* District Judge of the Southern District of Texas, sitting

by designation.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

____________________

No. 97-40008

____________________

In the Matter of: DUDLEY DAVIS TAYLOR,

Debtor.

-------------

INTERNAL REVENUE SERVICE,

Appellant,

v.

DUDLEY DAVIS TAYLOR,

Appellee.

_________________________________________________________________

Appeal from the United States District Court

for the Eastern District of Texas

_________________________________________________________________

January 6, 1998

Before KING and JONES, Circuit Judges, and WERLEIN,* District

Judge.

KING, Circuit Judge:

The Internal Revenue Service appeals the bankruptcy court’s

declaratory judgment that it is barred from proceeding against

Dudley Davis Taylor by the res judicata effect of his confirmed

Chapter 11 plan of reorganization, which purported to fix his

liability for a 26 U.S.C. § 6672 penalty at zero. The district

court affirmed the judgment of the bankruptcy court. We reverse.
 

1 Under 26 U.S.C. §§ 3111, 3402, an employer is required to

withhold income and FICA taxes from the wages of its employees

and pay them over to the IRS. In his brief, Taylor misidentifies

this duty as arising from 26 U.S.C. § 941, which has been

repealed and never referred to this duty in any way. See 26

U.S.C.A. § 941 historical and statutory notes (West 1988 & Supp.

1997). Taylor’s 941 reference therefore must refer to the form

that an employer uses to report these withholding taxes to the

IRS. See 26 C.F.R. § 31.6011(a)–(4)(a)(1) (1997) (requiring

withholding taxes to be reported on Form 941).

2

I. FACTUAL AND PROCEDURAL BACKGROUND

In August 1993, appellee Dudley Davis Taylor filed for

Chapter 11 bankruptcy. He had been the president and manager of

Marshall Mill and Elevator Co., Inc. (Marshall Mill). Marshall

Mill filed for Chapter 11 bankruptcy in 1992, and that proceeding

was converted to a Chapter 7 liquidation in 1993. Marshall Mill

withheld income and social security taxes from its employees, but

failed to remit the monies to the Internal Revenue Service (IRS). 

As a responsible person, Taylor is liable under § 6672 of the

Internal Revenue Code for a penalty in the amount of those taxes

that Marshall Mill failed to pay. See 26 U.S.C. § 6672.

In Taylor’s petition for bankruptcy, his schedules included

the IRS as a potential creditor with an “unassessed potential 941

penalty--unpaid corporate taxes” claim1 estimated at $80,000,

which was characterized as contingent, unliquidated, and

disputed. Additionally, the petition schedules noted that Taylor

had a significant position at Marshall Mill without being

specific as to the precise nature of the position.

In December 1993, Taylor filed a disclosure statement and a

proposed plan of reorganization. The plan defined the relevant
3

class of claims as “[a]ll claims entitled to priority of payment

in accordance with 11 U.S.C. § 507 including: . . . [a]ny claim

for taxes or penalties owed to the Internal Revenue Service,

including but not limited to penalties under 26 U.S.C. § 6672.” 

The plan proposed that this class be treated as follows:

“Pursuant to 11 U.S.C. § 505, Debtor is not indebted for any

claims in this class. All such claims, whether or not now

asserted, are discharged without receiving payment.” The

disclosure statement contained nearly identical provisions,

estimated the amount of prepetition tax claims to be “$0,” and

identified Taylor’s position at Marshall Mill. However, it did

not mention Marshall Mill’s withholding tax liabilities. The

disclosure statement also described this class of claims, which

included the IRS liability, as unimpaired.

On January 6, 1994, the IRS filed a proof of claim in the

bankruptcy proceeding for unpaid personal income taxes for 1992

to which Taylor objected. After an audit of Taylor’s return, the

IRS subsequently withdrew the claim on February 3, 1994 and

asserted no other claims in Taylor’s bankruptcy proceeding.

