankruptcy. Specifically, a bankruptcy discharge does not relieve a debtor from any debt
' (1) for a tax or a customs duty—
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or -
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition....
11 U.S.C. § 523(a). It is undisputed that Justice filed his Forms -1040 after the dates on which they were last due and at least two years before filing his bankruptcy petition. As a result, if Justice’s Forms 1040 constitute tax returns, -his tax debts are not -excluded from discharge under § 523(a)(‘l)(B)(ii).- 3 If, however, the Forms 1040 do not qualify as “returns” at all, then Justice’s tax debts are non-dischargeable under § 523(a)(l)(B)(i) — i.e., Justice is deemed never to have filed “returns.” The -issue in this case is whether the Forms 1040 that Justice belatedly filed constitute “returns” for purposes of § 523(a)(l)(B)(i).
Until 2005, the bankruptcy code did not include any language defining “return.” The Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) of 2005 added, for the first time, a definition of “return” to the bankruptcy code. That definition reads:
- For purposes of this subsection, the term “return” means a return that satisfies the requirements of applicable non-bankruptcy law' (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
11 U.S.C. § 523(*) (herein referred to as the “hanging, paragraph” and cited as § 523(*)). 4 -
Partly because the one-day-late rule limits the application of.§ 523(a)(l)(B)(ii) to the unusual situations in which the IRS prepares a return with the taxpayer’s cooperation under § 6020(a), both Justice and the IRS argue that the rule is an incorrect interpretation of the, statute. However, we hold that, even under Justice’s preferred interpretation of § 523(*), his tax debts are non-dischargeable. We can assume arguendo, although we expressly do not decide, 6 that the one-day-late rule is incorrect. We can do. this because, even under this assumption, Justice’s tax debts are nevertheless non-dis-chargeable for the following reasons.
Thus, we assume
arguendo
that the applicable filing requirements Congress envisioned in the hanging paragraph do not include filing deadlines. Even if late-filed tax documents, can sometimes qualify as returns, the BAPCPA definition also demands that a return satisfy “the requirements of applicable nonbankruptcy law.” Both parties to this ease, and all courts to consider the issue, agree that the term “applicable nonb'ankruptcy law” incorporates the
Beard
test.
See, e.g., In re Martin,
Only the fourth prong of
the. Beard
test — that there must be an honest and reasonable attempt to satisfy the requirements of the tax law — is disputed'in this case. The parties advocate competing interpretations of that language. The IRS argues, consistent with the holdings of the Fourth, Sixth, Seventh, and Ninth Circuits, that delinquency in filing a tax return is relevant to determining whether the taxpayer made an honest and reasonable effort to comply with the law. Justice urges the contrary approach adopted by the Eighth Circuit, which holds “that the honesty and genuineness of the filer’s'attempt to satisfy the tax laws should be determined from the face of the form itself, not from the filer’s delinquency or the reasons for it. The filer’s subjective intent is irrelevant.”
In re Colsen,
We join the majority of federal appeals courts in holding that the fourth
Beard
factor requires analysis of the entire time- frame relevant to the taxpayer’s actions. Failure to file a timely return, at least without a legitimate excuse or explanation, evinces the lack of a reasonable effort to comply with the law. This interpretation comports with the common-sense meaning of “honest and reasonable.” It is also consistent with the purpose of bankruptcy generally: to provide a “fresh start” to the “honest but unfortunate debt- or.”
In re Mitchell,
A significant' factor in our decision to adopt the majority position espoused by the Fourth, Fifth, Seventh, and Ninth Circuits 7 is the fact that our system' of taxation relies on prompt and honest self-reporting by taxpayers. A taxpayer who does not file a timely return and who submits no information at all until contacted by the IRS frustrates the requirements and objectives of that system. Indeed, filing-tax documents only after the IRS has gathered the relevant information and assessed a deficiency significantly undermines the self-assessment system. Delinquency in filing, therefore, is evidence that the taxpayer failed to make a reasonable effort to comply with the law.
As the Fourth Circuit in
Moroney
points out, a fundamental disagreement between the majority position and that of the Eighth Circuit, is “about the relevant time frame in which to assess the honesty and reasonableness” of the taxpayer’s efforts to comply with the tax laws.
