# Opposition Brief — Waugh v. Internal Revenue Service, 118 S. Ct. 80 (1997) (No. 96-2036)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0958%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1997

## Text

» TILED
ee 2) 2

In the Supreme Court of the Une Snes

OCTOBER TERM, 1996

WILLIAM WINSTON WAUGH, PETITIONER
v.

INTERNAL REVENUE SERVICE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

WALTER DELLINGER
Acting Solicitor General
LORETTA C. ARGRETT
Assistant Attorney General
GARY D. GRAY
SARA S. HOLDERNESS
Attorneys
Department of Justice
Washington, D.C. 20520-0001
(202)514-2217

QUESTION PRESENTED

Whether the three-year priority period established
in Section 507(a)(8)(A)(i) of the Bankruptcy Code runs
during the pendency of a bankruptcy proceeding.

(I)

TABLE OF CONTENTS

Page
I ld ace taal siealionchnidda lah bactdbbsiasiennieaandnnaniia 1
EIS TESTS AY an) OnE TOE ON De TEEN ]
AEE En a a a ee Ee 2
I Sits ail icaal ash aenhiaehiamipiinnesanianntindatthennimannaasnenes 6
I a peuiiaubuanshausnnnns 13
TABLE OF AUTHORITIES
Cases:

Acosta v. IRS, 184 B.R. 544 (W.D. Tenn. 1995) ..... 10

Bowling, In re, 147 B.R. 383 (Bankr. E.D. Va.
SE niin hihntcediitiddinadldidansbsibaeaiins Anediesanenghiaitbntnneivaisees il

Brickley, In re, 70 B.R. 113 (Bankr. 9th Cir. 1986) .... 10
Bryant, In re, 120 B.R. 983 (Bankr. E.D. Ark.

SS pga as er eee ee ee ae PN 11
Carter, In re, 74 B.R. 613 (Bankr. E.D. Pa. 1987) .... 11
Cowart, In re, 199 B.R. 799 (Bankr. M.D. Fla.

REESE CSAP EE RPP RRC Ese tae eS SP er 10
Darden, In re, 202 B.R. 715 (Bankr. E.D. Va. 1996) . 10
Davidson, In re, 120 B.R. 777 (Bankr. D.N.J.

a eneniben 11
Deitz, In re, 116 B.R. 792 (D. Colo. 1990) ........00..0..... 10
DiCamillo, In re, 186 B.R. 59 (Bankr. E.D. Pa.

a a os clednmnobonsbente 10
Eysenbach, In re, 183 B.R. 365 (W.D.N.Y. 1995) ...... 10
Florence, In re, 115 B.R. 109 (Bankr. S.D. Ohio

ESS AE Re A a 11

Gore, In re, 182 B.R. 293 (Bankr. N.D. Ala. 1995) .... 11
Harris, In re, 167 B.R. 680 (Bankr. M.D. Fla.

a oiviimenonantnics 10
Jones, In re, 177 B.R. 541 (Bankr. N.D. Ohio 1994) .. 11
Linder, In re, 139 B.R. 950 (D. Colo. 1992) ............... 10

(III)

IV

Cases—Continued: Page

Macko, In re, 193 B.R. 72 (Bankr. M.D. Fla. 1996) .. 11
McMillan, In re, 204 B.R. 835 (Bankr. M.D. Ga.

RUD. nsepceitnebisintieeuastnsadipiaaduinndamdadsddtintaiininttheiuactalces 10
Molina, In re, 99 B.R. 792 (S.D. Ohio 1988) .............. 10
Montoya, In re, 965 F.2d 554 (7th Cir. 1992) ........... 10, 11
Pastula, In re, 203 B.R. 941 (Bankr. M.D. Fla.