On February 22, 1994, the bankruptcy court approved Taylor’s

disclosure statement, and in April 1994, the bankruptcy court

confirmed his proposed Chapter 11 plan (the Plan). The IRS did

receive a copy of the Plan, but it did not participate in the

confirmation hearing. The IRS has not at any time appealed the

confirmation of the Plan.
4

On May 25, 1994, the IRS notified Taylor that a § 6672

penalty of $96,251.15 would be assessed against him based upon

Marshall Mill’s failure to pay over withholding taxes to the

government. On October 13, 1994, Taylor initiated the current

proceeding in the bankruptcy court seeking a declaratory judgment

that he was not indebted to the government for the Marshall Mill

§ 6672 penalty. The bankruptcy court resolved the dispute on

cross-motions for summary judgment and held that the IRS could

not proceed against Taylor for the Marshall Mill § 6672 penalty. 

The IRS appealed to the district court, which affirmed the

bankruptcy court’s judgment. The IRS appeals.

II. STANDARD OF REVIEW

The facts in this case are undisputed, leaving only

questions of law to be resolved, which we review de novo. See

Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd., II (In

re Briscoe Enters., Ltd., II), 994 F.2d 1160, 1163 (5th Cir.

1993).

III. DISCUSSION

Taylor argues that the principles of res judicata and

estoppel bar the IRS from proceeding against him to collect the

Marshall Mill § 6672 penalty. The bankruptcy and district courts

ruled that the IRS was barred by the res judicata effect of the

confirmation of the Plan, which purports to determine that the
 

2 The bankruptcy court opinion arguably rests upon two

alternative grounds: (1) the debt was discharged by the Plan or

(2) the debt was determined by the Plan to be zero. Taylor

concedes that the Plan could not discharge the debt and that any

discharge by the Plan would be invalid and unenforceable. The

district court interpreted the bankruptcy court’s decision as

resting only upon the second ground, and Taylor only argues that

the bankruptcy court’s decision rests upon the second ground. 

Because the only question resolved below that is in dispute is

whether the Plan determined the debt to be zero and is res

judicata in regards to the amount of the debt, we will discuss

the case only in that context.

5

§ 6672 liability is zero.2 We disagree and find that the IRS is

not barred by either principle.

A. Res Judicata

Taylor argues that the bankruptcy court has the authority to

determine the amount of a tax or tax penalty of a debtor under 11

U.S.C. § 505. Relying upon this authority and on his references

to it and to a § 6672 penalty in his Plan, Taylor urges this

court to apply Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th

Cir. 1987), in order to affirm the judgments of the bankruptcy

and district courts, which gave res judicata effect to the Plan

and thus barred the IRS from proceeding against Taylor to collect

the Marshall Mill § 6672 penalty. In Taylor’s view, the IRS’s

filing of a claim for income tax and its subsequent withdrawal,

the Plan’s recitation invoking § 505, the Plan’s reference to

§ 6672 liability, and his listing of the debt in his petition

schedules demonstrate that the bankruptcy court dealt with the

debt, and therefore, the Plan confirmation is binding on the IRS.

In Shoaf, we gave res judicata effect to a confirmed plan

that released a third-party guarantor on one of the debtor’s
6

debts. Id. at 1048. The release was a condition of a settlement

between the creditors, including the creditor on the guaranteed

debt, and the deceased debtor’s widow designed to persuade her to

release life insurance proceeds to the estate. Additional

consideration for the release included the guarantor dismissing

with prejudice a separate, related legal action. Id. At a

hearing to amend the plan, the creditor on the guaranteed debt

objected to the inclusion of the release in the plan, and the

bankruptcy court responded that the creditor’s proper course of

action would be to object to the confirmation of the plan. Id.

at 1048-49. At a subsequent hearing, the plan was confirmed

without objection, and the bankruptcy court’s order of

confirmation included express language noting the release of the

guarantor. No appeal ensued. Id. at 1049. Despite the fact

that the Bankruptcy Code’s prohibition against the release of

liability of a third party found in § 524 might have led to a

different result on direct appeal, this court found that the

confirmed plan barred the nonobjecting creditor from proceeding

against the third-party guarantor. Id. at 1048-51; see also 11

U.S.C. § 524(e).

In Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639,

641 (5th Cir. 1992), this court acknowledged that Shoaf presented

the general rule that a confirmed plan was res judicata on the

validity of a plan provision. However, Howard recognized that

our previous decision, Simmons v. Savell (In re Simmons), 765

F.2d 547 (5th Cir. 1985), represented a limited exception to that
7

general rule that reflected the competing concerns expressed in

the Bankruptcy Code. Howard, 972 F.2d at 641.

In Simmons, the debtor listed a secured debt as unsecured in

his proposed plan even after the creditor had filed a proof of

claim indicating his secured status. 765 F.2d at 549. The plan

was confirmed without objection, but the creditor had noted his

objection to the listing of his debt as unsecured on the form for

acceptance of the plan. Id. The debtor then attempted to use

the confirmed plan as res judicata to force the creditor to

cancel his otherwise valid lien. Id. at 550. We held that the

lien remained valid. Id. at 559.

In reaching our conclusion in Simmons, this court considered

the purpose of the proof-of-claim process and the Bankruptcy

Code’s treatment of a secured creditor. An objection to a proof

of claim serves to initiate a contested matter and thereby serves

the purpose of putting the parties on notice that litigation is

required to resolve the objection and to make a final

determination on the allowance or disallowance of the claim. Id.

at 552. Congress intended that a secured creditor could preserve

his lien without participating in the bankruptcy proceeding by

the protections it offers the secured creditor in §§ 502 and 506

of the Bankruptcy Code. Id. at 551-52, 558-59 (discussing 11

U.S.C. §§ 502(a) and 506(d) and In re Tarnow, 749 F.2d 464 (7th

Cir. 1984), which noted that the 1984 amendment to § 506(d)

codified the rule that a secured creditor can preserve his lien

without participating in the bankruptcy proceeding); see also 11
 

3 “Unpublished opinions issued before January 1, 1996, are

precedent.” 5TH CIR. R. 47.5.3.

8

U.S.C. §§ 502, 506. Once a proof of claim is filed, the debt is

considered allowed unless the debtor or another party in interest

files an objection to the proof of claim. Id. at 559.

The Simmons opinion considered whether the confirmed plan

could substitute for an objection to a secured claim. Unlike an

objection to a proof of claim, the filing of a plan does not

generally initiate a contested matter with respect to a

particular claim, and when a plan is filed with a petition (as is

the case in Chapter 13), creditors may not have even contemplated

filing proofs of claims. Id. at 552. In deciding that the plan

could not substitute for an objection to the secured claim at

issue, this court stated that

given the differences in purpose and effect of filing a

plan and lodging an objection, Simmons’ filing of the

plan did not clearly place the claim in issue. The

plan is like a proof of claim to which objections are

filed, thereby instituting contested matters, rather

than a vehicle through which objections are made. . .

. The Code and the Rules do not envision the use of a

Plan as a means for objecting to proofs of claims. 

Consequently, we hold that Simmons’ plan did not

constitute an objection to Savell’s proof of secured

claim.

Id. at 553 (emphasis added).

We have built upon Simmons in Howard and Boyle Mortgage Co.

v. Cook (In re Cook), No. 93-7459 (5th Cir. June 2, 1994)

(unpublished), both of which also involved secured claims.3 In

Howard, a secured creditor filed a proof of claim to which the

debtor did not object, and the plan, which purported to
9

compromise the claim, was confirmed without objection. 972 F.2d

at 640. The Howard court found that the secured creditor was

entitled to the protection of the proof-of-claim process and that

his claim could not be compromised by the confirmed plan unless

an objection was filed to put him on notice that his claim was at

risk. Id. at 641-42. Otherwise, the right to stay outside the

bankruptcy and rely upon one’s lien would be meaningless because

the confirmation of the plan alone could compromise one’s secured

debt. Id. at 641.

In Cook, a debtor attempted to raise a confirmed plan as a

shield to limit recovery on a lien to the amount stated in the

plan where no proof of claim was filed. No. 93-7459, slip op. at

2. The Cook court found that “collapsing the secured creditor’s

ability to object to the plan into his right to preserve his lien

intact absent an objection to his claim . . . effectively

render[s] the claims objection process meaningless.” Id. at 3-4. 

