McCoy v. Mississippi State Tax Commission (In re McCoy)

Summarized by John Jones , J. R. Jones Law PLLC
14 years 1 month ago

Citation:

Case No. 11-60146 (5th Cir. January 4, 2012)

Tag(s):

Ruling:

In affirming the dismissal of an adversary complaint seeking a declaration that a state tax liability had been discharged, the 5th Circuit held that unless a late-filed tax return is filed under a "safe harbor" provision similar to Section 6020(a) of the Internal Revenue Code, a state income tax return that is filed late under the applicable nonbankruptcy state law is not a "return" for bankruptcy discharge purposes under Section 523(a)(*). Therefore, Debtor was not entitled to discharge her state tax liabilities and failed to properly state a claim for relief.

Procedural context:

Debtor filed a post-discharge adversary proceeding seeking a declaration that Mississippi state taxes due for pre-petition income for the years 1998 and 1999 were discharged. The Mississippi State Tax Commission ("MSTC") filed a motion to dismiss for failure to state a claim because (1) the 1998 and 1999 tax returns were filed late and did not qualify as "returns" under 11 U.S.C. 523(a)(*) (*unnumbered hanging paragraph) and (2) that late-filed returns did not qualify as returns for discharge purposes. Debtor responded by arguing the pre-BAPCPA Hindenlang test should be applied to determine if documents qualified as a return. Pursuant to Rule 7012, the bankruptcy Court dismissed the complaint for failure to state a claim and the district court affirmed.

Facts:

Linda McCoy filed for bankruptcy in 2007 and received a discharge purusant to 11 U.S.C. 727. She subsequently filed a post-discharge adversary proceeding seeking a declaration that Mississippi state taxes due for pre-petition income for the years 1998 and 1999 were discharged. There was no dispute that McCoy failed to comply with Mississippi's tax filing deadlines and her tax returns were late-filed. Mississippi State Tax Commission ("MSTC") filed a motion to dismiss for failure to state a claim because (1) the 1998 and 1999 tax returns were late-filed and did not qualify as "returns" under 11 U.S.C. 523(a) and (2) that late filed returns did not qualify as returns for discharge purposes. McCoy responded by arguing that pre-BAPCPA Hindenlang test should be used in determining whether a late-filed document constituted a return for state income tax purposes to determine if documents qualified as a return and therefore could be discharged. MSTC argued that the late-filled tax returns could not be considered tax returns for bankruptcy purposes under the plain language of Section 523(a)(*) and could not be discharged.

Judge(s):

King, Jolly and Wiener, Circuit Judges

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