Tax fraud and bankruptcy dischargeability

The federal laws governing bankruptcy and taxation often intersect, although their makeup, effectiveness, and interpretation are significantly impacted by distinct policy concerns, lobbying efforts, and judicial interpretations.¹ These factors influence the interplay between bankruptcy debt dischargeability and tax fraud liability.

Criminal tax fraud

Criminal tax fraud proceedings are punitive in nature. They are prosecuted by the U.S. Attorney’s Office and are brought against alleged criminally culpable taxpayers. The remedy sought by the government can range from criminal fines to imprisonment. Because they are criminal proceedings, the burden of proof is proof beyond a reasonable doubt and rests with the federal government. The government must show that a taxpayer’s violation of a federal criminal tax statute was willful.

Tax evasion

When people think of criminal tax fraud, they generally think of tax evasion, which is defined in Sec. 7201. Under the statute, it is a felony for any person² to willfully attempt in any manner to evade or defeat any tax imposed under the Internal Revenue Code or its payment. Sec. 7201 states in full:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

Accordingly, under Sec. 7201, a taxpayer is criminally culpable if the federal government can show beyond a reasonable doubt: (1) the existence of a tax deficiency; (2) willfulness on the part of the taxpayer; and (3) an affirmative act by the taxpayer constituting an evasion or attempted evasion of tax.³ Sec. 7201, therefore, creates two offenses: (1) the willful attempt to evade or defeat the assessment of a tax, and (2) the willful attempt to evade or defeat the payment of a tax.⁴ For example, if a taxpayer transfers assets to prevent the IRS from calculating the taxpayer’s true tax liability, the taxpayer has attempted to evade an assessment. On the other hand, if the taxpayer transfers assets to prevent the IRS from collecting a tax liability, the taxpayer has evaded the payment.⁵

The word “willfully” is not defined in the Internal Revenue Code for purposes of determining whether a taxpayer has acted willfully for purposes of criminal tax evasion. Rather, its definition is derived from case law precedent. The U.S. Supreme Court has described it as the “voluntary, intentional violation of a known legal duty.”⁶ Moreover, an “affirmative willful attempt may be inferred from … any conduct, the likely effect of which would be to mislead or to conceal.”⁷ Therefore, it is a conscious, knowing decision to take, or fail to take, action.

Affirmative acts that have been deemed criminal tax evasion or attempted criminal tax evasion include filing a false tax return,⁸ filing a false amended tax return,⁹ and holding property in nominee names.¹⁰ They also include failing to file a tax return in conjunction with an affirmative act such as (1) keeping double sets of books; (2) making false entries or alterations; (3) creating false invoices; (4) destroying records; (5) concealing assets; (6) handling transactions to avoid usual records; and (7) any other conduct likely to conceal or mislead.¹¹

Willful failure to collect or pay tax

Under Sec. 7202, it is a felony for a taxpayer to willfully fail to collect or truthfully account for and pay any tax required under the Code. This section was “designed primarily to assure compliance by third parties obligated to collect excise taxes and to deduct from wages paid to employees the employees’ share of Federal Insurance Contributions Act (FICA) taxes and the withholding tax on wages applicable to individual income taxes.”¹² Sec. 7202 states:

Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

To criminally convict a taxpayer of willful failure to collect or pay over tax under Sec. 7202, the federal government must prove beyond a reasonable doubt the following elements: (1) willfulness; (2) a duty to collect, and/or to truthfully account for, and/or pay over tax; and (3) a failure to collect, or truthfully account for, and/or pay over the tax.¹³

The making of a false statement to the IRS that a taxpayer owned no assets and thus did not have the wherewithal to pay a tax was held to be a willful violation of the taxpayer’s duty to pay over tax.¹⁴ In addition, the concealing of assets by using bank accounts of family members and business associates was held to be a willful violation of a taxpayer’s duty to truthfully account for tax.¹⁵

Failure to file return or supply information

Under Sec. 7203, it is a misdemeanor for a taxpayer to willfully fail to pay estimated tax or tax, make a return, keep records, or supply information at the time or times required by law or regulations. Sec. 7203 states in part:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.