Therefore, the court allowed the creditor to maintain his lien

without being limited by the confirmed plan.

The same policies that weigh against a debtor relying upon a

confirmed plan of reorganization to compromise a secured debt

weigh in with equal force in the context of a § 6672 tax penalty. 

First and most important, the IRS has the option to remain

outside the bankruptcy proceeding and preserve a debt for a

§ 6672 penalty without filing a claim in Chapter 11. This option

lies in §§ 1141 and 523 of the Bankruptcy Code. Section

1141(d)(2) saves debts excepted from discharge in § 523 from the
 

4 After Taylor’s Plan was confirmed, the Bankruptcy Reform

Act of 1994, Pub. L. No. 103-394, tit. III, sec. 304(c), 108

Stat. 4112, 4142, renumbered the subsections of § 507 and

references thereto without changing the relevant language. 

Therefore, all references are to the current Code.

10

general discharge of all pre-existing debts given to the debtor

by § 1141(d)(1). See 11 U.S.C. § 1141(d). The debts excepted

from discharge by § 523 include taxes described in § 507(a)(8)4

“whether or not a claim for such tax was filed or allowed.” Id.

§ 523(a)(1)(A). Section 507(a)(8)(C) describes “a tax required

to be collected or withheld and for which the debtor is liable in

whatever capacity.” Id. § 507(a)(8)(C). The responsible person

penalty of § 6672 for withholding taxes falls within

§ 507(a)(8)(C). See In re Vaglica, 112 B.R. 17, 18 (Bankr. E.D.

Tex. 1990). Therefore, the Marshall Mill § 6672 penalty would

normally survive bankruptcy even if no proof of claim was filed. 

Accord Fein v. United States, 22 F.3d 631, 633 (5th Cir. 1994)

(“‘[L]ike any other holder of nondischargeable debt, the IRS is

also free to pursue the debtor outside bankruptcy.’” (quoting

Grynberg v. United States (In re Grynberg), 986 F.2d 367, 370

(10th Cir. 1993))).

Second, the normal procedure to determine the amount of a

tax debt is for the debtor (or the IRS) to file a motion

requesting that the bankruptcy court make the determination under

11 U.S.C. § 505. In re Horton, 95 B.R. 436, 440 (Bankr. N.D.

Tex. 1989) (determining a § 6672 liability pursuant to § 505); 15

COLLIER ON BANKRUPTCY ¶ TX5.04[2][b], at TX5-29 (Myron M. Sheinfeld

et al. eds., 15th ed. rev. 1997). Section 505 authorizes the
11

court to determine “the amount or legality of any tax . . .

whether or not previously assessed.” 11 U.S.C. § 505(a)(1). 

This determination should be made under Rule 9014, which governs

contested matters, because it does not fall within adversary

proceedings as delineated by Rule 7001. See Whelan v. United

States (In re Whelan), 213 B.R. 310, 313 (Bankr. W.D. La. 1997);

Horton, 95 B.R. at 442 n.11; 15 COLLIER ON BANKRUPTCY, supra,

¶ TX5.04[2][b], at TX5-29. Compare FED. R. BANKR. P. 9014 with

FED. R. BANKR. P. 7001. Under Rule 9014, “relief shall be

requested by motion, and reasonable notice and opportunity for

hearing shall be afforded the party against whom relief is

sought.” FED. R. BANKR. P. 9014. The motion should state with

particularity the grounds and the relief desired. FED. R. BANKR.

P. 9013. Alternatively, the debtor can file a proof of claim on

behalf of the IRS and object to it, in order to dispute the

§ 6672 penalty. See 11 U.S.C. § 501(c); United States v. Kolstad

(In re Kolstad), 928 F.2d 171, 173 (5th Cir. 1991); 15 COLLIER ON

BANKRUPTCY, supra, ¶ TX5.03[1].

The Simmons line of cases has held that, in the context of a

secured claim, a confirmed plan does not substitute for an

objection to a proof of claim. See Cook, No. 93-7459, slip op.

at 5-6; Howard, 972 F.2d at 642; Simmons, 765 F.2d at 553. 