ED sisasinsonciieeeieeabeabnendinaa Dee dedsdianseceneses 11
Pepper v. Litton, 308 U.S. 295 (1939) ..................068 7
Quenzer, In re, 19 F.3d 163 (5th Cir. 1993) .............. 11, 12
Quinlan, In re, 107 B.R. 300 (Bankr. D. Colo.

| Ee, Den SUSE: Pee NG HR PONS ae SONS ON EE Se 11
Richards, In re, 994 F.2d 763 (10th Cir. 1993) ....... 7&6

10, 11, 12
Ringdahl, In re, Bankr. L. Rep. (CCH) 4 74,082

(Hemmer. TEED. Fon; SOD, TOG ED vncaceicsestsnscsccccsnsieces 11
Ross, In re, 130 B.R. 312 (Bankr. D. Neb. 1991) ....... 11
Shabazz, In re, 206 B.R. 116 (Bankr. E.D. Va.

SOD: cninicsunienssayariiciticiasicanbladagabesabasadaiaietisavineiaaaicmagens 10

Shedd, In re, 190 B.R. 692 (Bankr. M.D. Fla. 1996) . 10
Solito v. United States, 172 B.R. 837 (W.D. La.

BED vc cacstinssdsteccsecebobanteeaabtaeilanindetaaenatiadiiaiesedds 10
Stoll, In re, 132 B.R. 782 (Bankr. N.D. Ga. 1990) ..... 11
Taylor, In re, 81 F.3d 20 (3d Cir. 1996) ................44 10, 11
Teeslink, In re, 165 B.R. 708 (Bankr. S.D. Ga.

BOD ockisnkecicccrcsbintiiadealaittnabamdiaaicblidarnleisiedaons 10-11
Tibaldo, In re, 187 B.R. 673 (Bankr. C.D. Cal.

SUSI inhicsncnsiteieddatacinaidanaiseehantnndaniadineiininabietnmeiie 10

Turner, In re, 182 B.R. 317 (1995), adhered to on
reconsideration, 195 B.R. 476 (Bankr. N.D. Ala.

OID x sitonerisincinennibneniadealaianiniabmnbpeeilianeteatnntinies 11
United States v. Energy Resources Co., 495 U.S.

GOR CII eiveistiite ie iininnimine 7
United States v. Ron Pair Enterprises, Inc.,

GD UT FE, Fe Ce sated tincsesseetnitncintiasisnsncnesine 7, 12
West, In re, 5 F.3d 423 (9th Cir. 1993), cert. denied,

GEE Sia, Se Se ei iecicce siantenstctecensetainesinieveninns 10, 11

Ee

Cases—Continued: Page
West v. United States, 511 U.S. 1081 (1994) ............. 3
Wise, In re, 127 B.R. 20 (Bankr. E.D. Ark. 1991) ....... 11

Statutes:

Bankruptcy Code, 11 U.S.C. 101 et seq.:
Ch. 1, 11 U.S.C. 101 et seq:

Be Be IEE Sisnaindendanvbnnancsditninncieiniianconaans 4,114, 2
Pe Fe Ak UE sadeeda tien cacateniiaeneianicasiuainineibneyenbinipiniions 12
PE Renee IE ninhicncavknnsoreninebacncvedinnenesinte 6, 9, 11, 12
Ch. 3, 11 U.S.C. 301 et seq.:
a I zak ih alnidcdidnsansh pec oneamniecanensaamansnionses 2,8
Be eG CED irerevestbinibonseuchinicasnimncnbniieientnis 2
Ch. 5, 11 U.S.C. 501 et seq.:
ER Re EE Daaensnidinadancedvinieiicdineptictnvdnnanianiiciiinine 12
11 US.C. S0TaXTHANI) (1988) ...................eceeee. 3
EE Eres eI siicaleidek inndbitdiiveanaseimnnssceniinianiinnes 6
OF Rees CIEE tatentlsdovecenenacceasarnsian 5, 10, 11, 12
RR UB. BTR) nsecccssncansesssccnseosens 3, 4, 6, 7, 8
Be Gree HED nipictinsccnsnsictacinccnrprnasiopconente 3
CAR. Fi Ee Rae I TIE, eiietspcinninsinsstciassincn setannneinsonicio 2, 3,8
AF. By Ee Sites BO eID, nideentecnnsisivncesnsvemnensnes 2
mks Ty: 2 eo Ses SE TEED. Nelterctoesennesesdvanskunnuncvins 2,8