Accordingly, under Sec. 7203 the government must prove: (1) willfulness; (2) a requirement to file a return, pay an estimated tax or tax, maintain records, or supply information; and (3) a failure to file a return, pay an estimated tax or tax, maintain records, or supply information.¹⁶

Pertaining to a failure to file a return, the government must prove beyond a reasonable doubt that: (1) the person was required to file a return; (2) the person failed to file the return; and (3) the person’s violation was willful.¹⁷ For purposes of failing to pay a tax, the government must prove beyond a reasonable doubt that: (1) the person was required to pay taxes; (2) the person failed to pay the taxes; and (3) the person acted willfully in failing to pay.¹⁸

Civil tax fraud

Sec. 6663(a) provides for the imposition of additional tax for civil tax fraud. It states: “If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.” The Internal Revenue Manual Fraud Handbook “provides an overview of fraud, defines the elements of fraud, and provides information for potential fraud examinations and procedures that examiners should understand and apply in the performance of their duties.”¹⁹

This Fraud Handbook describes affirmative acts of fraud as done deliberately “for the purpose of deceit, subterfuge, camouflage, concealment, some attempt to color or obscure events, or make things seem other than what they are.”²⁰ Accordingly, like the willfulness requirement needed for a criminal tax fraud conviction, a finding of civil tax fraud requires the fraudulent act to be deliberate. However, rather than being punitive in nature, civil tax fraud allows the government to take remedial measures, such as assessing the correct tax due and imposing civil penalties in addition to the recalculated tax assessment due.

Sec. 6663(b) provides a presumption that the entire underpayment of tax is fraudulent if any portion of it can be shown to be due to fraud. However, it also allows a taxpayer to rebut this presumption if the taxpayer can demonstrate by a preponderance of the evidence that a portion was not attributable to fraud.

The burden of proof regarding the assessment of civil fraud penalties on a taxpayer rests with the federal government under Sec. 7454(a). Although Sec. 6663(b) specifies that a taxpayer may rebut a presumption of fraud by a preponderance of the evidence, Sec. 7454(a) is silent as to which civil standard of proof applies to the government, whether a preponderance of the evidence or clear and convincing evidence. The distinction is important, as “[c]lear and convincing evidence is that measure or degree of proof which will produce in the mind of the trier of facts a firm belief or conviction as to the allegations sought to be established. It is intermediate, being more than a mere preponderance, but not to the extent of such certainty as is required beyond a reasonable doubt as in criminal cases.”²¹

This appropriate burden of proof for civil tax fraud was addressed by the Tax Court in Stone,²² in which the court held that it is clear and convincing evidence.²³ Accordingly, civil fraud penalties are imposed where there is clear and convincing evidence that some underpayment of tax was due to fraud. For this purpose, a finding of fraud must evidence a taxpayer’s intent to evade a tax assessment believed owed.²⁴ Intent is distinguished from “inadvertence, reliance on incorrect technical advice, sincerely-held difference of opinion, negligence or carelessness.”²⁵

Civil and criminal tax fraud distinguished

To summarize the major differences between civil and criminal tax fraud:

• Statute of limitation: Although the government is not restricted by a statute of limitation to impose civil tax fraud penalties,²⁶ there is a six-year statute of limitation for the government to commence a criminal tax fraud prosecution.²⁷
• Burden of proof: The burden of proof imposed on the government to establish civil tax fraud is clear and convincing evidence,²⁸ while the burden for a criminal tax fraud proceeding is proof beyond a reasonable doubt.²⁹
• Remedy sought: The remedy sought by the government for civil tax fraud is the collection of the recalculated tax owed, interest, and a 75% fraud penalty.³⁰ A criminal tax fraud conviction under Sec. 7201 leads to criminal fines of up to $100,000 ($500,000 for a corporation) and up to five years of imprisonment.³¹
• Nature of proceeding: Civil fraud is a remedial action, while criminal fraud is punitive in nature.³²

Post-BAPCPA treatment of income tax liabilities

In 1978 the current Bankruptcy Code replaced the Bankruptcy Act of 1898.³³ The Bankruptcy Code introduced Chapter 13, titled “Adjustment of Debts of an Individual With Regular Income,” essentially, a plan of reorganization for eligible debtors. Chapter 13 reflected Congress’s intent to encourage debtors, as a means to achieving a financial fresh start, to repay a portion of their debts, pursuant to bankruptcy-sanctioned repayment plans.