Filing a § 505 motion institutes a contested matter which puts

the parties on notice that litigation is required to resolve a

dispute as to the amount of the debt, which, as we held in

Simmons, the filing of a plan does not do in relation to a
12

particular debt. See 765 F.2d at 553 (noting that a “plan is

like a proof of claim to which objections are filed, thereby

instituting contested matters, rather than a vehicle through

which objections are made”). Similarly, the confirmation of a

plan does not substitute for a § 505 motion any more than it

substitutes for an objection to a proof of claim. Accord United

States v. Gurwitch (In re Gurwitch), 794 F.2d 584, 585 (11th Cir.

1986) (“The Bankruptcy Code makes clear under 11 U.S.C.

§ 1141(d)(2) that the confirmation of a plan of reorganization

does not fix tax liabilities made nondischargeable under 11

U.S.C. § 523.” (footnote omitted)), quoted in Fein, 22 F.3d at

633.

Taylor failed to invoke the power of the bankruptcy 

court to determine the amount of the Marshall Mill § 6672

penalty. He did not file a proof of claim on behalf of the IRS

or file a motion under § 505, one of which is necessary to

compromise a nondischargeable debt. Taylor’s listing of the debt

in his schedules, disclosure statement, and Plan along with the

recitation “Pursuant to § 505" did not invoke in any way the tax

determination process. This mere recitation of the authority of

§ 505 does not make a plan confirmation hearing something that it

is not; following the Simmons line of cases, we require an

objection to a proof of claim or a § 505 motion to determine the

amount of a tax debt. This burden is minor and no greater than

the filing of a tax return required of all taxpayers. Therefore,

Taylor’s Plan is not res judicata as to the amount of his
13

liability on the Marshall Mill § 6672 penalty, and the IRS is not

barred from proceeding against him to collect that penalty.

Taylor’s reliance upon the fact that the IRS filed a proof

of claim for income taxes as support for his claim that res

judicata should apply is misplaced. The § 6672 penalty is a

completely separate debt and a separate type of tax which is not

determined by the consideration of an income tax proof of claim. 

Cf. Grynberg, 986 F.2d at 371-72 (holding that the IRS’s full

participation in the bankruptcy proceeding in relation to an

income tax debt did not bar it from collecting a gift tax debt

that had also been listed in the debtor’s schedules where the IRS

did not file a proof of claim and the debtor did not force the

IRS into the proceeding on the gift tax debt). Therefore, the

tax determination process was not invoked by the IRS filing an

income tax proof of claim and Taylor’s subsequent objection to

it.

Taylor also attempts to deal with his failure to invoke

properly the tax determination process by arguing that it is

merely a procedural defect that the IRS waived by failing to

object in the bankruptcy proceeding. To so hold would make the

ability of the IRS to remain outside bankruptcy as a tax debt

creditor as meaningless as if we applied res judicata. The IRS’s

ability to remain outside the bankruptcy proceeding is a product

of Congress’s policy decision to elevate the goal of revenue

collection above the debtor’s interest in a fresh start after

bankruptcy. See Fein, 22 F.3d at 633 (“Congress consciously
 

5 Taylor would lead us to believe that he did everything he

could to let the IRS realize that the Marshall Mill § 6672

penalty would be dealt with by his bankruptcy, but the schedules

that accompanied his bankruptcy petition show something else. He

failed to list Marshall Mill as a codebtor or indicate the

existence of a codebtor on the tax debt, but he did list Marshall

Mill as a codebtor on three other claims, including a Texas sales

tax debt. Additionally, in his disclosure statement he listed

the class of claims that included the § 6672 penalty as

unimpaired, which, while technically correct if the tax debt had

been determined to be zero, was inconsistent with the language of

discharge in the treatment of the class of claims. As discussed

in the text, Taylor had the ability to deal with the tax debt in

his bankruptcy proceeding, but these facts, while not at all

dispositive, suggest along with the rest of the proceedings that

the goal of Taylor and his counsel has been to avoid Taylor’s

liability on this tax debt through artful draftsmanship rather

than to determine its amount.

