United States Court of Appeals For the First Circuit No. 21-1206
IN RE: TERRENCE P. KRISS,
Debtor,
TERRENCE P. KRISS,
Appellant,
v.
UNITED STATES,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Lynch and Kayatta, Circuit Judges, and Woodlock,* District Judge.
John A.E. Pottow and Timothy Chevalier for appellant. Julie Ciamporcero Avetta, Attorney, Tax Division, Department of Justice, with whom John J. Farley, Acting United States Attorney, David A. Hubbert, Acting Assistant Attorney General, and Ellen Page DelSole, Attorney, Tax Division, Department of Justice, were on brief, for appellee.
* Of the District of Massachusetts, sitting by designation. November 22, 2022 KAYATTA, Circuit Judge. Terrence Kriss failed to file
income tax returns when due for 1997 and 2000. Nor did he pay the
taxes that were owed. In March of 2003, without the benefit of a
return (or any other help from Kriss), the IRS assessed the tax
believed to be due, including penalties and interest, for tax year
1997, in the amount of $30,568. Six months later, it calculated
-- again on its own -- $46,344 in tax, penalties, and interest due
for tax year 2000. The IRS thereafter undertook unsuccessful
collection efforts. Subsequently, in 2007, Kriss filed Forms 1040
for years 1997 and 2000, but did not pay the long-overdue taxes.
Five years later, Kriss filed a chapter 13 petition for bankruptcy.
After he received a discharge in 2017, Kriss and the IRS joined
issue on whether his discharge covered his debts to the IRS for
the taxes due for 1997 and 2000.
The bankruptcy court held that the tax liabilities
relevant here had not been discharged, and the district court
affirmed. We review the bankruptcy court's conclusions of law de
novo. In re Healthco Int'l, Inc., 132 F.3d 104, 107 (1st Cir.
1997).
Resolution of this dispute turns on the interpretation
of a particularly puzzling section of the Bankruptcy Code, 11
U.S.C. § 523(a)(1)(B)(i)–(ii), which provides:
(a) A discharge . . . does not discharge an individual debtor from any debt--
- 3 - (1) for a tax or a customs duty--
. . .
(B) with respect to which a return, or equivalent report or notice, if required--
(i) was not filed or given; or
(ii) was filed or given after the date on 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[.]
Until 2005, the Bankruptcy Code did not define "return"
for purposes of this section. Then, as part of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L.
No. 109-8, 119 Stat. 23, Congress added the following unenumerated
subsection, denoted as section 523(a)(*):
For purposes of this subsection, the term "return" means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
This section requires us to decide whether Kriss's
returns "satisf[y] the requirements of applicable nonbankruptcy
law (including applicable filing requirements)." In 2015, we
- 4 - decided a case presenting a similar inquiry. In re Fahey, 779
F.3d 1 (1st Cir. 2015). In that case, the debtor owed
Massachusetts income tax, so we looked to Massachusetts state law
as the applicable nonbankruptcy law. Id. at 4. That law included
a requirement that returns be filed by a specified date. Id. And
because the debtor's return was filed after that specified date,
we held that the return was not a "return" within section 523(a)(*)
(the so-called "one-day-late" rule). Id. at 5.
At least on its face, Fahey does not directly control
this appeal because Massachusetts's filing requirements are not
applicable given that the debt here arises under federal law. One
might nevertheless think that distinction easily erased. After
all, federal tax law required Kriss to file his returns before he
did. See 26 U.S.C. § 6072. The United States, though, makes clear
that it nonetheless regards many late-filed federal returns to be
returns within the meaning of section 523(a)(*).
Ultimately, we need not decide whether Fahey entirely
applies to federal returns just as it applies to Massachusetts
returns. Nor need we consider the cogent arguments well marshalled
by Kriss on appeal for rethinking Fahey. Rather, even if Fahey
does not control, Kriss loses because his much belated filings did
not qualify as returns under section 523(a)(*) even under the
alternative test put forward by Kriss in the bankruptcy court.
See United States v. Lara, 970 F.3d 68, 78 (1st Cir. 2020) ("We
- 5 - need not decide which standard applies in this case, as
[appellant's] challenge fails under either standard."); United
States v. Burgos-Montes, 786 F.3d 92, 105 (1st Cir. 2015).
Kriss contends that this case should turn on the
application of the four requirements of the so-called Beard test.
Beard v. Comm'r, 82 T.C. 766 (1984), aff'd, 793 F.2d 139 (6th Cir.
1986). Beard provides that "a document must meet four requirements
to be a tax return: (1) it must purport to be a return, (2) it
must be executed under penalty of perjury, (3) it must contain
sufficient data to allow calculation of tax, and (4) it must
represent an honest and reasonable attempt to satisfy the
requirements of the tax law." In re Giacchi, 856 F.3d 244, 248
(3d Cir. 2017) (paraphrasing Beard). Kriss correctly contends
that he satisfies the first three requirements of the Beard test.