Under the Bankruptcy Code as originally enacted, income tax liabilities were dischargeable under Chapter 13 if the tax return was due more than three years prior to the filing of the bankruptcy petition and the tax had been assessed for more than 240 days prior to the bankruptcy. Therefore, Chapter 13 delinquent taxpayers needed only to satisfy the three-year rule and the 240-day rule. Also, under Chapter 13, certain income tax liabilities that satisfied the three-year rule but had not yet been assessed were also dischargeable, as were income tax liabilities where the taxing authority failed to file a timely proof of claim.³⁴ However, in addition to satisfying the three-year rule and the 240-day rule, delinquent Chapter 7 taxpayers were subject to three additional requirements: Chapter 7 debtors could not have filed a fraudulent return, could not have attempted to evade tax, and were required to have filed their tax return more than two years before the bankruptcy to discharge an income tax liability.

The enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)³⁵ in 2005 made the discharge of income tax liabilities more difficult. BAPCPA made significant alterations to the Bankruptcy Code. These included 20 tax-related provisions that significantly changed how tax liabilities are treated in bankruptcy. As a result, BAPCPA’s tax-related provisions favored tax authorities by providing income tax liabilities additional priority status and protections against discharge.

As a result of BAPCPA, a Chapter 13 discharge now excludes taxes “of the kind specified in … paragraph (1)(B) [and] (1)(C) … of section 523(a).”³⁶ Bankruptcy Code Section 523(a)(1)(B) denies discharge from any debt with respect to which a required tax return or its equivalent was not filed, or was filed after its due date (including extensions) and less than two years before the filing of the bankruptcy petition. Section 523(a)(1)(C) similarly denies discharge of a tax debt with respect to which the debtor made a fraudulent return or willfully attempted to evade or defeat the tax. Therefore, all the exceptions to discharging taxes applicable in Chapter 7 became applicable in Chapter 13 — two directly through Section 1328(a) (2), and one indirectly through the requirement that priority claims be paid in full as part of a plan of reorganization.

As a result of BAPCPA, in addition to the two pre-BAPCPA Chapter 13 requirements (the three-year rule and the 240-day rule), the two additional rules that previously applied only to Chapter 7 debtors seeking to discharge income tax liabilities were added to Chapter 13. Accordingly, Chapter 13 debtors saddled with income tax debts must also have filed their tax return for the year in question more than two years before the filing of the bankruptcy and must not have engaged in a willful attempt to evade or defeat the tax.

Bankruptcy dischargeability of tax liabilities resulting from fraud or evasion

One result of BAPCPA, therefore, has been that debtor/taxpayers seeking discharge of their tax debts have been required to show that their failure to pay taxes was not due to fraud or evasion.

In Colsen, the bankruptcy court held that taxes owed by a debtor on late-filed returns were dischargeable where the returns were accurate and the debtor genuinely attempted to satisfy the law.³⁷

In affirming the decision of the bank-ruptcy court and a bankruptcy appellate panel permitting the discharge of the tax liabilities, the Eighth Circuit stated that “exceptions from discharge are to be strictly construed so as to give maximum effect to the policy of the bankruptcy code to provide debtors with a fresh start.”³⁸ Accordingly, statutory exemptions to a bankruptcy discharge are narrowly construed in favor of debtors. However, would the result in Colsen have been different if evidence indicated the debtor filed a fraudulent return or willfully attempted to evade the tax owed? What impact on bankruptcy discharge-ability would there be if there had been a pre-petition judicial determination of criminal and/or civil tax fraud? (See the table, “Data of Florida Criminal Tax Fraud Convictions,” below, for a sample of federal district court cases in Florida, illustrating how few cases involving convictions for criminal or civil tax fraud liability proceed to bankruptcy and litigate the issue of the tax debt’s dischargeability.)

Bankruptcy often considers the dischargeability of claims related to issues that have been litigated prior to the filing of a bankruptcy case. Where a creditor has secured a favorable prebankruptcy judicial disposition of its interests, such a creditor is motivated to apply principles of collateral estoppel to prevent the relitigating of issues and have their claims deemed per se nondischargeable. The principle of collateral estoppel has been deemed applicable in bankruptcy by the Supreme Court in Grogan v. Garner.³⁹ However, the prerequisites of applying collateral estoppel to a bankruptcy case include that:

