§ 42.6     Tax Return Duties One Day before First Scheduled Meeting of Creditors
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 42.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

As if the new tax return filing and providing responsibilities in § 521 were not enough,1 BAPCPA added a new § 1308 dealing only with filing tax returns in Chapter 13 cases:

(a) Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341(a), if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.
(b)(1) Subject to paragraph (2), if the tax returns required by subsection (a) have not been filed by the date on which the meeting of creditors is first scheduled to be held under section 341(a), the trustee may hold open that meeting for a reasonable period of time to allow the debtor an additional period of time to file any unfiled returns, but such additional period of time shall not extend beyond—
(A) for any return that is past due as of the date of the filing of the petition, the date that is 120 days after the date of that meeting; or
(B) for any return that is not past due as of the date of the filing of the petition, the later of—
(i) the date that is 120 days after the date of that meeting; or
(ii) the date on which the return is due under the last automatic extension of time for filing that return to which the debtor is entitled, and for which request is timely made, in accordance with applicable nonbankruptcy law.
(2) After notice and a hearing, and order entered before the tolling of any applicable filing period determined under this subsection, if the debtor demonstrates by a preponderance of the evidence that the failure to file a return as required under this subsection is attributable to circumstances beyond the control of the debtor, the court may extend the filing period established by the trustee under this subsection for—
(A) a period of not more than 30 days for returns described in paragraph (1); and
(B) a period not to extend after the applicable extended due date for a return described in paragraph (2).
(c) For purposes of this section, the term “return” includes a return prepared pursuant to subsection (a) or (b) of section 6020 of the Internal Revenue Code of 1986, or a similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal.2
[2]

For no obvious reason, new § 1308(a) picks the “day before” the meeting of creditors is first scheduled under § 341(a). This is six days after the deadline in § 521(e)(2)(A) by which the debtor must provide to the trustee or to a timely requesting creditor a copy or transcript of the federal tax return for the most recent tax year ending immediately before the petition for which a federal tax return is filed.3

[3]

Although the words are different, the date from which the “day before” is counted under § 1308(a) seems to be the date “first scheduled” for the meeting of creditors under § 341(a).4 For purposes of § 1308(a), the “day before” deadline would probably be counted from the first date scheduled for the meeting of creditors without regard to when the meeting is actually held and without regard to whether the debtor appears at that first scheduled date.5

[4]

No later than the day before the first date set for the meeting of creditors, § 1308(a) requires a Chapter 13 debtor to “file with appropriate tax authorities all tax returns for all taxable periods ending during the four-year period ending on the date of the filing of the petition.”6 The predicate for this broad mandate is, “if the debtor was required to file a tax return under applicable nonbankruptcy law.” As discussed above with respect to § 521(e)(2)(A)(i),7 the word “required” implicates the Internal Revenue Code with respect to federal tax returns and state law with respect to tax returns “required” by other nonbankruptcy law. Section 1308(a) applies to tax returns required by state and federal laws without regard to whether a required return is due or past due.

[5]

In contrast to § 521(e)(2)(A),8 the four years of tax returns required by § 1308(a) are filed with “appropriate tax authorities.” In other words, the tax returns described in § 1308(a) are not filed with bankruptcy courts and the consequences of failing to file all of the tax returns required by § 1308(a) are different from the consequences of failing to file the one tax return described in § 521(e)(2)(A).9

[6]

Section 1308(a) creates a strange mandate for Chapter 13 debtors with respect to tax returns that are “required” but that are not due or past due at the petition. Many Chapter 13 debtors will fall in this category. Continuing the example above,10 in a Chapter 13 case filed on January 10, 2006, an individual debtor was almost certainly “required” to file a tax return for 2005 under federal and state tax laws. For federal income tax purposes, that 2005 return was not past due until after April 17, 2006, or any date of extension. If the meeting of creditors was scheduled for March 1, 2006, § 1308(a) could be read to mandate that the debtor file the 2005 federal income tax return (and all other required returns for tax periods ending between January 10, 2002, and January 10, 2006) not later than February 28, 2006. For lots of good reasons, many debtors will not be able to complete a 2005 tax return on this schedule. This is not a benign possibility: the penalty for missing a deadline in § 1308 can be mandatory dismissal or conversion of the Chapter 13 case.11

