§ 113.4 — All Tax Returns Must Be Filed

Revised: March 28, 2006

[1]

New § 1325(a)(9) conditions confirmation that the debtor “has filed all applicable federal, state and local tax returns as required by section 1308.” Detailed elsewhere,1 new § 1308 requires Chapter 13 debtors, not later than the day before the first scheduled meeting of creditors, to file with appropriate taxing authorities all tax returns for all taxable periods ending during the four-year period before the petition. Section 1308 applies to all “required” tax returns even if a required tax return is not yet due at the petition. Section 1308 includes the possibility that the meeting of creditors will be “held open” by the trustee for the debtor to file required tax returns.

[2]

New § 1325(a)(9) makes no distinctions among tax returns “required” by § 1308. Arguably, a Chapter 13 plan cannot be confirmed if a “required” tax return has not been filed, without regard to whether that required tax return is due. It will be common in Chapter 13 cases for debtors to be “required” to file tax returns that are not yet due. For example, in every Chapter 13 case filed before April 15 of the tax year, most individual debtors will be “required” to file federal and state tax returns for the previous tax year, but those returns will not yet be due.2 Chapter 13 trustees may or may not routinely “hold open” meetings of creditors to allow additional time for debtors to file tax returns that are required but not yet due.

[3]

But the question remains: can a plan be confirmed in a Chapter 13 case when a tax return is “required” but not yet due at the time of confirmation? For example, can a plan be confirmed in a Chapter 13 case filed in January 2006 when the 2005 tax return is “required” but not due until April 17, 2006? A technical reading of new § 1325(a)(9) would not allow confirmation under these circumstances—an outcome that is at least silly if not an outright frustration of the interests of all concerned.

[4]

New § 1324(b) requires that the hearing on confirmation in a Chapter 13 case be held no later than 45 days after the date of the § 341 meeting of creditors.3 New § 1308(b) permits a Chapter 13 trustee to hold open the meeting of creditors for 120 days or more to allow a reasonable period of time for the debtor to file required tax returns that are unfiled.4 These sections may collide with new § 1325(a)(9) when the debtor hasn’t filed a required tax return, the trustee has held open the meeting of creditors to permit the filing of the required return but the hearing on confirmation must be held before the required return is filed. It is unfortunately possible to interpret these three sections to prohibit the confirmation of any Chapter 13 plan when a required tax return remains unfiled more than 45 days after the date of the meeting of creditors.

[5]

The message for debtors is clear: file tax returns for all prepetition tax years before the Chapter 13 petition, if possible, but certainly no later than one day before the meeting of creditors consistent with § 1308. If there is a required tax return for a prepetition tax year that is due or will become due after the filing of the petition, file that tax return as quickly as the information can be gathered to avoid the trap that may result if the required return is not filed within 45 days after the meeting of creditors. If the return can’t be filed within 45 days of the § 341(a) meeting, the debtor should move to reschedule the hearing on confirmation.

[6]

There is a troubling, uncodified new condition for confirmation that relates to the filing of tax documents in Chapter 13 cases. Section 1228(b) of S. 256 states: “The court shall not confirm a plan of reorganization in the case of an individual under chapter 11 or 13 of title 11, United States Code, unless requested tax documents have been filed with the court.”5

[7]

This section of BAPCPA did not purport to amend any existing section of the Bankruptcy Code, and as a result, it is not codified in Title 11. “Requested tax documents” is not a defined term. There are quite a number of Code sections after BAPCPA that authorize a request for tax documents in Chapter 13 cases.6

[8]

For example, under new § 521(f), “at the request of the court, the United States trustee or any party in interest,” a Chapter 13 debtor must file with the court “at the same time filed with the taxing authority” a copy of each federal income tax return for each tax year ending while the Chapter 13 case is pending.7 Under new § 521(e)(2)(A)(ii), a Chapter 13 debtor must provide “to any creditor that timely requests” a copy (or transcript) of the tax return for the most recent tax year ending immediately before the commencement of the Chapter 13 case for which a federal income tax return was filed.8

[9]

There are “requested tax documents” that are filed with the court and there are “requested tax documents” that are provided to the trustee or to a timely requesting creditor but not filed with the court. The uncodified condition on confirmation in § 1228(b) of BAPCPA addresses only requested tax documents that were supposed to be filed with the bankruptcy court.

[10]

It is not clear how anyone will know whether all requested tax documents have been filed in every Chapter 13 case that is ready for confirmation. The condition on confirmation in new § 1325(a)(9) that the debtor has filed all applicable federal, state and local tax returns required by § 1308 addresses the filing of tax returns with taxing authorities, not the filing of tax documents with the bankruptcy court. There is no provision of the Interim Rules that requires a certificate or statement by the debtor that requested tax documents have been filed with the court. Prophylactically, debtors’ counsel might consider including a statement in the plan that all requested tax documents have been filed consistent with § 1228(b) of BAPCPA.


 

1  See § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

2  See § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors for further discussion of this issue.

 

3  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.

 

4  11 U.S.C. § 1308(b), discussed in §§ 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors, 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns and 398.1 [ Holding Open the Meeting of Creditors ] § 43.7  Holding Open the Meeting of Creditors.

 

5  Pub. L. No. 109-8, § 1228(b), 119 Stat. 23 (2005).

 

6  See § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

7  See 11 U.S.C. § 521(f), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

8  11 U.S.C. § 521(e)(2)(A)(ii), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.