Bankruptcy Reform Act of 1994, Pub. L. No. 103-394,
108 Stat. 4106:

Fo Fe | | . Senne en en 3
as Be Ps AI ainsi tn dcsecraestccintioniainsninpsistctntenaii 3
Bankruptcy Tax Act of 1980, Pub. L. No. 96-589,
et NE MEINE ssa nctepnacrncsdaieh be cceuinnuitdadsehtecmnadnnannes gy
Internal Revenue Code (26 U.S.C.):
BE dich eteniasdinti dein apadiitiatialicuabiaengitcdlsabiiedientenduanians 6, 11, 22
Ie IIIT sissssLisossaienceteendledabhenaeiusdedidetd ltendataishhowehiniionindatialasaaeal 8, 9
ED - savndiscsisvebiceisaideeicvahcnceaidieminananininiabeibainanaas ata 6, 9
Miscellaneous:
S. Rep. No. 1158, 89th Cong., 2d Sess. (1966) ............ 8
S. Rep. No. 989, 95th Cong., 2d Sess. (1978) .............. 8, 9

S. Rep. No. 1035, 96th Cong., 2d Sess. (1980) ............ 9

In the Supreme Court of the Giuted States

OCTOBER TERM, 1996

No. 96-2036

WILLIAM WINSTON WAUGH, PETITIONER
Vv.

INTERNAL REVENUE SERVICE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. Al-
A10) is reported at 109 F.3d 489. The opinion of the
district court (Pet. App. Al1-A27) is unofficially
reported at 76 A.F.T.R.2d 95-7059. The opinion of the
bankruptcy court (Pet. App. A28-A34) is unofficially
reported at 75 A.F.T.R.2d 95-2601.

JURISDICTION

The judgment of the court of appeals was entered on
March 26, 1997. The petition for a writ of certiorari
was filed on June 24, 1997. The jurisdiction of this
Court is invoked under 28 U.S.C. 1254(1).

(1)

STATEMENT

1. a. On April 15, 1988, petitioner filed his federal
income tax return for the taxable year 1987 but failed
to pay the tax due. On July 1, 1988, petitioner filed a
petition for relief under Chapter 13 of the Bankruptcy
Code. The bankruptcy case was subsequently con-
verted to proceedings under Chapter 11. The bank-
ruptcy court initially confirmed petitioner’s Chapter
11 plan but later revoked it (because petitioner failed
to make child support and alimony payments in
accordance with the plan) and dismissed petitioner’s
case. Petitioner appealed to the district court from
the order of revocation and dismissal. Petitioner was
granted a stay pending that appeal. From July 1, 1988
(the date that petitioner filed his petition) until
February 6, 1991 (the date the district court affirmed
the bankruptcy court’s order dismissing the bank-
ruptcy case), the government was prevented from
taking any action to collect petitioner’s 1987 tax
liabilities by (i) the automatic stay provided by
Section 362 of the Bankruptcy Code (11 U.S.C.
362(a)(6)), (ii) the provisions of the confirmed re-
organization plan and (ili) the stay pending appeal
from the order of dismissal. Pet. App. A2.

b. On May 9, 1991, petitioner filed a second petition
for relief, this time under Chapter 7 of the Bank-
ruptcy Code. Under the provisions of this Chapter,
he was granted a discharge on August 27, 1991. Pet.
App. A2.

2. On April 2, 1994, petitioner filed his income tax
return for 1998. He directed that his income tax
refund of $11,019 for that year, plus an additional cash
payment of $847 that he remitted with his return, be
applied by the Internal Revenue Service against his

outstanding 1989 tax liability. The Service, however,
instead applied the 1993 tax refund and the cash
remittance to petitioner’s still unsatisfied 1987 tax
liability. The Service also sent notices advising peti-
tioner of the government’s intent to levy on his assets
to recover his remaining unpaid income tax liabilities
for 1987 ($157,631.36) and 1989 ($15,620.52). Pet. App.
A2.

