Bankr. No. 06-10026-MER, Adv. No. 06-01425-MER Chapter 7 Appeal from the United States Bankruptcy Court for the District of Colorado.
The opinion of the court was delivered by: Nugent, Bankruptcy Judge.
Before NUGENT, THURMAN, and KARLIN, Bankruptcy Judges.
The United States of America, acting through the Internal Revenue Service (the "IRS"), appeals from a summary judgment order holding that tax penalties assessed against Rickie Allen Wilson ("Wilson") for filing frivolous returns under 26 U.S.C. § 6702 are dischargeable under 11 U.S.C. § 523(a)(7)(B).*fn1 Relying on the Tenth Circuit's Roberts case,*fn2 the bankruptcy court held that the event giving rise to these penalties was Wilson's failure to file timely returns for tax years outside the three-year lookback period provided for in § 523(a)(7)(B), rendering the penalties dischargeable. After oral argument and careful review of the record before us, we REVERSE.*fn3
I. Appellate Jurisdiction and Standards of Review
This Court has jurisdiction over this appeal. The Appellant timely filed its notice of appeal from the bankruptcy court's final order.*fn4 The parties have consented to this Court's jurisdiction because they have not elected to have the appeal heard by the United States District Court for the District of Colorado.*fn5
We review the grant or denial of summary judgment de novo, applying the same legal standard used by the trial court pursuant to Federal Rule of Civil Procedure 56(c).*fn6 The determination of the nondischargeability of debt is an issue of law that we review de novo.*fn7
II. Factual Background*fn8
On February 28, 2005, Wilson filed purported tax returns for each of the tax years 1997, 1998 and 1999, each indicating that he owed no tax for those years. The IRS determined that these filings were frivolous, and, in accordance with IRC § 6702,*fn9 assessed penalties against Wilson of $500 for each of the frivolous returns.*fn10
Wilson and his wife filed their voluntary Chapter 7 petition on January 5, 2006, less than one year after the returns were filed. Thereafter, Wilson filed an adversary complaint against the IRS, seeking to have all his IRS tax liabilities and penalties discharged. Wilson and the IRS filed cross-motions for summary judgment. Wilson asserted that the IRS's records of assessments were defective, and therefore did not show a legally sustainable tax liability. In arguing that its tax debts were excepted from discharge under various subsections of § 523(a), the IRS sought a determination that the frivolous filing penalties for tax years 1997, 1998, and 1999 are excepted from discharge pursuant to § 523(a)(7)(B).
The bankruptcy court granted partial summary judgment to Wilson and to the IRS.*fn11 Before us today is the bankruptcy court's denial of the IRS's Motion for Summary Judgment as to the frivolous filing penalties for tax years 1997, 1998, and 1999, and discharge of those penalties. The bankruptcy court held that "under the Tenth Circuit's Roberts opinion, the events giving rise to penalties asserted for tax years 1997, 1998, and 1999 were Wilson's failure to file timely returns [in those years], rendering the penalties dischargeable under § 523(a)(7)(B)."*fn12
The IRS filed a motion to alter or amend judgment, objecting solely to the discharge of the frivolous filing penalties. The IRS argued that it is the filing of the frivolous returns in February 2005, rather than the due date of the underlying tax return, that constitutes the "transaction or event" that gives rise to the imposition of the frivolous filing penalties. The bankruptcy court denied the IRS's motion to alter or ...