In the Matter of Linda Trenett McCOY, also known as Linda Trenett Hays, Debtor. Linda Trenett McCoy, Appellant, v. Mississippi State Tax Commission, State of Mississippi, Appellee.
No. 11-60146.
United States Court of Appeals, Fifth Circuit.
Jan. 4, 2012.
666 F.3d 924
III.
For these reasons, we REVERSE the district court‘s judgment denying qualified immunity. This case is REMANDED to the district court for proceedings consistent with this opinion.
Richard Ray Grindstaff, Byram, MS, for Appellant.
Heather S. Deaton, Abigail Marshall Marbury, Mississippi Dept. of Revenue, Legal Div., Jackson, MS, for Appellee.
Before KING, JOLLY, and WIENER, Circuit Judges.
KING, Circuit Judge:
Linda Trenett McCoy filed for bankruptcy on September 25, 2007, and was granted a discharge by the bankruptcy court pursuant to
I. FACTUAL AND PROCEDURAL BACKGROUND
On September 25, 2007, Linda Trenett McCoy (“McCoy“) filed a voluntary Chap-
MSTC moved to dismiss McCoy‘s complaint, arguing that because the state income returns filed by McCoy for the 1998 and 1999 tax years were filed late, they did not qualify as “returns” under the definition provided in
The bankruptcy court agreed with MSTC‘s interpretation of § 523(a)(*), concluding that because McCoy‘s filings did not comport with Mississippi‘s timeliness requirements, they were not “returns” for discharge purposes. Accordingly, the bankruptcy court held that McCoy had failed to properly state a cause of action and dismissed her claim on August 31, 2009. McCoy appealed the bankruptcy court‘s decision to the district court, which rejected McCoy‘s appeal and affirmed the bankruptcy court‘s decision. McCoy now appeals the dismissal of her case, arguing that we should adopt the Hindenlang test for determining whether filings constitute returns for discharge purposes, that the documents she filed constitute returns under this test, and that her tax debts to Mississippi should be declared discharged.
II. DISCUSSION
A. Standard of Review
“We review a district court‘s affirmance of a bankruptcy court decision by applying the same standard of review to the bankruptcy court decision that the district court applied.” Barner v. Saxon Mortg. Servs., Inc. (In re Barner), 597 F.3d 651, 653 (5th Cir.2010) (internal quotation marks and citation omitted). We review factual findings for clear error and conclusions of law de novo. Id.
The pleading standards for a Rule 12(b)(6) motion to dismiss are derived from Rule 8 of the Federal Rules of Civil Procedure, which provides, in relevant part, that a pleading stating a claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”
B. Section 523(a) of the Bankruptcy Code
Section 727 of the Bankruptcy Code permits the discharge of debts in Chapter 7 bankruptcies, but contains several exceptions, including those outlined in § 523. See
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(3) 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, or equivalent report or notice, if required—
(i) was not filed or given ....
Until the passage of BAPCPA, the term “return” was not defined for § 523(a) purposes and so courts relied on a four-part test outlined in Hindenlang, 164 F.3d at 1033.6 This test, based on the holdings of the Supreme Court cases of Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 55 S.Ct. 127, 79 L.Ed. 264 (1934), and Germantown Trust Co. v. Commissioner, 309 U.S. 304, 60 S.Ct. 566, 84 L.Ed. 770 (1940), was adopted by other courts of appeals. See In re Payne, 431 F.3d 1055, 1057 (7th Cir.2005); Moroney v. United States (In re Moroney), 352 F.3d 902, 905 (4th Cir.2003); United States v. Hatton (In re Hatton), 220 F.3d 1057, 1060–61 (9th Cir.2000). These cases held that a late-filed tax return that required the government to assess the tax without the tax payer‘s assistance would not be treated as a “return” for § 523 purposes. Payne, 431 F.3d at 1058; Moroney, 352 F.3d at 906; Hatton, 220 F.3d at 1061; Hindenlang, 164 F.3d at 1035. These cases, however, dealt with federal income taxes, and the court in Hindenlang specifically explained that its holding “d[id] not address the issue of the definition of return for purposes of § 523(a)(1)(B) when a taxpayer seeks to discharge state, municipal, or other tax liability.” Hindenlang, 164 F.3d at 1033 n. 4.
In 2005, Congress passed BAPCPA to address several problems with the Bankruptcy Code. See H.R. REP. NO. 109-31 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 90-92 (explaining that BAPCPA was motivated by four factors: the “recent escalation of consumer bankruptcy filings,” the “significant losses ... associated with bankruptcy filings,” the fact that the “bankruptcy system has loopholes and incentives that allow and sometimes—even encourage opportunistic personal filings and abuse,” and “the fact that some bankruptcy debtors are able to repay a significant portion of their debts“). As part of its package of amendments, BAPCPA added a new hanging paragraph to § 523(a) which defined the term “return” for discharge purposes:
For purposes of this subsection, the term “return” means a return that satisfies the requirements of applicable nonbankruptcy 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.
