Court Opinion

ID: 4677133
Source: CourtListenerOpinion
Date Created: 2021-04-14 16:00:34.911175+00
Date Added: 2024-06-11T08:03:36.623141
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 21a0189n.06

                                           No. 20-5686

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

 UNITED STATES OF AMERICA,                               )                        FILED
                                                         )                    Apr 14, 2021
        Plaintiff-Appellee,                              )               DEBORAH S. HUNT, Clerk
                                                         )
 v.                                                      )      ON APPEAL FROM THE
                                                         )      UNITED STATES DISTRICT
 JOHN C. HELTON,                                         )      COURT FOR THE EASTERN
                                                         )      DISTRICT OF TENNESSEE
        Defendant-Appellant.                             )
                                                         )

       Before: KETHLEDGE, STRANCH, and NALBANDIAN, Circuit Judges.

       KETHLEDGE, Circuit Judge. John Helton appeals the district court’s determination, after

a bench trial, that his federal tax debts were not dischargeable in bankruptcy because Helton had

willfully evaded paying them. We reject Helton’s arguments and affirm.

       Helton has been a self-employed attorney practicing law since 1994. His income fluctuated

over the years, approaching $100,000 in the late 1990s but spiking to $178,913 in 2004, $250,536

in 2005, and $234,359 in 2006, before declining to about $60,000 in 2007. But Helton failed to

make any estimated tax payments for those years, and did not even file tax returns for years 2004-

06 until several years later. And even after Helton filed his returns, he made minimal payments

toward his tax debts for those years and (later) for the years 2009 and 2012.

       Meanwhile, Helton enjoyed a comfortable lifestyle, driving a Mercedes-Benz sedan,

purchasing numerous luxury gifts for his wife, eating at restaurants “almost every day,” enjoying

annual vacations, and spending (along with his wife) an average of $10,000 per month on
No. 20-5686, United States v. Helton

discretionary purchases during some of the years at issue. Helton also donated about $34,000 to

charity during the years in which he failed to pay his taxes, and in 2014 spent an unspecified sum

in support of his successful campaign to become a part-time state-court judge.

        The United States brought this suit in February 2017, seeking to reduce to judgment its

assessments against Helton for the years 2004-07, 2009, and 2012, among other requested relief.

Helton filed for bankruptcy two months later. The district court then stayed this case until October

2017, when the bankruptcy court entered an order generally discharging Helton’s debts, thereby

lifting the stay.

        The issue here is whether Helton’s tax debts were nondischargeable under the Bankruptcy

Code, specifically 11 U.S.C. § 523(a)(1)(C). That provision excepts from discharge any tax debt

“with respect to which the debtor . . . willfully attempted in any manner to evade or defeat such

tax.” The district court held a bench trial after which it found that Helton had done precisely that

for the years 2004-07, 2009, and 2012. The district court thereafter entered judgment in favor of

the United States in the amount of $347,479 for Helton’s unpaid taxes during those years.

        We review the district courts factual findings for clear error and its interpretation of

§ 523(a)(1)(C) de novo. See Atkins v. Parker, 972 F.3d 734, 739 (6th Cir. 2020). As interpreted

by the caselaw, § 523(a)(1)(C) has both a “conduct requirement” and a “mental state requirement.”

In re Gardner, 360 F.3d 551, 558 (6th Cir. 2004). The conduct requirement is met if the

government proves that the taxpayer engaged in “acts of omission” or “acts of commission” that

themselves amounted to an attempt to evade paying taxes. Id. at 557. Here, Helton does not

dispute the district court’s finding that his failure to file tax returns and to pay most of his taxes

owed for the relevant years satisfied the conduct requirement of § 523(a)(1)(C).

                                                 -2-
No. 20-5686, United States v. Helton

       That leaves the mental-state requirement, which is met if the government proves that the

taxpayer “(1) had a duty to pay taxes; (2) knew he had such a duty; and (3) voluntarily and

intentionally violated that duty.” Id. at 558. Helton concedes that he knew he had a duty to pay

taxes for the years at issue here, which leaves only the question whether he voluntarily and

intentionally violated that duty. That element is met when the taxpayer has “the financial means

to meet his outstanding tax liabilities” but makes “a conscious decision not to apply” those monies

“toward his tax debt.” Id. at 560-61. Here, Helton’s discretionary spending—lavish when

compared to the pittance he allocated toward his taxes—amply supported the district court’s

finding that Helton’s violation of his duty to pay taxes was voluntary and intentional. See Gardner

at 561; compare U.S. v. Storey, 640 F.3d 739, 745 (6th Cir. 2011) (holding this element was not

met because “there is no evidence that Storey lived lavishly during the years she did not pay her

taxes, or that she chose to engage in recreational or philanthropic activities instead of paying her

taxes”).

       Helton barely disputes that finding, asserting that he was too busy with work or too

depressed during some of the years at issue to pay his taxes. The district court did not clearly err

when it found those excuses belied by Helton’s ability to maintain his law practice and to run

successfully for election as a state-court judge.

       Helton’s principal argument, rather, is that § 523(a)(1)(C) requires proof that the debtor

acted with “specific intent to evade the tax.” Hawkins v. Franchise Tax Bd., 769 F.3d 662, 670

(9th Cir. 2014). Thus, in Helton’s view, the government was required to prove not only that Helton

chose to allocate his funds toward Mercedes-Benz sedans and dinners out each night and luxury

gifts, rather than towards his taxes; instead, the government was required also to prove that he

purchased or paid for those things specifically to avoid paying his taxes. Regardless of whether

                                                    -3-
No. 20-5686, United States v. Helton

that is the law in the Ninth Circuit, it is not the law in this one, as shown above. See, e.g., Gardner,

360 F.3d at 561; accord In re Feshbach, 974 F.3d 1320, 1331 (11th Cir. 2020); United States v.

Coney, 689 F.3d 365, 374 (5th Cir. 2012); In re Fegeley, 118 F.3d 979, 984 (3d Cir. 1997). We

therefore reject his argument.

       The district court’s judgment is affirmed.

                                                  -4-