Opinion ID: 3065242
Heading Depth: 5
Heading Rank: 2

Heading: was filed or given after the date on

Text: which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax. 11 U.S.C. § 523(a)(1) (emphasis added). Section 507 referenced in section 523(a)(1) in turn describes the priority of certain claims in the distribution of the debtor’s assets. Section 507(a) of the statute gives the eighth priority to “allowed unsecured claims of governmental units,” including: (A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition— (i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition. 11 U.S.C. § 507(a)(8)(A)(i). [5] As summarized by the Supreme Court, “[i]f the IRS has a claim for taxes for which the return was due within three years before the bankruptcy petition was filed, the claim enjoys eighth priority under § 507(a)(8)(A)(i) and is nondischargeable in bankruptcy under § 523(a)(1)(A).” Young v. SEVERO v. CIR 15439 United States, 535 U.S. 43, 46 (2002). Because the Severos filed their bankruptcy petition on September 28, 1994, less than three years after their 1990 taxes were due on October 15, 1991, their 1990 tax liability was not discharged. The Severos argue that their 1990 tax liability indeed was discharged because it does not fall within a separate exception for bankruptcy discharges under section 523(a)(1)(B)(ii). Under that provision, late-filed taxes are not exempt from discharge orders if the return was filed within two years of the bankruptcy petition filing. Because they filed their 1990 tax returns on October 18, 1991 (three days late), and more than two years before filing for bankruptcy, they do not fall within that exception to discharge. However, just because they do not fall within the section 523(a)(1)(B)(ii) exception does not preclude falling within the section 523(a)(1)(A) exception.2 Section 523(a)(1)’s exceptions are phrased in the disjunctive, and the Tax Court therefore correctly held that the Severos’ 1990 tax liability was not discharged. See Young, 535 U.S. at 49 (describing Sections 523(a)(1)(A) and (a)(1)(B)(ii) as “complementary”). 2 The Severos cite to one case in which a court held that a late-filed tax return filed more than two years before the bankruptcy petition is not excepted from discharge, despite falling within the terms of Section 507(a)(8). See In re Doss, 42 B.R. 749 (Bankr. E.D. Ark. 1984). However, Doss has been widely criticized, see Vitaliano v. California (In re Vitaliano), 178 B.R. 205, 208 (B.A.P. 9th Cir. 1995) (collecting cases), and other courts addressing the interplay between Sections 523(a)(1)(B)(ii) and 507(a)(8)(A) have held that late-filed tax returns, filed more than two years but less than three years pre-petition, are not excepted from discharge under 11 U.S.C. § 523(a). See Etheridge v. Illinois, 127 B.R. 421 (Bankr. C.D. Ill. 1989); cf McElfresh v. United States (In re McElfresh), No. 96-5736, 1996 WL 628086 (Bankr. S.D. Ohio 1996) (“[I]if a tax liability is dischargeable under one subsection [of section 523(a)(1)] but not dischargeable under another subsection, the tax liability is not dischargeable.”). 15440 SEVERO v. CIR