(1) the issue sought to be precluded [is] the same as that involved in the prior action; (2) that issue [was] actually litigated; (3) it [was] determined by a final and valid judgment; and (4) the determination [was] essential to the prior judgment. … In its classic form, collateral estoppel also required “mutuality” — i.e., that the parties on both sides of the current proceeding be bound by the judgment in the prior proceeding.⁴⁰

Colsen supports the proposition that, just as a violation of the civil and criminal tax fraud statutes must be willful, a finding that an income tax liability is nondis-chargeable under Bankruptcy Code Section 523(a)(1)(C) must similarly include a finding that the fraud or evasion is willful. However, Berkery supports the proposition that, absent a finding of willful evasion or fraud, a tax court’s finding did not have a collateral estoppel impact as to whether a tax liability for fraud and evasion was dischargeable under Bankruptcy Code Section 523(a)(1)(C).⁴¹ In Berkery the debtor filed an adversary proceeding in his bankruptcy case to seek dischargeability of his federal income tax liability, despite the fact that a tax court had previously held the deficiency owing. The bankruptcy court held that “a finding of liability for an income tax deficiency alone is not akin to a finding of fraud or willful evasion for dischargeability purposes; these are separate issues which needed to be litigated separately.”

Accordingly, Colsen and Berkery stand for the notion that, like a finding of civil and criminal tax fraud under the Internal Revenue Code, there must be a finding of a willful fraud or evasion for the otherwise dischargeable income tax liability to be deemed nondischargeable in bankruptcy. However, what these cases did not address is whether the definition of “willfulness” for tax evasion under the Internal Revenue Code and under the Bankruptcy Code were the same. If so, a pre-bankruptcy determination of willfulness might have a collateral estoppel impact on a bankruptcy court’s determination of the liability’s dischargeability.

In In re Gathwright the bankruptcy court concluded that the definition of “willful” tax evasion is the same under the Internal Revenue Code as it is under the Bankruptcy Code.⁴² In doing so, the court concluded that the terms of Section 523 of the Bankruptcy Code’s requirement that there be a willful attempt to evade or defeat the tax “should be construed consistently with their usage in certain sections of the Internal Revenue Code.”⁴³ Specifically, the court held that the phrase “willfully attempted in any manner to evade or defeat such tax” in Bankruptcy Code Section 523(a) (1)(C) should be interpreted consistent with IRC Sec. 7201(a).⁴⁴ In doing so, the court said: “To the extent that the language of the statutes is identical and in the absence of any indication that Congress intended different meanings for the phrases in the different codes, I will interpret them the same.”⁴⁵

Consequently, Gathwright, like Colsen and Berkery, found there must be a finding of willful evasion or fraud to deem nondischargeable an income tax liability that is otherwise dischargeable in bankruptcy. However, unlike in Gathwright, the Colsen and Berkery courts did not address whether the definition of “willfulness” for tax evasion or fraud under the Internal Revenue Code and under the Bankruptcy Code were the same. Gathwright addressed this issue, holding that the definitions are identical. What Gathwright did not address is whether these identical definitions lead to a bankruptcy court’s being collaterally estopped from holding a tax liability dischargeable when there has been a pre-bankruptcy determination of civil and/or criminal tax evasion.

Section 523(a) of the Bankruptcy Code states: “A discharge … does not discharge an individual debtor from any debt (1) for a tax or a customs duty … (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.” However, this section does not address whether an independent determination of nondischargeability of a tax obligation must be made in bankruptcy under Section 523(a) (1)(C) when there has been a prebankruptcy civil tax fraud or criminal tax fraud finding by the tax or district court. Stated another way, does a prepetition civil or tax fraud finding deem a tax liability per se nondischargeable under Section 523(a)(1)(C)?

Bankruptcy courts have consistently held that a criminal conviction for tax fraud collaterally estops a debtor from asserting that the associated tax debt is dischargeable under Section 523(a)(1)(C).⁴⁶ Therefore, a debtor with a tax fraud conviction is collaterally estopped from discharging the subject tax liability whether the conviction is a result of a trial or a guilty plea.⁴⁷ This is despite the U.S. attorney, and not the IRS, being a party to the criminal prosecution. The fact that both are federal government agencies is insufficient to claim that they are the same party.⁴⁸

Recall that one of the prerequisites of applying collateral estoppel to a bankruptcy case is “ ‘mutuality’ — i.e., that the parties on both sides of the current proceeding be bound by the judgment in the prior proceeding.”⁴⁹ Notwithstanding, in Goff, the debtor filed for bankruptcy after pleading guilty to a criminal charge of tax evasion and entering into a consent decree in Tax Court in which he admitted to committing civil tax evasion.⁵⁰ The debtor sought discharge of the associated tax judgment against him. The government opposed, arguing that the deficiency was nondischargeable under Section 523(a)(1)(C). The bankruptcy court, agreeing with the government, held that the doctrine of collateral estoppel precluded him from relitigating this issue, and, thus, the tax indebtedness was nondischargeable in bankruptcy.