Returns of individuals, estates, trusts and partnerships shall be filed on or before the fifteenth day of the fourth month following the close of the fiscal year; or if the return is filed on the basis of a calendar year, it shall be filed on or before April 15th of each year.
The parties disagree, however, over whether McCoy‘s failure to comply with Mississippi‘s filing requirements prevents the filings that she submitted late from being “returns” for bankruptcy discharge purposes. MSTC contends that McCoy‘s failure to file in the time required under Mississippi‘s tax law is a failure to satisfy the applicable nonbankruptcy law referenced in § 523(a). This, MSTC argues, means that McCoy‘s late-filed returns cannot be considered tax returns for bankruptcy discharge purposes under the plain language of the statute.
McCoy disputes this reading of § 523(a)(*). McCoy first observes that this court has previously held that it is “bound to construe the exceptions contained in § 523 of the Bankruptcy Code narrowly and in favor of the debtor.” Boyce v. Greenway (Matter of Greenway), 71 F.3d 1177, 1180 n. 8 (5th Cir.1996) (citing Citizens Bank & Trust Co. v. Case (Matter of Case), 937 F.2d 1014, 1024 (5th Cir.1991)). McCoy then argues that MSTC‘s reading of § 523(a)(*) would impermissibly render part of the statute superfluous. See Kawaauhau v. Geiger, 523 U.S. 57, 62, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998) (“[W]e are hesitant to adopt an interpretation of a congressional enactment which renders superfluous another portion of that same law.“). She observes that a “return” for discharge purposes 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.
We find MSTC‘s interpretation of § 523(a)(*) more convincing. We have previously explained that “the plain language meaning of the [Bankruptcy] Code should rarely be trumped. Although the Code at times is ‘awkward, and even ungrammatical ... that does not make it ambiguous.‘” Miller, 570 F.3d at 638 (quoting Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)). The plain language interpretation of § 523(a)(*) offered by MSTC comports with this admonition.
MSTC‘s reading also finds support in the post-BAPCPA holdings of the bankruptcy courts, at least in the context of federal income tax returns. Cannon v. United States (In re Cannon), 451 B.R. 204, 206 (Bankr.N.D.Ga.2011) (“The cases that have addressed the impact of the undesignated paragraph added by BAPCPA to define ‘return’ [in § 523(a)] have concluded that a late return can never qualify as a return unless it is filed under § 6020(a) safe harbor provision.... The reasoning in those cases is persuasive.“) (citations omitted); Links v. United States (In re Links), Nos. 08-3178, 07-31728, 2009 WL 2966162, at *5 (Bankr.N.D.Ohio Aug. 21, 2009) (“The definition of ‘return’ under § 523(a) ... necessarily encompasses the filing deadlines for submitting returns contained in the Internal Revenue Code so that a late filed return cannot qualify as a return for purposes of a dischargeability determination.“); Creekmore v. Internal Revenue Serv. (In re Creekmore), 401 B.R. 748, 751 (Bankr.N.D.Miss.2008) (“The definition of ‘return’ in amended § 523(a) apparently means that a late filed income tax return, unless it was filed pursuant to § 6020(a) of the Internal Revenue Code, can never qualify as a return for dischargeability purposes because it does not comply with the ‘applicable filing requirements’ set forth in the Internal Revenue Code.“); cf. Pansier v. Wisc. Dep‘t of Revenue, No. 10-C-0550, 2010 WL 4025884, at *5 (E.D.Wis. Oct. 14, 2010) (observing that § 523(a)(*) strengthens the Seventh Circuit‘s pre-BAPCPA position that a late-filed, post-assessment tax return cannot qualify as a return for discharge purposes). In the view of these courts, BAPCPA amended § 523(a) to provide an unambiguous definition of “return,” obviating the need to return to the pre-BAPCPA Hindenlang test. While these cases dealt with federal taxes, their reading of the plain language of the statute applies equally well to state taxes. See
In contrast, the Hindenlang test was specifically conceived of and applied in the
We also find no support for McCoy‘s position in any post-BAPCPA court of appeals decisions. Most of the courts of appeals which have addressed what qualifies as a return for bankruptcy discharge purposes did so prior to BAPCPA and so have not construed the language of § 523(a)(*). See, e.g., Colsen v. United States (In re Colsen), 446 F.3d 836, 839 (8th Cir.2006) (noting § 523(a)(*) but not addressing it because the bankruptcy petition was filed before BAPCPA‘s effective date). The sole exception is In re Ciotti, 638 F.3d 276 (4th Cir.2011). In that case, the Fourth Circuit considered whether a state form reporting federal tax adjustments required to be filed under Maryland law was sufficiently similar to a return to qualify as an “equivalent report or notice” under § 523(a)(1)(B). Id. at 278. The court quoted both the language of § 523(a)(*), as well as the Hindenlang test, in concluding that this form was indeed a return for bankruptcy discharge purposes. Id. at 280-81. But in so holding, the Ciotti court said little about the meaning of § 523(a)(*). Moreover, the issue in Ciotti—whether the attributes of a particular form make it similar to a return—is different from the issue in the case before us—whether a return that fails to comply with the applicable state filing requirements is a return. Accordingly, Ciotti provides little guidance for the case at hand and does not bolster McCoy‘s argument.