3. In response to these notices of intent to levy,
petitioner filed a complaint in bankruptcy court seek-
ing a declaration that his 1987 tax liability had been
discharged in his Chapter 7 case. Pet. App. A2-A3.

a. Under Sections 507(a)(8)(A)(i) and 523(a)(1)(A) of
the Bankruptcy Code, an income tax obligation of a
debtor is entitled to priority status and is not
dischargeable if the last day on which the tax return
could have been filed falls within three years of
the date of the filing of the bankruptcy petition. 11
U.S.C. 507(a)(8)(A)(i), 523(a)(1)(A).’ Petitioner as-
serted, however, that, because his 1987 tax return was
due on April 15, 1988—a date more than three years
prior to the filing of his Chapter 7 petition on May 9,
1991—his income tax liability for 1987 was not enti-
tled to priority status in ‘the Chapter 7 proceeding
under Section 507(a)(8)(A)(i). If, as petitioner claimed,
the tax liability was not entitled to priority status in
the Chapter 7 proceeding, it would have been within
the scope of the discharge that he received in that
proceeding. Pet. App. A2.

1 Effective October 22, 1994, Section 507(a)(7)(A)(i) was
renumbered Section 507(a)(8)(A)(i). Bankruptcy Reform Act
of 1994, Pub. L. No. 103-394, §§ 304(c)(2), 702(b), 108 Stat. 4132,
4150. The provision was otherwise unchanged. Consistent with
the decisions below, we use the new section number throughout
this brief.

The government contended, however, that the
three-year priority period of Section 507(a)(8)(A)(i)
was extended by the period of time that the govern-
ment was prevented by petitioner’s first bankruptcy
case from collecting his 1987 taxes. The priority
period therefore would not have expired before peti-
tioner filed his second bankruptcy case, and those
taxes therefore would not have been within the scope
of the discharge received in that proceeding. Pet.
App. A3.

b. The bankruptcy court agreed with the govern-
ment’s position. The court stated that a “literal
reading and ‘plain meaning’ approach to the Bank-
ruptcy Code, seems to indicate that [an] income tax
liability of a debtor who has filed a return, which is
last due more than three years before the filing of a
bankruptcy case, is not covered by the nondischarge-
ability provision of 11 U.S.C. § 523(a)(1); even where
the same tax debt was involved in an earlier bank-
ruptcy case as a nondischargeable tax liability falling
within the three year period” (Pet. App. A31). The
court noted, however, that nearly every reported
decision holds that the “running of the tax priority
periods fixed in 11 U.S.C. § 507(a)(8)(A) are [sic] tolled
during pendency of bankruptcy proceedings in which
the IRS is stayed from collection efforts to secure
payment of the tax” (id. at A31-A32). The court con-
cluded that these decisions, “clearly driven by percep-
tions of Congressional intent, Bankruptcy Code pur-
pose, and underlying public policy,” are correct and
“reflect a near universal agreement on the state of
the law” (id. at A32-A33). Applying the holdings of
these cases to the facts in the present case, the court
held that “[djebtor’s income tax liability for the 1987

5

taxes was not dischargeable in his May 9, 1991,
Chapter 7 bankruptcy case” (id. at A33).

