Debtor, filed this adversary proceeding primarily seeking a determination that his 2008 tax liabilities to the Massachusetts Department of Revenue (“MDR”) are discharged under §523(a)(1)(B) of the Bankruptcy Code. MDR contends Debtor’s tax liability was not discharged because he filed his tax returns late.Both parties now ask for summary judgment. The cross motions for summary judgment both are denied because a material factual dispute over whether the Debtor acted honestly and reasonably in filing his tax returns late prevents resolution as a matter of law.
On November 19, 2009, the Debtor filed his 2008 state tax return with MDR. Debtor, who
was in a contested divorce, missed the April 15 deadline by about seven months arguing he did
not know his then- spouse would file “Married, Filing Separately.” He allegedly waited because
he needed to know which deductions and exemptions his wife would claim . MDR assessed
the Debtor’s 2008 state taxes based on the Debtor’s late tax return.
Debtor then moved to Florida, and years later, on October 8, 2015, the Debtor filed this Chapter
7 proceeding. He received a discharge on January 26, 2016. When MDR pursued collection
efforts after the discharge and the bankruptcy case was closed, Debtor requested the
reopening of the case so he could file this adversary proceeding to determine if his 2008 tax
obligation to MDR was discharged.
The parties agree the Debtor filed his 2008 state tax return late; they disagree whether the
late filing prevents the Debtor from discharging the debt. The legal dispute arises from a
statutory change made by Congress in 2005, when they enacted the Bankruptcy Abuse
Prevention and Consumer Protection Act (BAPCPA). Congress added a “hanging paragraph”
applicable to §523(a)(1)(B) of the Bankruptcy Code defining the term tax “return” to mean “a
return that satisfies the requirements of applicable nonbankruptcy law (including applicable
Some courts have interpreted this new language to require debtors to timely file their tax
returns if they seek to discharge their taxes. Other courts reject the harsh effect of this “one day
late” filing rule. The primary issue on summary judgment is whether the Debtor’s 2008 tax
liability to MDR is not discharged because he undisputedly failed to timely file his tax return in
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