- Case Type:
- Case Status:
- 18-5378/5386 (6th Circuit, Mar 06,2019) Not Published
- The Court of Appeals affirmed the rulings of the District and Bankruptcy Courts that the state tax authorities' levy upon the Debtors' account was barred by the applicable statute of limitations, and that there was no abuse of discretion in denying the trustee's request for sanctions against the state tax authority.
- Procedural context:
- The Bankruptcy Court denied the trustee's emergency motion for sanctions and the trustee appealed. The District Court remanded, finding that the applicable statute of limitations was not tolled by statute or equitable considerations. On remand, the Bankruptcy Court held that the tax authority claims (except for $210) were barred by the statute of limitations, but that no sanctions were appropriate because the post-petition taxes weren't discharged. The District Court affirmed, and the tax authority then appealed to the Sixth Circuit.
- Debtor filed a chapter 11 case in February, 2005. It incurred post-petition state taxes of approximately $34,000, but did not pay them. After a trustee was appointed in June, 2011, a plan of reorganization was approved in September, 2012 and became effective in October, 2012. The state taxing authority (TDOR) filed a claim for the post-petition taxes in October, 2012, but never filed a formal application for allowance of the claim as an administrative expense. Fast forward 3 years to October, 2015 when TDOR levied the Debtor's bank account and recovered some $38,000. The Trustee filed an emergency motion for sanctions, which the bankruptcy court denied. After the District Court remanded, the Bankruptcy Court found the TDOR levy was barred by the statute of limitations except for $210 in taxes, holding that the state statute of limitations applied to the tax authority, a state tolling statute did not apply, and equitable grounds did not exist to toll the statute of limitations. The Bankruptcy Court denied the trustee's request for sanctions based on TDOR's violation of the discharge injunction because the post-petition taxes were not discharged.
- Daughtrey, Gibbons and Griffin; Opinion by Gibbons
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