MEMORANDUM GRANTING SUMMARY JUDGMENT
This matter comes before the Court on the motion of the United States/Internal Revenue Service (“US/IRS”) for summary judgment in this suit by Robert and Ucinda Rench (“Debtors”) to determine the dis-chargeability of income taxes, and the penalties and interest thereon, pursuant to 11 U.S.C. § 523(a). The US/IRS is represented by James J. Long, Trial Attorney, Tax Division, U.S. Department of Justice. The Debtors’ attorney, Woody D. Smith, Cof-feyville, Kansas, did not file a response to this summary judgment motion.
Findings of Fact
The facts of this matter are undisputed. These Chapter 7 debtors seek a determination of dischargeability of individual income taxes, and the penalties and interest thereon, for the tax periods ending December 31 of the calendar years 1979 through 1986. The debtor-husband was a single taxpayer for the tax years 1979 through 1985. Both debtors filed a joint return in 1986.
For the tax years 1979 through 1983, at some time subsequent to April 15 of the following year, the IRS prepared by examination and filed a substitute federal income tax return for the debtor-husband pursuant to 26 U.S.C. § 6020. The US/IRS contends that the filing of a substitute return does not permit the discharge of the taxes for those years under 11 U.S.C. § 523(a)(l)(B)(i).
The US/IRS concedes that the debtors’ liabilities for the tax years 1984 through 1986 are dischargeable. It contends, however, that the federal tax liens for those years remain enforceable against the exempt assets of the debtors’ estate and from any assets acquired before the bankruptcy petition was filed pursuant to 11 U.S.C. § 522(c)(2)(B).
Conclusions of Law
An individual debtor is not discharged from any debt for a tax with re
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spect to which a return, if required, was not filed. 11 U.S.C. § 523(a)(l)(B)(i). This is true even if the government has filed a tax return for him.
In re Haywood,
The
Hofmann
court rejected a debtor’s argument that literally a return was filed, evén if by the government, and the
Pruitt
court rejected a debtor’s reliance on the language of 26 U.S.C. § 6020(b)(2) which provides that a substitute return “shall be prima facie good and sufficient for all legal purposes.”
Hofmann,
Instead, the courts have determined that nondischargeability when the debtor failed to make a required return is supported by both the language of the statute itself and the legislative history behind it:
The language of the statute is. clear. An individual’s debt arising as the result of tax for which the debtor, was required to file a return is nondischargeable if the debtor did not file that return. This plain reading of the statute is reinforced by the Report of the Senate Finance Committee which outlined the intent of the statute....
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... “[T]he debtor should not be able to use bankruptcy to escape these kinds of taxes [arising from his deliberate misconduct]. Therefore, these taxes have no priority in payment from the estate but survive as continuing debts after the case.”
Haywood,
The
Haywood
court concluded that § 523(a)(1)(B) “was meant to encourage honest and self-generated reporting by taxpayers, not to immunize non-reporting debtors who, once caught, seek to discharge their discovered tax obligations along with other debts in Bankruptcy.”
Haywood,
Even though the debtors’ liabilities for the tax years 1984 through 1986 are dischargeable, the federal tax liens for those years do remain enforceable against the exempt assets of the debtors’ estate and from any assets acquired before the bankruptcy petition was filed. Property exempted under § 522 remains liable after the case for any pre-petition debt secured by a tax lien, notice of which is properly filed. 11 U.S.C. § 522(c)(2)(B). Thus, 11 U.S.C. § 522(c)(2)(B) prevents avoidance of a lien for tax penalties, where the IRS has properly filed notice of tax lien.
In re Gerulis,
Even if notice of the tax lien has not been properly filed, an IRS lien is not avoidable under 11 U.S.C. § 522(f).
In re Booth,
Under § 522(f)(1), the debtor may avoid a judicial lien “which would arise upon the docketing of a judgment.”
Booth, id.
A “judicial lien” is defined in the Bankruptcy Code as one “obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.” 11 U.S.C. § 101(27). The tax lien was not obtained by levy, or by any legal or equitable process or proceeding; because it arises at the time assessment is made for tax liability, it is not a judicial lien.
Mills,
Accordingly, the filing of a substitute return does not permit the discharge of the taxes for the tax years 1979 through 1983 under 11 U.S.C. § 523(a)(l)(B)(i), and although the Debtors’ liabilities for the tax years 1984 through 1986 are dischargeable, the federal tax liens for those years remain enforceable against the exempt assets of the Debtors’ estate pursuant to 11 U.S.C. § 522(c)(2)(B), (f).
The foregoing constitutes Findings of Fact and Conclusions of Law under Bankruptcy Rule 7052 and Rule 52(a) of the Federal Rules of Civil Procedure.