All Tax Returns Means All Tax Returns
by Charles Baer
The U.S. Attorney's Office (S.D. Ala.); Mobile
To obtain confirmation, a chapter 13 debtor must file all tax returns for all taxable periods ending during the four-year period before the petition date, even if the return is not yet due under the Internal Revenue Code.
In what the court states was a case of first impression, the bankruptcy court for the Eastern District of Wisconsin interpreted the requirement of Bankruptcy Code §1308(a) to mean that a debtor that is required to file tax returns file all tax returns for all taxable periods ending during the four-year period ending on the day of the petition no later than the day before the first date set for a meeting of creditors. In re French, 354 B.R. 258 (Bankr. E.D. Wis. 2006). The application of this rule to situations where the tax return is not yet due, either because the meeting of creditors is before April 15 or because the debtor has obtained an extension of the time to file from the Internal Revenue Service, has become a common issue in the Gulf Coast region. Due to the 2004-05 hurricane seasons, there have been long extensions of the tax return filing deadlines. Section 1325(a)(9) of the Bankruptcy Code requires that the debtor have filed all tax returns required by §1308 before a case can be confirmed. The argument that §1308(a) does not apply, as the return is not yet due, is usually made by counsel for debtors who are not missing earlier returns.
Some debtor’s counsel have argued that the language of §1308(a), making the provision applicable only to debtors "required to file a tax return under applicable non-bankruptcy law," meant that §1308(a) applied only to returns already due under the tax laws. The court in French looked to the language of Code §1308(b)(1)(B), which specifically allows the trustee to hold open the meeting of creditors to allow tax return filing until the return is due under the last automatic extension in the situation where the return is not past due as of the date of filing. French, 354 B.R. at 263. As the court noted, the argument that §1308(a) does not apply to returns for pre-petition years if the return is not yet due under the tax laws would make §1308(b)(1)(B) meaningless, and courts are not to construe statutes to make provisions meaningless. French, 354 B.R. at 262. The court also looked to the plain language of Code §1308(a) and to the legislative history, which showed a strong intent that debtors file their tax returns. It therefore held that a debtor could not get her chapter 13 case confirmed until she filed the return for the immediately preceding year. French, 354 B.R. at 265.