So the parties train their debate on whether Kriss's filings
represent "an honest and reasonable attempt to satisfy the
requirements of the Federal income tax law." Beard, 82 T.C. at
779.
On appeal, Kriss argues that he would win
"automatically" under the objective version of the "honest and
reasonable" requirement adopted in In re Colsen, 446 F.3d 836 (8th
Cir. 2006). Under that version of the test, "the honesty and
genuineness of the filer's attempt to satisfy the tax laws [is]
determined from the face of the form itself, not from the filer's
- 6 - delinquency or the reasons for it. The filer's subjective intent
is irrelevant." Id. at 840.
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United States Court of Appeals For the First Circuit No. 21-1206
IN RE: TERRENCE P. KRISS,
Debtor,
TERRENCE P. KRISS,
Appellant,
v.
UNITED STATES,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Lynch and Kayatta, Circuit Judges, and Woodlock,* District Judge.
John A.E. Pottow and Timothy Chevalier for appellant. Julie Ciamporcero Avetta, Attorney, Tax Division, Department of Justice, with whom John J. Farley, Acting United States Attorney, David A. Hubbert, Acting Assistant Attorney General, and Ellen Page DelSole, Attorney, Tax Division, Department of Justice, were on brief, for appellee.
* Of the District of Massachusetts, sitting by designation. November 22, 2022 KAYATTA, Circuit Judge. Terrence Kriss failed to file
income tax returns when due for 1997 and 2000. Nor did he pay the
taxes that were owed. In March of 2003, without the benefit of a
return (or any other help from Kriss), the IRS assessed the tax
believed to be due, including penalties and interest, for tax year
1997, in the amount of $30,568. Six months later, it calculated
-- again on its own -- $46,344 in tax, penalties, and interest due
for tax year 2000. The IRS thereafter undertook unsuccessful
collection efforts. Subsequently, in 2007, Kriss filed Forms 1040
for years 1997 and 2000, but did not pay the long-overdue taxes.
Five years later, Kriss filed a chapter 13 petition for bankruptcy.
After he received a discharge in 2017, Kriss and the IRS joined
issue on whether his discharge covered his debts to the IRS for
the taxes due for 1997 and 2000.
The bankruptcy court held that the tax liabilities
relevant here had not been discharged, and the district court
affirmed. We review the bankruptcy court's conclusions of law de
novo. In re Healthco Int'l, Inc., 132 F.3d 104, 107 (1st Cir.
1997).
Resolution of this dispute turns on the interpretation
of a particularly puzzling section of the Bankruptcy Code, 11
U.S.C. § 523(a)(1)(B)(i)–(ii), which provides:
(a) A discharge . . . does not discharge an individual debtor from any debt--
- 3 - (1) for a tax or a customs duty--
. . .
(B) with respect to which a return, or equivalent report or notice, if required--
(i) was not filed or given; or
(ii) was filed or given after the date on 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[.]
Until 2005, the Bankruptcy Code did not define "return"
for purposes of this section. Then, as part of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L.
No. 109-8, 119 Stat. 23, Congress added the following unenumerated
subsection, denoted as section 523(a)(*):
For purposes of this subsection, the term "return" means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
This section requires us to decide whether Kriss's
returns "satisf[y] the requirements of applicable nonbankruptcy
law (including applicable filing requirements)." In 2015, we
- 4 - decided a case presenting a similar inquiry. In re Fahey, 779
F.3d 1 (1st Cir. 2015). In that case, the debtor owed
Massachusetts income tax, so we looked to Massachusetts state law
as the applicable nonbankruptcy law. Id. at 4. That law included
a requirement that returns be filed by a specified date. Id. And
because the debtor's return was filed after that specified date,
we held that the return was not a "return" within section 523(a)(*)
(the so-called "one-day-late" rule). Id. at 5.
At least on its face, Fahey does not directly control
this appeal because Massachusetts's filing requirements are not
applicable given that the debt here arises under federal law. One
might nevertheless think that distinction easily erased. After
all, federal tax law required Kriss to file his returns before he
did. See 26 U.S.C. § 6072. The United States, though, makes clear
that it nonetheless regards many late-filed federal returns to be
returns within the meaning of section 523(a)(*).
Ultimately, we need not decide whether Fahey entirely
applies to federal returns just as it applies to Massachusetts
returns. Nor need we consider the cogent arguments well marshalled
by Kriss on appeal for rethinking Fahey. Rather, even if Fahey
does not control, Kriss loses because his much belated filings did
not qualify as returns under section 523(a)(*) even under the
alternative test put forward by Kriss in the bankruptcy court.
See United States v. Lara, 970 F.3d 68, 78 (1st Cir. 2020) ("We
- 5 - need not decide which standard applies in this case, as
[appellant's] challenge fails under either standard."); United
States v. Burgos-Montes, 786 F.3d 92, 105 (1st Cir. 2015).
