BANKRUPTCY CORNER
That Late Filed Return May Actually Be a
“Return” Afterall
JASON S. RIGOLI
There has been a change in the law of
this Circuit since the publishing of a prior
article Is that Tax Return a “Return”? .
Generally, individual debtors, and as of
February 19, 2020, the subchapter V small
business debtor 1 , are entitled to a discharge
of debts that arose prepetition, subject to
certain exceptions found in § 523 of the
Bankruptcy Code.
One exception to the general discharge is for
taxes for which a return, or its equivalent, is
not filed or given by the debtor. 11 U.S.C. §
523(a)(1)(B)(i). For purposes of § 523 “return”
is defined in a hanging paragraph as “a
return that satisfies the requirements of
applicable nonbankruptcy law (including
applicable filing requirements).” 11 U.S.C. §
523 (hanging paragraph).
There has been disagreement among the
bankruptcy courts in this Circuit, and
beyond, whether the “timeliness” of the
filing of a return is necessary for the return
to be a return – for purposes of exceptions
to discharge under § 523 – and, therefore,
any obligation arising therefrom possibly
being discharged. 2 Compare In re Wendt ,
512 B.R. 716, 720 (Bankr. S.D.Fla. 2013)
(Kimball, J.) with In re Briggs , 511 B.R. 707
(Bankr. N.D.Ga. 2014).
Including timeliness in the definition of
return, creates what has become known
as the “one-day-late” rule, where if the
return is filed one day late it is not a return
for purposes of bankruptcy and any tax
obligation arising from that return is
nondischargeable. See In re Martin , 508
B.R. 717, 726 (Bankr. E.D.Cal. 2014).
On January 23, 2020, the Eleventh Circuit
resolved the disagreement, at least in this
Circuit for the time being, 3 by holding
that the “one-day-late” rule does not
apply. In re Shek , 947 F.3d 770 (11th Cir.
2020).
The Eleventh Circuit applying
cannons of statutory construction and
focusing on the meaning of “applicable”
held that “applicable” does not mean “all,”
but “requires an analysis of context and
typically means ‘appropriate, relevant,
suitable or fit.’ ” Shek , at 776 ( quoting
Ransom v. FIA Card Servs., N.A. , 562 U.S. 61,
69-70, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011)).
And, went on to consider the statute as a
whole, giving context to the language of the
statute. Id. In doing so, the Court interprets
a statute “harmoniously” and reconciles
sections to be read compatibly and not
contradictory. Id. (citations omitted).
Applying that framework, the Court found
that applying the “timeliness” requirement
to the definition of “return” renders § 523(a)
(1)(B)(ii) superfluous or insignificant and
therefore is not included in the definition
of “return” under § 523. Shek at 780. The
court expressly adopted the Beard test,
as set forth in Beard v, Commissioner of
Internal Revenue , 82 T.C. 766, 777 (T.C.
1984) (establishing four requirements that
a putative return must satisfy to constitute
a “return”: (1) it must purport to be a return;
(2) it must be executed under penalty
of perjury; (3) it must contain sufficient
data to allow calculation of tax; and (4) it
must represent an honest and reasonable
attempt to satisfy the requirements of the
tax law.”).
Justice Teaching Program
The mission of the Palm Beach
County Bar Association’s Law Related
Education Committee is to teach
civics to school age children with
fun and interactive lessons through
a program called Justice Teaching.
Member Bruce Blitman volunteers
at Palm Beach Lakes Community
High School and was recently joined
by Retired Florida Supreme Court
Justice Barbara Pariente. Justice
Pariente spoke to students in the
Law Academy.
Under Shek debtors are no longer D.O.A.
in some bankruptcy courts in the Circuit,
when seeking the discharge of certain tax
obligations because the Debtor’s return was
just one-day-late.
This article submitted by Jason S. Rigoli,
Furr and Cohen, P.A., 2255 Glades Road,
Suite 301E, Boca Raton, FL 33431, jrigoli@
furrcohen.com
On August 23, 2019,the Small Business
Reorganization Act of 2019 (“SBRA”)was signed by
the President, codifying the new subchapter V of
Chapter 11 of the Bankruptcy Code, in §§ 1181-1195.
The SBRA went into effect on February 19, 2020.
1
This article is only analyzing the requirement of
a “return” being filed for purposes of section 523(a)
and is not analyzing any of the other requirements
necessary for a tax debt to be discharged.
2
Other Circuit Courts of Appeal have held that
timeliness is an “applicable filing requirement” and
therefore applied the “one-day-late” rule. See In re
Fahey , 779 F.3d 1, 6 (1st Cir. 2015); In re Mallo , 774
F.3d 1313, 1327 (10th Cir. 2014); and I n re McCory , 666
F.3d 924, 932 (5th Cir. 2012), which may lead to the
Supreme Court weighing in due to the Circuit split.
3
PBCBA BAR BULLETIN
7
Pictured from left to right:
Bruce Blitman; Principal David
Alfonso; Retired Florida Supreme
Court Justice Barbara Pariente;
and Dr. Jeffrey Van Tresse, III. Esq.