[7]

Can “required” in § 1308(a) be interpreted to mean “due” or “past due”? The statute itself argues otherwise. New § 1308(b) provides that if a tax return “required” by § 1308(a) has not been filed by the first scheduled date for the meeting of creditors, the trustee “may hold open that meeting” for a reasonable time to allow the debtor to file unfiled returns. Subsection 1308(b)(1)(A) limits the additional time period for any return that is “past due as of the date of the filing of the petition,” and this deadline is different than the permissible additional time for any return “that is not past due as of the date of the filing of the petition.”12 The obvious implication is that there will be “required” tax returns that are both past due and not past due at the petition. These words compel the conclusion that many Chapter 13 debtors filing cases during the early months of a calendar year will be required by § 1308(a) to file state and federal tax returns for the immediately previous tax year no later than the day before the first date set for the meeting of creditors, without regard to when those tax returns are due under state or federal law.

[8]

The Bankruptcy Court for the Eastern District of Wisconsin described this effect of § 1308(a) as accelerating the tax return filing responsibilities of some Chapter 13 debtors. In In re French,13 the Chapter 13 case was filed on January 9, 2006. The meeting of creditors was scheduled at the end of March to allow the debtor to file a 2005 tax return. Anxious to get on with paying creditors, the debtor moved for an earlier hearing on confirmation. The bankruptcy court found that § 1308 required delaying the meeting of creditors and confirmation to fulfill Congressional intent that Chapter 13 debtors file tax returns:

[F]rom the beginning of BAPCPA’s long journey to enactment, Congress intended to require debtors to file their tax returns as a condition of confirmation. . . . Congress wanted to help state revenue agencies figure out whether they had claims against the debtor. . . . Congress wanted to punish those debtors who were delinquent in filing tax returns . . . . [Section] 1308 focuses on the question of whether applicable nonbankruptcy law requires the debtor to file a return at all, not on when the applicable nonbankruptcy law requirement must be met. . . . If the returns aren’t delinquent—exactly the situation the current debtor faces—the debtor may have either four months from the date first scheduled for the meeting of creditors or the date the return is due under the last correctly-applied-for automatic extension, whichever is later. When one reads § 1308(b)(1)(B)—dealing with not-yet-delinquent returns—in conjunction with § 1308(a), it becomes clear that Congress intended to make the filing of tax returns a condition of confirmation. For those debtors who file for Chapter 13 protection between January 1 and April 15 of any given year, Congress intended to require them to have their return for the prior year filed by the date first scheduled for the meeting of creditors, even if the return is not yet delinquent under the tax code. . . . [T]he enforcement mechanism that Congress created in § 1308 is a requirement that the returns be filed—regardless of whether they are yet due—in order to obtain confirmation. In other words, Congress bumped up the deadline for filing tax returns for those debtors who file petitions between January 1 and April 15 of a given year.14
[9]

Under § 1308(b)(1), the trustee may “hold open” the meeting of creditors for a “reasonable period” to allow a Chapter 13 debtor to file returns required by state or federal law for any taxable period ending during the four years before the petition. The hold-open period is limited depending on whether the unfiled return is past due or not past due at the Chapter 13 petition. If the required return is past due at the petition, the trustee may hold open the meeting of creditors for up to 120 days after “the date of that meeting.”15 If the return was not past due at the petition, the trustee may hold open the meeting of creditors until the later of 120 days after “the date of that meeting” or the date the return is due, including “the last automatic extension of time for filing that return to which the debtor [was] entitled, and for which request is timely made.”16

[10]

The phrase “date of that meeting” is somewhat ambiguous in § 1308(b)(1)(A) and (B). It may refer back to “that meeting” which the trustee may hold open under § 1308(b)(1); but the meeting that the trustee may hold open follows a phrase referring back to tax returns that are required to be filed “by the date on which the meeting of creditors is first scheduled.” To avoid the awkward image of a trustee holding open a meeting that is scheduled but that has not yet occurred, it would make sense to count the permissible hold-open periods in § 1308(b)(1)(A) and (B) from the date that a meeting of creditors actually occurs in the Chapter 13 case.