Kriss contends that this case should turn on the
application of the four requirements of the so-called Beard test.
Beard v. Comm'r, 82 T.C. 766 (1984), aff'd, 793 F.2d 139 (6th Cir.
1986). Beard provides that "a document must meet four requirements
to be a tax return: (1) it must purport to be a return, (2) it
must be executed under penalty of perjury, (3) it must contain
sufficient data to allow calculation of tax, and (4) it must
represent an honest and reasonable attempt to satisfy the
requirements of the tax law." In re Giacchi, 856 F.3d 244, 248
(3d Cir. 2017) (paraphrasing Beard). Kriss correctly contends
that he satisfies the first three requirements of the Beard test.
So the parties train their debate on whether Kriss's filings
represent "an honest and reasonable attempt to satisfy the
requirements of the Federal income tax law." Beard, 82 T.C. at
779.
On appeal, Kriss argues that he would win
"automatically" under the objective version of the "honest and
reasonable" requirement adopted in In re Colsen, 446 F.3d 836 (8th
Cir. 2006). Under that version of the test, "the honesty and
genuineness of the filer's attempt to satisfy the tax laws [is]
determined from the face of the form itself, not from the filer's
- 6 - delinquency or the reasons for it. The filer's subjective intent
is irrelevant." Id. at 840. As Kriss describes, "'Protest
returns' of all zeros, etc., fail this objective test . . . . But
a properly completed Form 1040, as is at issue in this appeal,
would satisfy this prong as a matter of law."
Kriss, however, never made this argument in the
bankruptcy court. To the contrary, in direct response to the
government's assertion that Fahey's "one-day-late rule" applied,
Kriss urged the bankruptcy court instead to apply the Beard test
as defined in In re Justice, 817 F.3d 738 (11th Cir. 2016), In re
Giacchi, 856 F.3d 244 (3d Cir. 2017), and In re Smith, 828 F.3d
1094 (9th Cir. 2016), all of which rejected the Colsen objective
test. Those cases adopted a "subjective" test that, as Kriss
describes, "turns to the taxpayer's conduct and looks beyond the
return itself." Under this test, "[f]ailure to file a timely
return, at least without a legitimate excuse or explanation,
evinces the lack of a reasonable effort to comply with the law."
In re Justice, 817 F.3d at 744; see also In re Giacchi, 856 F.3d
at 248 ("[T]he timing of the filing of a tax form is relevant to
determining whether the form evinces an honest and reasonable
attempt to comply with tax law."); In re Smith, 828 F.3d at 1097
(rejecting the argument that courts can look "only at the face of
the filing," and holding that a return filed seven years after its
- 7 - initial due date "was not an 'honest and reasonable' attempt to
comply with the tax code").
During the bankruptcy court hearing, Kriss stated that
"if we're not defining ['return'] with a one-day-late rule, we
have to propose an alternative," and went on to quote In re Justice
for the point that "all of the taxpayer's conduct with respect to
[the] relevant tax years" must be considered in evaluating the
fourth Beard factor. See In re Justice, 817 F.3d at 746. Far
from asserting that only the face of the form need be consulted,
Kriss argued that the "analysis in the case law" focuses on whether
"there [was] a reasonable effort based on all the facts and
circumstances." Following the logic of this subjective test, Kriss
asserted that his delinquency in filing was excusable because "he
was lied to [by his spouse] and he thought that [the tax returns]
had been filed."
Kriss's argument on appeal for applying an objective
test as in Colsen is therefore waived. See Ondine Shipping Corp.
v. Cataldo, 24 F.3d 353, 355 (1st Cir. 1994) ("[The] dispositive
answer is that plaintiff never broached this argument before the
bankruptcy court. . . . Not only is it 'a bedrock rule' that a
party who has not presented an argument below 'may not unveil it
in the court of appeals,' but also, no principle is more firmly
anchored in the jurisprudence of this circuit." (quoting United
States v. Slade, 980 F.2d 27, 30 (1st Cir. 1992))).
- 8 - Under the subjective version of the Beard test, Kriss's
alleged facts, even viewed most favorably to him, fall well short
of plausibly qualifying as descriptions of a reasonable effort to
file timely returns. Kriss's only excuse for his very belated
filings is that his wife falsely assured him that she had filed
the returns for him. But the United States tells us that Kriss
and his wife were filing separate returns -- an assertion that
Kriss does not challenge. Kriss also makes no allegation
explaining why he did not respond to notices sent by the IRS
inquiring about the status of his unfiled returns. He does not
even allege that he ever signed any returns for 1997 or 2000 until
2007. Therefore, applying the Beard test that Kriss urged the
bankruptcy court to adopt, he never filed "returns" for the tax
years relevant here.1
For the foregoing reasons, the judgment of the district
court is affirmed.
1 The United States argues that a return filed after the IRS estimates and assesses a tax on its own can never be the product of an honest and reasonable effort to comply. Given our holding, we need not decide whether that is so.
- 9 -