Similarly, in Freidus the debtor had pleaded guilty to tax evasion in criminal court.⁵¹ The bankruptcy court held that the debtor was collaterally estopped under Section 523(a)(1)(C) from seeking dischargeability of the associated tax liability.

Nonetheless, although a criminal conviction for tax fraud collaterally estops an individual from seeking discharge of the associated liability in bankruptcy, a pre-bankruptcy determination of civil tax fraud does not necessarily have the same collateral impact. In a case where a debtor has been held guilty of civil tax evasion with respect to a tax debt and the debtor seeks to discharge the debt, the deciding factor is whether he or she had an opportunity to fully litigate the civil tax evasion issue.

For example, in Graham, the Tax Court issued a stipulated decision that imposed an underpayment assessment for fraud under former Sec. 6653(b) of the Internal Revenue Code.⁵² Subsequently, the debtor filed for bankruptcy, seeking a determination that the subject tax indebtedness was dischargeable. The IRS argued that, under collateral estoppel and res judicata (claim preclusion), the issue of whether the failure to pay the tax was due to fraud could not be relitigated in bankruptcy court, and thus the income tax liability was per se nondischargeable under Sec. 523(a)(C)(1).

The bankruptcy court disagreed with the IRS and held that the tax debt was dischargeable. In doing so, it determined that collateral estoppel only would apply if the issue of fraud had been litigated in the previous proceeding. Here, the issue of fraud had not been litigated in Tax Court, so the bankruptcy court was not precluded from deciding whether the tax debt was dischargeable under Bankruptcy Code Section 523(a)(1)(C). Further, it determined that res judicata did not preclude litigation of the issue because it did not apply in bankruptcy proceedings for discharge.

The Third Circuit affirmed. In doing so, the court stated that the “[a]pplication of claim preclusion to this dispute would take the issue of non-dischargeability for tax debts tainted with fraud out of the hands of the bankruptcy court, in contradiction of the Supreme Court’s conclusion that Congress intended to leave discharge questions in the exclusive jurisdiction of the bankruptcy courts.”⁵³

Accordingly, it appears that the only instance in which an otherwise dischargeable income tax liability would be deemed per se nondischargeable is when there has been a pre-petition criminal tax fraud conviction associated with the subject liability. For civil tax fraud, a prepetition determination that the liability is owed will not render a tax debt per se nondischargeable; only a holding that a tax debt is a result of civil tax fraud, in a case where the debtor actually had the opportunity to litigate the issue of fraud, has the same preclusive effect as a criminal tax fraud conviction.

Public policy perspective

As we have seen, the element of willfulness is a requirement for the finding of either criminal tax fraud culpability, civil tax fraud liability, or bankruptcy non-dischargeability. However, despite these similarities, only the pre-petition taint of a criminal tax conviction is always binding on a bankruptcy court. What is not clear is how and why a pre-petition criminal tax conviction should render the underlying income tax liability non-dischargeable when a finding of civil tax fraud does not always have a collateral impact. Why should this principle have disparate treatment for criminal tax convictions from that of pre-petition civil tax fraud findings? In addition, as mentioned, since the IRS was not a party to any pre-petition criminal conviction, it would seem that such a conviction should not be given collateral estoppel effect, as the requirement of “ ‘mutuality’ — i.e., that the parties on both sides of the current proceeding be bound by the judgment in the prior proceeding,” is not satisfied.⁵⁴

Empowering bankruptcy courts to make an income tax dischargeability determination considering only applicable bankruptcy law, even subsequent to a criminal tax conviction, is consistent with applicable bankruptcy legislative history indicating it is “not fair to penalize private creditors of the debtor by paying out of the ‘pot’ of assets in the estate tax liabilities arising from the debtor’s deliberate misconduct.”⁵⁵ Accordingly, bankruptcy courts must weigh equitable considerations when applying bankruptcy law, unique and distinct from other judicial forums.