4. The district court affirmed. The court stated
that the literal terms of the applicable statutes do not
suspend the running of the priority periods of Section
507(aX(8)(A) during a prior bankruptcy. The court —
held, however, that this was the “rare case” in which
it was necessary to go beyond the literal language of
the statutes (Pet. App. A19). The court explained that
under a purely literal construction of the statute,
debtors would be able to avoid tax obligations simply
by dismissing their first bankruptcy petition after
the priority periods of Section 507(a)(8)(A) expired
and then filing a second petition shortly thereafter
(Pet. App. A19). The court emphasized that, if the pri-
ority periods ran during a pending bankruptcy pro-
ceeding, the government would not be given the time
periods to collect tax liabilities that Congress clearly
sought to provide (id. at A21). The court noted that
the legislative history of these provisions —“militates
directly against the improperly narrow reading sug-
gested by [petitioner]” (id. at A22). Because peti-
tioner’s argument “would operate to defeat the pur-
pose of Congress,” the court concluded that “[t]he
proper result is that the filing of a bankruptcy
petition suspends the running of the three-year col-
lection period in determining tax claim priority
status, pursuant to 11 U.S.C. § 507(a)(8)(A)i)” (id. at
A26).

5. The court of appeals affirmed. The court ac-
knowledged that the “Bankruptcy Code does not con-
tain any provisions which explicitly suspend the
priority period of section 507(a)(8)(A)(i) while a debtor
is engaged in bankruptcy proceedings” (Pet. App. A6).
After examining the structure and history of these

provisions, however, the court agreed with the
district court that this was the “rare case” in which
the plain meaning of legislation should not be applied
in a manner that would frustrate the plain object of
the statute to afford the government a three-year
period for the collection of taxes (id. at A7-A8). The
court therefore concluded that “the three-year prior-
ity period of section 507(a)(8)(A)(i) is suspended by 11
U.S.C. § 108(c) and 26 U.S.C. § 6503(b) and (h), for the
time that the automatic stay prevents the IRS from
collecting outstanding tax debts” (id. at A8).

ARGUMENT

The decision of the court of appeals is correct and
does not conflict with any decision of this Court or
any other court of appeals. Further review is there-
fore not warranted.

1. Petitioner contends (Pet. 5-9) that the decision
of the court of appeals unjustifiably disregards the
language of Sections 108(c) and 507(aX(8)(A\i) of the
Bankruptcy Code and Section 6503 of the Internal
Revenue Code. Petitioner asserts (i) that Section
507(aX8 Ai) is silent regarding any tolling of the
three-year priority period during the pendency of a
prior bankruptcy proceeding, (ii) that Section 108(c)
of the Bankruptcy Code only extends nonbankruptcy
law limitation periods, not the priority periods found
in Section 507(aX8), and (iii) that, while Section
6503(h) of the Internal Revenue Code suspends the
statute of limitations for the assessment or collection
of taxes when the government “is prohibited by rea-
son of [a bankruptcy] case” from assessing or collect-
ing taxes (26 U.S.C. 6503(h)), that statute does not
expressly apply to the three-year priority period of
Section 507(aX(8)A\i). Petitioner further claims that

7

this is not one of those “rare cases [in which] the
literal application of a statute will produce a result
demonstrably at odds with the intentions of its
drafters” (United States v. Ron Pair Enterprises,
Inc., 489 U.S. 235, 242 (1989)).

As the Tenth Circuit concluded in Jn re Richards.
994 F.2d 763 (1993), however, these statutory provi-
sions are not alone controlling. Authority to suspend
the three-year priority period of Section 507(a)(8)(A)
(i) can be found in a different statutory provision,
Section 105(a) of the Bankruptcy Code. See 994 F.2d
at 765. That Section provides bankruptcy courts with
the authority to issue orders “necessary or appropri-
ate to carry out the provisions of [the Bankruptcy
Code,}] * * * to enforce or implement court orders or
rules, or to prevent an abuse of process.” 11 U.S.C.
105(a). Applying Section 105(a) in United States v.
Energy Resources Co., 495 U.S. 545, 549 (1990), this
Court noted the “traditional understanding” that
bankruptcy courts are courts of equity. See also
Pepper v. Litton, 308 U.S. 295, 303-304 (1939). The
orders in this case—suspending the three-year prior-
ity period of Section 507(a)(8)(A)(i) during petitioner’s
first bankruptcy case—represent an appropriate ap-
plication of this equitable power. See 994 F.2d at 765.