[11]

“Automatic” extension of time for filing a tax return is a term of art under tax law that will vary from state to state and may not exist at all under some state tax laws. For federal income tax purposes, “automatic extension of time” probably refers to 26 U.S.C. § 6081(a) and the four-month extension allowed by 26 C.F.R. § 1.6081-4.

[12]

Statutory authority for “the trustee” to “hold open” a meeting of creditors is a new concept. At this writing, the § 341 meeting of creditors is convened by the U.S. trustee and the U.S. trustee presides.17 The Chapter 13 trustee participates at the meeting of creditors. Though not specifically authorized by the Code, in many districts, the Chapter 13 trustee conducts meetings of creditors in Chapter 13 cases—sometimes without the physical presence of an assistant U.S. trustee.

[13]

But “the trustee” referenced in § 1308(b)(1) seems to be the Chapter 13 trustee, and this new Code section contemplates that the Chapter 13 trustee will “hold open” meetings of creditors in Chapter 13 cases for a reasonable period of time to allow debtors to file tax returns. There is no statutory authority for the U.S. trustee (or Bankruptcy Administrator) to perform this function. By statute, the Chapter 13 trustee now controls the scheduling of meetings of creditors when the trustee determines to hold open a meeting for the filing of tax returns.

[14]

What does it mean to “hold open” a § 341 meeting? Bankruptcy Rule 2003(e) contemplates that a meeting of creditors “may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice.”18 Section 1308(b) nowhere uses the word “adjournment.” Are “hold open” and “adjournment” the same thing? Can a Chapter 13 trustee hold open a meeting of creditors by announcement at the meeting of creditors without further written notice? This invites complications for parties in interest not present at the § 341 meeting. Memories of announcements at the meeting of creditors are not a reliable method for fixing the deadline for the mandated filing of tax returns under § 1308. There will be no public record of the date to which a § 341 meeting has been held open. A more formal procedure is needed when the trustee holds open a meeting of creditors in a Chapter 13 case.

[15]

Holding open meetings of creditors on any large scale is a dim prospect for Chapter 13 practice. Section 1308(a) will impact many Chapter 13 cases. If Chapter 13 trustees routinely hold open meetings of creditors to allow the filing of tax returns for the four years preceding the petition, there will be thousands of “open” meetings of creditors in thousands of Chapter 13 cases that are not progressing toward confirmation and distributions to creditors. One hundred twenty days or more after the meeting of creditors is a lifetime in a Chapter 13 case. The potential hold open period in § 1308(b) runs headlong into and through the accelerated schedule for confirmation hearings BAPCPA mandates in § 1324(b).19

[16]

The additional period to file a tax return that the trustee may provide by holding open the meeting of creditors is not the end of the § 1308 story. In § 1308(b)(2), BAPCPA authorizes the bankruptcy court to further extend “the filing period established by the trustee” for not more than 30 days for returns “described in paragraph (1)” and for a period “not to extend after the applicable extended due date for a return described in paragraph (2).”20 This extension by the bankruptcy court requires notice and a hearing and an order entered “before the tolling of any applicable filing period determined under this subsection.” The debtor must demonstrate by a preponderance of the evidence that the failure to file a return required by § 1308(b) is attributable to “circumstances beyond the control of the debtor.” There are strange things here.

[17]

First, there is no “paragraph (1)” or “paragraph (2)” for purposes of the cross-references in § 1308(b)(2)(A) and (B). It would be easy enough to call this a scrivener’s error, but then we have to divine what was meant by the nonexistent cross-references. The reference to paragraph (1) could be read as § 1308(b)(1)(A) and the reference to paragraph (2) could be read as § 1308(b)(1)(B). But this is not the only possible reading.