A primary purpose of bankruptcy is to provide debtors with a financial fresh start, “to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy ‘a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.’ ”⁵⁶

A 1973 U.S. House of Representatives commission put it this way: “Especially from debtors’ perspectives it is important to have a sanctuary from the jungle of creditors’ pursuit of their individualistic collection efforts, both under law and outside of the law. Relief by way of stay of collection may be all that is needed. It is equally important to be able to obtain authoritative relief, through discharge, from the hardship of unpaid debts. The … function of the bankruptcy process … is to rehabilitate debtors for continued and more value-productive participation, i.e., to provide a meaningful ‘fresh start.’ ”⁵⁷ In addition, discharging a bankrupt’s pre-existing debt is beneficial to the overall economy, as it frees up a debtor’s post-bankruptcy resources to become a viable consumer.⁵⁸

Thus, there is a strong public policy presumption in favor of liberally discharging a debtor’s pre-petition debts, a principle unique to bankruptcy. It also therefore stands to reason that bankruptcy courts are tasked with viewing bankruptcy law as it pertains to debt dischargeability through a different lens than tax and district courts for the purpose of criminal and civil tax fraud findings. That is the apparent point made in Graham.

The determination of debt dischargeability, regardless of type and circumstance, is one that should be left solely to the purview of the bankruptcy courts as Congress intended. Due to the uniqueness of bankruptcy’s stated purpose and goal, there is little room for principles of res judicata and collateral estoppel to interfere with a bankruptcy court’s unique mandate within American jurisprudence.

Contributors

Richard S. Gendler, J.D., J.S.D., LL.M., M.Tax., is business law coordinator and senior instructor; Joel M. DiCicco, CPA/CFF, Ph.D., MST, MBA, is senior instructor; George Young, CPA, Ph.D., M.Acc., CFE, is director and associate professor; and Teodora Minkova, CPA, is a Ph.D. student, all in the Florida Atlantic University College of Business, School of Accounting. For more information about this article, contact thetaxadviser@aicpa.org

Footnotes

¹ Dion and Curatolo, “Bankruptcy Law — Rethinking the Discharge of Late Filed Taxes in Consumer Bankruptcy,” 40 W. New Eng. L. Rev. 197 (2018).

²The term “person” includes an individual or natural person, although Sec. 7343 does not specifically include the term “individual.” See Lynch, 735 F. App’x 780 (3d Cir. 2018).

³ Sansone, 380 U.S. 343 (1965).

⁴ Lawn, 355 U.S. 339, 361 (1958).

⁵ Mal, 942 F.2d 682, 687–88 (9th Cir. 1991).

⁶ Cheek, 498 U.S. 192 (1991); Pomponio, 429 U.S. 10 (1976).

⁷Spies, 317 U.S. 492 (1943).

⁸ Cutler, 948 F.2d 691 (10th Cir. 1991).

⁹ Norwitt, 195 F.2d 127, 133–34 (9th Cir. 1952).

¹⁰ Wilson, 118 F.3d 228, 236 (4th Cir. 1997).

¹¹ See Spies, 317 U.S. 492, 498–99 (1943).

¹² IRS Office of Chief Counsel, Criminal Tax Division, Tax Crimes Handbook, p. 30 (2009).

¹³ Thayer, 201 F.3d 214, 219–21 (3d Cir. 1999).

¹⁴ Schoppert, 362 F.3d 451 (8th Cir. 2004).

¹⁵ McGill, 964 F.2d 222 (3d Cir. 1992).

¹⁶ See also Internal Revenue Manual (IRM) Exhibit 25.1.1-1, Criminal Violations (4/22/21).

¹⁷ Houser, 754 F.3d 1335, 1351 (11th Cir. 2014).

¹⁸ Curtis, 781 F.3d 904, 907 (7th Cir. 2015).

¹⁹ IRM §25.1.1.1.1 (4/22/21).

²⁰ IRM §25.1.1.4(2) (4/22/21).

²¹ Ohio v. Akron Center for Reproductive Health, 497 U.S. 502, 516 (1990).

²² Stone, 56 T.C. 213 (1971).

²³ See also Mohamed, T.C. Memo. 2013-255, fn. 7. Under Sec. 7454(a), to successfully impose the Sec. 6651(f) penalty, the government must prove by clear and convincing evidence that the taxpayer’s failure to timely file was an intentional attempt to evade tax believed to be owing.