As the court of appeals explained (Pet. App. A9-
A10), the suspension of the three-year priority period
in this case fulfills the statutory design of providing a
reasonable time for the government to collect taxes
and preventing debtors from escaping liability by
shielding their assets in repetitive bankruptcies. As
a result of petitioner’s first bankruptcy proceeding,
the government was precluded from collecting peti-
tioner’s 1987 taxes (i) by the automatic stay provi-
sions of Section 362, (ii) by the provisions of peti-

- 8

tioner’s confirmed plan of reorganization, and (iii) by
the stay that petitioner obtained pending his appeal
from the order revoking his plan and dismissing his
case. Instead of the three years that Congress con-
templated in Section 507(a)(8)(A)(@i) that the govern-
ment would have for collecting taxes, petitioner’s
repetitive bankruptcy filings gave the government
only 169 days to do so: (i) the period of 77 days from
April 15, 1988, the date the 1987 return was due to be
filed, to July 1, 1988, the date the Chapter 13 petition
was filed, and (ii) the period of 92 days from February
6, 1991, the date the district court affirmed the bank-
ruptcy court’s order of revocation and dismissal, to
May 9, 1991, the date the Chapter 7 petition was filed.
Suspending the priority period for collecting taxes
under Section 507(a)(8)(A)(i) during petitioner’s ini-
tial bankruptcy case was necessary to ensure that the
government was not deprived of the full benefit of the
three years that Congress granted for collection
(Pet. App. A9-A10). Accord, In re Richards, 994 F.2d
at 765; S. Rep. No. 989, 95th Cong., 2d Sess. 14 (1978)
(“the tax collector * * * should not lose taxes which
he has not had reasonable time to collect or which the
law has restrained him from collecting”); S. Rep. No.
1158, 89th Cong., 2d Sess. 3 (1966) (excepting priority
taxes from discharge would “discourage recourse to
bankruptcy as a facile device for evading tax obliga-
tions”).” As the court explained in In re Richards,

2 In several related provisions, Congress has evidenced its
clear intent to afford the government an opportunity to collect
taxes unimpeded by intervening bankruptcy cases. Section
6503(b) of the Internal Revenue Code was already in effect
when the Bankruptcy Code was enacted in 1978. It suspends
any limitations on the time in which the government may
collect taxes during the period that the assets of the taxpayer

9

994 F.2d at 765, “use of the equitable authority in 11
U.S.C. § 105(a) [to deprive debtors of unintended bene-
fits from repetitive bankruptcy filings] is not incon-
sistent with any specific provision of the Bankruptcy
Code, and * * * is consistent with the underlying
philosophy of the Bankruptcy Code.”

The court of appeals was also correct in noting that
acceptance of petitioner’s contrary argument—under
which the three-year priority period would continue
to run during a prior bankruptcy proceeding—would
facilitate schemes of tax avoidance (Pet. App. Al0). A
debtor could avoid paying his tax debt by filing a
petition that stayed collection of taxes, then dismiss-
ing his bankruptcy petition after the three-year pri-

are in the custody or control of any court. See 26 U.S.C.
6503(b). When the Bankruptcy Code was enacted, Congress
specified that nonbankruptcy statutes of limitations (such as
those contained in the Internal Revenue Code) are suspended
until the automatic stay is lifted. 11 U.S.C. 108(c). This provi-
sion is intended to “minimize the administrative problems
governmental tax authorities face, or may face, in collecting
taxes in bankruptcy proceedings.” S. Rep. No. 989, supra, at
14-15.

Shortly after the Bankruptcy Code was enacted, Congress
added Section 6503(h) to the Internal Revenue Code. Bank-
ruptey Tax Act of 1980, Pub. L. No. 96-589, § 6(a), 94 Stat.
3389. That Section specifically tolls the statute of limitations on
assessment and collection of taxes while bankruptcy proceed-
ings are pending. 26 U.S.C. 6503(h). “{I]f the * * * Internal
Revenue Service is prohibited for a period of time by reason of
a bankruptcy case from assessment or collection of tax (for
example, because of the automatic stay under new 11 U.S. Code
sec. 362(a)(6)), The running of the period of limitations is sus-
pended, for assessment, for the prohibition period and for 60
days thereafter; and for collection, for the prohibition period
and for six months thereafter.” S. Rep. No. 1035, 96th Cong.,
2d Sess. 50-51 (1980).