McCoy tries to counter the absence of precedent for her argument by referring to a notice issued by the I.R.S.‘s chief counsel taking the position that reading § 523(a) to “create[] the rule that no late-filed return could qualify as a return” would result in a superfluous reading of § 523(a)(*), since all § 6020(b) returns are “always prepared after the due date.” I.R.S. Chief Couns. Notice No. CC-2010-016 at 2 (Sept. 2, 2010). The notice also asserts that such a reading would contradict a “special rule for interpreting the Bankruptcy Code” laid out by the Supreme Court: “[T]his Court has been reluctant to accept arguments that would interpret the Code, however vague the particular language under consideration might be, to effect a major change in pre-code practice that is not the subject of at least some discussion in the legislative history.” Id. (quoting Dewsnup v. Timm, 502 U.S. 410, 419, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992)).9 The I.R.S. notice concludes that “[§] 523(a) in its totality does not create the rule that every late-
Even leaving aside that the I.R.S. notice is focused on federal and not state taxes, both of the concerns it raises are misplaced in this case. First, the second sentence of § 523(a)(*) is not superfluous if plainly read as an explanation of what kinds of tax filings qualify as “returns.” Section 523(a)(*) defines a return for discharge purposes as a “return the satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements).”
Second, there is no indication that such a reading represents a “major change” from pre-BAPCPA policies. As the bankruptcy court in this case explained, “[u]nder § 6020(a) of the [Internal Revenue Code], the Secretary may prepare a ‘substitute’ return based on information voluntarily provided by the taxpayer. In contrast, § 6020(b) of the [Internal Revenue Code] comes into play when there is little or no cooperation from the taxpayer.” McCoy v. Miss. State Tax Comm‘n (In re McCoy), No. 07-02998-EE, 2009 WL 2835258, at *7 (Bankr.S.D.Miss. Aug. 31, 2009) (emphasis added).11 In passing § 523(a), Congress made clear that “[i]n general, tax claims which are nondischargeable, despite a lack of priority, are those to whose staleness the debtor contributed by some wrong-doing or serious fault....” S. REP. NO. 95-989 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5800. Congress, when later drafting § 523(a)(*) to differentiate between § 6020(a) and § 6020(b) returns, likely wanted to reward taxpayers who cooperated with the I.R.S. See H.R. REP. NO. 109-31 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 92 (explaining that BAPCPA was passed, in part, to address the problem of the “bankruptcy system ha[ving] loopholes and incentives that allow and sometimes—even encourage opportunistic personal filings and abuse“). All this is consonant with the pre-BAPCPA test‘s emphasis “that where a fiduciary, in good faith, makes what it deems the appropriate return, which discloses all of the data from which the tax ... can be computed,’ a proper return has been filed.” Hindenlang, 164 F.3d at 1033 (quoting Germantown Trust Co., 309 U.S. at 309, 60
In light of all these considerations, we adopt the reading of § 523(a)(*) suggested by MSTC and the bankruptcy courts: Unless it is filed under a “safe harbor” provision similar to § 6020(a), a state income tax return that is filed late under the applicable nonbankruptcy state law is not a “return” for bankruptcy discharge purposes under § 523(a). McCoy‘s 1998 and 1999 returns did not comply with the filing requirements of applicable Mississippi tax law and were, therefore, not “returns” for discharge purposes. Accordingly, McCoy is not entitled to discharge her tax liabilities to Mississippi for the tax years of 1998 and 1999 and has failed to properly state a claim for relief.
III. CONCLUSION
For all of the foregoing reasons, we AFFIRM the Opinion and Order of the district court affirming the judgment of the bankruptcy court.