This proceeding may have been costly to the estate and to

the creditor involved, the IRS. The bankruptcy court should

consider whether Taylor’s counsel should bear some of the expense

for this unfortunate maneuver.

14

opted to place a higher priority on revenue collection than on

debtor rehabilitation or ensuring a ‘fresh start.’”). The

responsibility for Taylor’s predicament lies only with Taylor and

his counsel because they could have chosen to bring the IRS into

the bankruptcy proceeding by the proof-of-claim process or

through a § 505 motion, which allows the debtor to attenuate the

potential harshness of the congressional policy decision to place

revenue collection above the debtor’s fresh start.5

We do not hold that a bankruptcy court must have distinct

proceedings in order to determine a tax debt or that the court

cannot combine a § 505 hearing and a plan confirmation hearing or

address a tax debt in another manner. See Cook, No. 93-7459,

slip op. at 5 (noting that a combined hearing would be acceptable

and that surely creative bankruptcy courts have properly used
 

6 Similar facts led the Tenth Circuit not to apply estoppel

to the IRS using the same affirmative misconduct standard that

this circuit uses. Depaolo v. United States (In re Depaolo), 45

15

other methods to efficiently deal with the issues before the

court). Rather, we hold that the confirmation of a plan does not

itself invoke the tax determination process.

B. Estoppel

Taylor alternatively argues that the IRS should be estopped

from collecting on the debt because he relied upon the IRS’s

failure to file a claim in binding himself to the Plan. In order

to establish estoppel against the government in this circuit, a

party must prove affirmative misconduct by the government as well

as the four traditional elements of estoppel. United States v.

Bloom, 112 F.3d 200, 205 (5th Cir. 1997). The traditional

elements of estoppel are “(1) that the party to be estopped was

aware of the facts, and (2) intended his act or omission to be

acted upon; (3) that the party asserting estoppel did not have

knowledge of the facts, and (4) reasonably relied on the conduct

of the other to his substantial injury.” Id. 

Taylor relies upon In re La Difference Restaurant, Inc., 29

B.R. 178, 181 n.4, 181-83 (Bankr. S.D.N.Y. 1983), where estoppel

was applied to the IRS in the bankruptcy context using a standard

different from this circuit’s. In La Difference Restaurant, the

IRS negotiated a stipulation to the amount of a tax debt upon

which the debtor relied in arranging his reorganization plan, and

the feasibility of the debtor’s plan hinged upon this

stipulation. Id. at 179-80.6
F.3d 373, 377 (10th Cir. 1995) (finding no estoppel where the IRS

had stipulated to the amount of taxes and later assessed

additional tax amounts). 

16

In Taylor’s bankruptcy, the IRS stood outside the bankruptcy

proceeding and did not participate, unlike in La Difference

Restaurant where the IRS stipulated to the amount of the tax

liability upon which the plan’s feasibility hinged. Taylor does

not point to any affirmative government misconduct in this case,

and Taylor did not reasonably rely upon any government

representation that the IRS would not seek to enforce its claim

because a reasonable debtor should expect the IRS to enforce

nondischargeable taxes. Fein, 22 F.3d at 634; see also Depaolo

v. United States (In re Depaolo), 45 F.3d 373, 377 (10th Cir.

1995); Gurwitch, 794 F.2d at 586. The only affirmative

misconduct apparent in the record is that of Taylor’s counsel in

pursuing this surreptitious path in attempting to dispose of

Taylor’s § 6672 liability. Therefore, estoppel does not lie

against the IRS to bar it from proceeding against Taylor to

collect on the Marshall Mill § 6672 penalty. Additionally, to

apply estoppel in this case would be inconsistent with the

policies discussed above that allow the IRS to choose to remain

outside a bankruptcy proceeding.

IV. CONCLUSION

For the foregoing reasons, we REVERSE the judgment of the

district court and REMAND the case to the district court for

remand to the bankruptcy court for entry of judgment that the IRS
17

may proceed against Taylor to collect the Marshall Mill § 6672

penalty. Costs shall be borne by Taylor.