Moroney,
352 F;3d at 905. We agree with the
ma
The Eighth Circuit’s decision in
Colsen
and Judge Easterbrook’s dissent from the Seventh Circuit’s majority opinion in
Payne
make three primary arguments against the majority interpretation of the “honest and reasonable” prong of the
Beard
test. First, they argue that a belated return is still useful to the IRS, even if filed after the authorities have assessed the taxpayer’s liability, because even a late return replaces thé agency’s estimates with facts.
See, e.g., Payne,
And neither Payne’s purpose nor wheth- ■ er his return had any value to the IRS is critical. 'The legal test is not whether the filing of a purported return has some utility for the .tax authorities, but .whether it is a reasonable endeavor to satisfy the taxpayer’s obligations....
Id. at 1G68 (emphasis in original).
' Second, they argue that one purpose- of the filing' requirement is that the person with the best knowledge of his particular income and deductible expenses — the taxpayer — provides that information.
See id.
at 1061 (Easterbrook, J., dissenting). While it is true that accuracy is one of the benefits of self-reporting (so long as it is honest), the
primary
rationale of the self-reporting system is that the IRS, as a practical matter, does not have the resources to investigate everyone’s tax liability.
See Moroney,
Finally, they point out that a strict interpretation of the honesty requirement might render § 523(a)(1)(C) superfluous.
Payne,
First, although there is-overlap, the category of filings which are not honest and reasonable is much broader than the category of fraudulent returns. Congress.had ample reason to deny dischargeability in cases where it would be difficult for the Government to prove fraud. And indeed, although a taxpayer’s actions might not rise to the level of fraud, Congress understandably intended to deny dischargeability to a taxpayer who did not make an honest and reasonable effort to comply with the tax laws.
Second, we note that the canon of statutory interpretation prohibiting a reading that renders one section of a statute superfluous is not absolute. “[C]anons of construction are no more than rules of thumb that help courts determine ■ the meaning of legislation, and in interpreting a statute a court should always turn first to -... [the] cardinal canon before all others _[C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there.”
Connecticut Nat. Bank v. Germain,
Thus we hold that the time frame for evaluation of a taxpayer’s apparent effort to comply with the law under the fourth Beard factor includes all of the taxpayer’s conduct with respect to the relevant tax years. . Ip a case such as this one, where a taxpayer files many years late, without any justification at all, and only after the IRS has issued notices of deficiency and has assessed his tax liability, the taxpayer’s behavior does not evince an honest and reasonable effort to satisfy the requirements of the tax law. Thus, Justice’s tax debts associated with his delinquent returns may not be discharged in bankruptcy. 8
We assume, without deciding, that Congress did not intend to include filing deadlines when it required, in the hanging paragraph, that tax returns comply with “applicable filing requirements.” Even making that assumption, however, we hold that Justice’s late-filed Forms 1040 do not qualify as tax returns under the
Beard
test because they do not evince an honest and reasonable effort to comply.with the tax law. As a result, his tax debts for tax
AFFIRMED.
Notes
. We note that this was actually the
third
prong of the original
Beard
and
Zellerbach
tests.
See Zellerbach,
. The Ninth Circuit also reached a similar conclusion in
Hatton.
. In other words, under § 523(a)(l)(B)(ii) a tax debt is non-dischargeable
only
if the return is
both
filed late
and also
filed within two years of filing for bankruptcy.
See In re Moroney,
. This definition of the term "return” appears at the end of subsection (a) of § 523. Because it is unattached to any lettered subsection of § 523, it is often cited as § 523(*) and referred to as the "hanging paragraph” or the
. Explicitly included as a return under the hanging paragraph is "a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986....” 11 U.S.C.' § 523(*). Section 6020(a) of the Internal Revenue Code permits the IRS, when a taxpayer has failed to file a return, to cooperate with the taxpayer to produce one. The IRS informs us that § 6020(a) returns represent "only a tiny minority of cases.”
. The IRS also proposes an alternative rule, under which a tax document filed after the IRS has conducted an independent asséssment of the taxpayer’s liability is not a return with respect to the portion of the liability the IRS has already assessed (though it may be a return for additional taxes owed). For the same reasons, we also need not decide whether the IRS’s preferred approach is correct.
.
In re Payne,
. However, we do not adopt a
per se,
rule. ' We agree with the Fourth Circuit that “[c]ir-cumstances not presented in this case might demonstrate that the debtor, despite his delinquency, had attempted in good faith to com-. ply with the tax laws.”
Moroney,