[18]

Read with this substitution, the court could extend the filing period established by the trustee for no more than 30 days after the 120 days after the date of the § 341 meeting under § 1308(b)(1)(A) with respect to any return that was past due at the Chapter 13 petition. For a return that was not past due at the petition under § 1308(b)(1)(B), the court could extend the filing period established by the trustee no further than the maximum additional period that the trustee could have held open the meeting of creditors under § 1308(b)(1)(B)—the later of 120 days after the meeting of creditors or the date the return was due under the last automatic extension of time to which the debtor was entitled and for which an extension request is timely made.

[19]

This court-ordered additional time period for filing tax returns is only available after notice and a hearing, and the order must be “entered before the tolling of any applicable filing period determined under this subsection.” “Tolling” in this context is ambiguous. Before the tolling could mean before the end of an applicable filing period; or it could mean before an applicable filing period is annulled or changed, for example, by action of the trustee.21 This is not a silly word play. As detailed below,22 the potential penalty for missing a tax return filing deadline under § 1308 is mandatory dismissal or conversion of the Chapter 13 case.

[20]

If the debtor needs an extension of the hold open period fixed by the trustee for the filing of a tax return, the debtor must file a motion and the court must enter an order for further extension before some clearly recognizable deadline. Tolling in § 1308(b)(2) could be interpreted as the end of the “reasonable period of time” that the trustee holds open the meeting of creditors under § 1308(b)(1). This interpretation makes it particularly important that the “hold open” period is concretely fixed by the trustee either in a document or some other formal statement. An announcement by the trustee at the meeting of creditors will never appear in a court document and offers little certainty as a deadline for court action in § 1308(b)(2).

[21]

New § 1308 gives no clue to what “circumstances beyond the control of the debtor” are for purposes of court extension of time to file a tax return. One possibility might be tax documents that the debtor needs from a third party to complete an unfiled tax return. Section 1308 requires all state and federal tax returns for all taxable periods ending during the four years before of the petition. Some debtors will need significant time after the petition to satisfy this new duty. As the examples above demonstrate, every Chapter 13 case filed during the early months of a calendar year is a potential candidate for a held-open meeting of creditors. The filing of the Chapter 13 case itself will complicate the preparation of tax returns—if for no other reason, because of the gathering, filing and providing of many new documents under various provisions of BAPCPA.23 Any debtor coming into a Chapter 13 case who is behind on the filing of state or federal tax returns will have to act quickly to stay within the brief period allowable by the trustee and the even briefer additional period that can be ordered by the bankruptcy court.

[22]

Section 1308 ends with an enigmatic definition: “return” for purposes of this new section includes tax returns prepared pursuant to § 6020(a) and § 6020(b) of the Internal Revenue Code or similar state or local law.24 Tax returns under § 6020(a) of the IRC are returns prepared by the Secretary of the Treasury that are signed or otherwise adopted by the taxpayer and then received by the Secretary as the tax return for that person. Tax returns under § 6020(b) are returns prepared by the Secretary from information not necessarily supplied by the taxpayer that are filed “involuntarily” by the Secretary on behalf of the taxpayer—often signaling that the taxpayer has willfully or otherwise failed to file a return or filed a false or fraudulent return.

[23]

Section 1308(c) says that income tax returns filed by the Secretary under either scenario are filed returns for purposes of the debtor’s tax return filing responsibilities under § 1308(a) and (b). In other words, whether the debtor consents and participates or not, a tax return prepared by the Secretary of the Treasury or an analogous state official satisfies a § 1308 filing requirement. For other bankruptcy purposes, the Bankruptcy Code makes a distinction between returns filed by the Secretary under § 6020(a) and § 6020(b).25

[24]

That § 1308 only addresses the filing of tax returns with tax authorities does not end the importance of this new section. As demonstrated below,26 other new tax return duties imposed by BAPCPA dovetail with § 1308 to require Chapter 13 debtors to provide to the trustee and to timely requesting creditors and to file with the court some tax returns that are unfiled at the petition.