10

ority period expired and then (as petitioner did in this
case) filing a new petition shortly thereafter. See
also In re West, 5 F.3d 423, 426 (9th Cir. 1993), cert.
denied, 511 U.S. 1081 (1994); In re Montoya, 965 F.2d
554, 556 (7th Cir. 1992). As the Third Circuit stated
in In re Taylor, 81 F.3d 20, 25 (1996), Congress “did
not intend to leave a loophole for debtors to engage in
tax avoidance.” See also Jn re Molina, 99 B.R. 792,
795 (S.D. Ohio 1988) (“Congress did not intend for a
taxpayer to be able to escape liability by protecting
his assets in a bankruptcy proceeding until the stat-
ute of limitations expired.”).

2. a. For these reasons, the courts of appeals have
(with only one, limited exception) consistently con-
cluded that the priority periods set forth in Section
507(aX(8A) are suspended during the pendency of a
prior bankruptcy proceeding. See Pet. App. A8-A9; Jn
re Taylor, 81 F.3d at 25; In re West, 5 F.3d at 426; In
re Richards, 994 F.2d at 765; In re Montoya, 965 F.2d
at 556.° In reaching this conclusion, however, the
courts have applied different analyses.

The lower courts have also generally agreed with this
conclusion. See, e.g., Acosta v. IRS, 184 B.R. 544, 547 (W.D.
Tenn. 1995); In re Eysenbach, 183 B.R. 365, 368 (W.D.N.Y.
1995); Solito v. United States, 172 B.R. 837, 840 (W.D. La.
1994); In re Linder, 139 B.R. 950, 952-953 (D. Colo. 1992); Jn re
Deitz, 116 B.R. 792, 794 (D. Colo. 1990); In re Molina, 99 B.R.
792, 795 (S.D. Ohio 1988); In re Brickley, 70 B.R. 113, 116
(Bankr. 9th Cir. 1986); Jn re Shabazz, 206 B.R. 116, 126 (Bankr.
E.D. Va. 1996); In re McMillan, 204 B.R. 835, 837-838 (Bankr.
M.D. Ga. 1996); In re Darden, 202 B.R. 715, 717 (Bankr. E.D.
Va. 1996); In re Cowart, 199 B.R. 799, 800 (Bankr. M.D. Fla.
1996); In re Shedd, 190 B.R. 692, 694 (Bankr. M.D. Fla. 1996);
In re Tibaldo, 187 B.R. 673, 676 (Bankr. C.D. Cal. 1995); Jn re
DiCamillo, 186 B.R. 59, 62 (Bankr. E.D. Pa. 1995); Jn re
Harris, 167 B.R. 680, 683 (Bankr. M.D. Fla. 1994); Jn re

11

Some courts, like the court of appeals in this case,
have held that a proper basis for suspending the prior-
ity periods of Section 507(a)(8)(A) results from apply-
ing Section 108(c) of the Bankruptcy Code, in con-
junction with Section 6503 of the Internal Revenue
Code, to achieve the clear legislative intent to allow a
three-year period unobstructed by any bankruptcy
stay of collection. See, e.g., In re Taylor, 81 F.3d at
22-24; In re West, 5 F.3d at 426-427: In re Montoya,
965 F.2d at 557-558. Other courts have relied more
directly on the conclusion that the authority to sus-
pend the priority period of Section 507(a)(8)(A) stems
from the equitable powers of the bankruptcy court
under Section 105(a) of the Bankruptcy Code. See,
e.g., In re Richards, 994 F.2d at 765; In re Jones, 177
B.R. 541, 543-544 (Bankr. N.D. Ohio 1994).