²⁴ Petzoldt, 92 T.C. 661 (1989).

²⁵ IRM §25.1.6.2(3) (6/10/21).

²⁶ Sec. 6501(c); see, e.g., Loren-Maltese, T.C. Memo. 2012-214.

²⁷ Sec. 6531.

²⁸ Tax Court Rule 142(b); see DiLeo, 96 T.C. 858, 873 (1991), aff’d, 959 F.2d 16 (2d Cir. 1992).

²⁹ Boulware, 552 U.S. 421 (2008).

³⁰ Sec. 6663(a).

³¹ In addition, 18 U.S.C. §3571 allows a fine upon conviction for a federal felony generally of up to the greater of $250,000 or double the defendant’s pecuniary gain or another person’s pecuniary loss from the offense.

³² IRM §25.1.1.3.2(2) (4/22/21).

³³ By the Bankruptcy Reform Act of 1978, P.L. 95-598.

³⁴ See, e.g., In re Tomlan, 102 B.R. 790, 794–96 (E.D. Wash. 1989), aff’d, 907 F.2d 114 (9th Cir. 1990); In re Leber, 134 B.R. 911, 915–16 (Bankr. N.D. Ill. 1991); In re Border, 116 B.R. 588, 595 (Bankr. S.D. Ohio 1990); In re Daniel, 107 B.R. 798, 802–03 (Bankr. N.D. Ga. 1989).

³⁵ Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, P.L. 109-8.

³⁶ 11 U.S.C. §1328(a)(2).

³⁷ In re Colsen, 311 B.R. 765 (Bankr. N.D. Iowa 2004).

³⁸ Colsen, 446 F.3d 836 (8th Cir. 2006), aff’g 311 B.R. 765 (B.A.P. 8th Cir. 2005), aff’g 311 B.R. 765 (Bankr. N.D. Iowa 2004) (quoting In re Geiger, 113 F.3d 848, 853 (8th Cir. 1997)).

³⁹ Grogan v. Garner, 498 U.S. 279 (1991).

⁴⁰ Peloro, 488 F.3d 163, 175 (3d Cir. 2007) (citing Burlington Northern Railroad Co. v. Hyundai Merchant Marine Co., 63 F.3d 1227, 1231–32 (3d Cir. 1995), quoting In re Graham, 973 F.2d 1089, 1097 (3d Cir. 1992)).

⁴¹ Berkery, 192 B.R. 835, 843 (Bankr. E.D. Pa. 1996), aff’d, 111 F.3d 125 (3d Cir. 1997).

⁴² In re Gathwright, 102 B.R. 211 (Bankr. D. Ore. 1989).

⁴³ Id. at 213.

⁴⁴ Id.

⁴⁵ Id.

⁴⁶ E.g., In re Terrell, 594 B.R. 792 (Bankr. W.D. Okla. 2018), aff’d, No. WO-16-7 (B.A.P. 10th Cir. 2/17/17).

⁴⁷ Id.

⁴⁸ See Pritchett, No. CV 00-09916 RSWL (CWx) (C.D. Cal. 4/12/01), fn. 5, where the U.S. attorney general and commissioner of the IRS were not the proper named party to a tax refund lawsuit.

⁴⁹ Peloro, 488 F.3d 163, 175 (3d Cir. 2007).

⁵⁰ In re Goff, 180 B.R. 193, 195 (Bankr. W.D. Tenn. 1995).

⁵¹ In re Freidus, 165 B.R. 537 (Bankr. E.D.N.Y. 1994).

⁵² In re Graham, 973 F.2d 1089 (3d Cir. 1992). Sec. 6653 was subsequently repealed and replaced by Sec. 6663.

⁵³ Id.

⁵⁴ Peloro, 488 F.3d at 167.

⁵⁵ S. Rep’t No. 95-1106, 95th Cong., 2d Sess. 22 (1978).

⁵⁶ Grogan v. Garner, 498 U.S. 279 (1991) (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934)).

⁵⁷ Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc. No. 93-137, 93d Cong., 1st Sess. (1973).

⁵⁸ Dion and Curatolo, “Bankruptcy Law — Rethinking the Discharge of Late Filed Taxes in Consumer Bankruptcy,” 40 W. New Eng. L. Rev. 197, 223 (2018).