[25]

Section 1308 comes into play again to affect the timely filing of proofs of claim by governmental entities under § 502(b)(9). Discussed elsewhere,27 § 502(b)(9) was amended by BAPCPA to allow the timely filing of proofs of claims in Chapter 13 cases by governmental units “for a tax with respect to a return filed under section 1308” until 60 days after the date on which the return was filed as required.28 As the discussion above demonstrates, the deadline for filing a § 1308 tax return in a Chapter 13 case could extend to dates beyond 150 days after the meeting of creditors. The timely filing of tax claims by governmental units will slide accordingly.


 

1  See 11 U.S.C. §§ 521(e), 521(f), 521(g) and 521(j), discussed in §§ 389.1 [ New Tax Return Duties—In General ] § 42.4  Tax Return Duties—In General, 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors and 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

2  11 U.S.C. § 1308.

 

3  See 11 U.S.C. § 521(e)(2)(A)(i) and (ii), discussed in § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

4  It is probably a safe assumption that the phrase “date first set for the first meeting of creditors” in 11 U.S.C. § 521(e)(2)(A)(i) means the same thing as “the date on which the meeting of creditors is first scheduled to be held under section 341(a)” in 11 U.S.C. § 1308(a). There is discussion of this issue in § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

5  This conclusion draws from cases interpreting Bankruptcy Rules 4004 and 4007, which time the deadline for objecting to discharge and dischargeability from the “first date set for the meeting of creditors under section 341(a).” See Fed. R. Bankr. P. 4004(a), 4007(c). See, e.g., Torrez v. Dickinson (In re Dickinson), 242 F.3d 388 (10th Cir. 2000) (table decision); Kelly v. Gordon (In re Gordon), 988 F.2d 1000 (9th Cir. 1993); Peerless Ins. Co. v. Miller (In re Miller), 228 B.R. 399 (B.A.P. 6th Cir. 1999).

 

6  11 U.S.C. § 1308(a).

 

7  See § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

8  See § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

9  See § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns. See, e.g., In re Barajas, No. 06-10598-B-13, 2006 WL 3254483 (Bankr. E.D. Cal. Nov. 8, 2006) (Section 1308(a) requires debtors to file four years of tax returns with “appropriate tax authorities” not later than the day before the meeting of creditors; § 1308(a) tax returns are not filed with bankruptcy court and § 1307(e) permits but does not require dismissal if all tax returns are not filed. In absence of evidence that debtors did not file returns with taxing authorities, it is not appropriate to dismiss Chapter 13 case.).

 

10  See § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

11  See § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns.

 

12  11 U.S.C. § 1308(b)(1)(A), (B).

 

13  354 B.R. 258 (Bankr. E.D. Wis. 2006).

 

14  354 B.R. at 260–64.

 

15  11 U.S.C. § 1308(b)(1)(A).

 

16  11 U.S.C. § 1308(b)(1)(B).

 

17  See 11 U.S.C. § 341(a) and Fed. R. Bankr. P. 2003(a), (b).

 

18  Fed. R. Bankr. P. 2003(e).

 

19  See 11 U.S.C. § 1324(b), discussed in § 502.1 [ Timing of Hearing on Confirmation ] § 115.2  Timing of Hearing on Confirmation after BAPCPA.

 

20  11 U.S.C. § 1308(b)(2).

 

21  See Webster’s New 20th Century Dictionary 1919 (2d ed. 1983).

 

22  See § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns.

 

23  See the list in § 387.1 [ New Filing Requirements and Other Duties: A List ] § 42.1  Filing Requirements and Other Duties: A List.

 

24  11 U.S.C. § 1308(c).

 

25  See, e.g., the hanging sentence added by BAPCPA at the end of 11 U.S.C. § 523(a) which includes returns under § 6020(a) but excludes returns made pursuant to § 6020(b) from the meaning of “return” for purposes of the dischargeability of debt under § 523(a).

 

26  See 11 U.S.C. §§ 521(f) and 521(e)(2)(A)(ii), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

27  See § 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.

 

28  See 11 U.S.C. § 502(b)(9), discussed in § 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.