b. Contrary to petitioner’s contention (Pet. 4), the
decision in this case does not conflict with the deci-
sion of the Fifth Circuit in In re Quenzer, 19 F.3d 163
(1993). In that case, as here, the government did not

Teeslink, 165 B.R. 708, 711-712 (Bankr. S.D. Ga. 1994); In re
Bowling, 147 B.R. 383, 385 (Bankr. E.D. Va. 1992): In re
Ringdahl, Bankr. L. Rep. (CCH) 4 74,082, at 99,718 (Bankr.
M.D. Fla. June 5, 1991); In re Stoll, 132 B.R. 782, 785-786
(Bankr. N.D. Ga. 1990); In re Ross, 130 B.R. 312, 313 (Bankr.
D. Neb. 1991); In re Wise, 127 B.R. 20, 23 (Bankr. E.D. Ark.
1991); In re Bryant, 120 B.R. 983, 985 (Bankr. E.D. Ark. 1990):
In re Davidson, 120 B.R. 777, 787 (Bankr. D.N_J. 1990); In re
Florence, 115 B.R. 109, 112-113 (Bankr. S.D. Ohio 1990); In re
Quinlan, 107 B.R. 300, 301 (Bankr. D. Colo. 1989); Jn re Carter,
74 B.R. 613 (Bankr. E.D. Pa. 1987); contra In re Pastula, 203
B.R. 941, 945-948 (Bankr. E.D. Mich. 1997); In re Macko, 193
B.R. 72 (Bankr. M.D. Fla. 1996); In re Turner, 182 B.R. 317
(1995), adhered to on reconsideration, 195 B.R. 476 (Bankr.
N.D. Ala. 1996); In re Gore, 182 B.R. 293, 298-299 (Bankr. N.D.
Ala. 1995).

— i

12

contend that the literal terms of Section 108(c) of the
Bankruptcy Code and Section 6503 of the Internal
Revenue Code tolled the priority periods of Section
507(a)(8)(A). The government contended instead that
suspension of the priority period was a_ proper
exercise of the court’s authority under Section 105(a)
of the Bankruptcy Code. The Fifth Circuit declined
to consider that argument, however, because the
government had not raised it in the lower courts. 19
F.3d at 165. Because the government had relied
exclusively on Section 105(a) on that appeal, the Fifth
Circuit merely adopted the government’s concession
that the literal terms of Sections 108, 507 and 6503 do
not themselves compel the suspension of the priority
period. /bid.

The court in Quenzer therefore did not consider
either of the arguments accepted by the various
courts that have ruled in favor of the government on
this issue. The court in Quenzer did not consider the
argument, adopted by the court of appeals here, that
this is the “rare case” in which “the intention of the
drafters, rather than the strict language, controls”
(United States v. Ron Pair Enterprises, Inc., 489
U.S. at 242). Nor did the court in Quenzer address
the argument adopted in decisions such as Richards,
994 F.2d at 765, that the priority periods of Section
507(a)(8)(A) may be suspended under Section 105(a) of
the Bankruptcy Code. Instead, the court in Quenzer
specifically declined to address that question because
it had not been raised in the lower courts in that case.
19 F.3d at 165.

A conflict among the circuits thus does not exist on
the proper disposition of the question presented in
this case. On the issues actually litigated in this
case, it cannot be said that the Fifth Circuit would

13

reach a different result than that reached by the sey-
eral circuits that have addressed them. Thus, when
the same alleged conflict between Quenzer and the
decisions of the other circuits was raised as a basis
for further review in In re West, supra, this Court
denied the petition for a writ of certiorari. 511 U.S.
1081 (1994). Review by this Court is not warranted
here for the same reasons. ©

CONCLUSION

The petition for a writ of certiorari should be
denied.

Respectfully submitted.

WALTER DELLINGER
Acting Solicitor General
LORETTA C. ARGRETT
Assistant Attorney General
GARY D. GRAY
SARA S. HOLDERNESS
Attorneys

AUGUST 1997

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0958%3A2. Public record. Not legal advice.