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In re Nilsen

United States District Court, D. Massachusetts

September 6, 2016

IN RE JOHAN K. NILSEN, Plaintiff/Appellant,
v.
MASSACHUSETTS DEPARTMENT OF REVENUE and the UNITED STATES, Defendants/Appellees.

          MEMORANDUM & ORDER

          WILLIAM G. YOUNG DISTRICT JUDGE

         I. INTRODUCTION

         Before this Court is a bankruptcy appeal stemming from a bankruptcy petition filed by the Plaintiff, Johan K. Nilsen (“Nilsen”), pursuant to Chapter 7 of the Bankruptcy Code. Following the partial grant of Nilsen's petition, Nilsen initiated adversary proceedings against the Massachusetts Department of Revenue (the “Department”) and the United States of America in the United States Bankruptcy Court for the District of Massachusetts, seeking discharge of his income-tax debts for 2000 through 2005, 2007, 2009, and 2010 (the “periods at issue”). [1] The Bankruptcy Court entered an order of summary judgment in favor of the Department and the United States. Nilsen now appeals that decision, arguing that his late-filed IRS Form 1040s and Massachusetts Form 1s for the periods at issue constitute “equivalent reports” and thus are not excepted from discharge under 11 U.S.C. § 523(a)(1)(B).

         A. Procedural Posture

         On March 20, 2015, Nilsen filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Bankr. R. 17-50, ECF No. 4. After the Bankruptcy Court granted his petition and partially discharged Nilsen's debts, he brought an adversary proceeding against the Department and the United States seeking discharge of the remainder of his debts, specifically taxes due for the periods at issue. Id. at 10-12, 51-54. The Department and the United States filed motions for judgment on the pleadings on August 3, 2015, and September 15, 2015, respectively. Id. at 63-66, 95-97. During the motion hearing the Bankruptcy Court required Nilsen to submit additional documentation of filings made to the Department and to the Internal Revenue Service (the “IRS”). In re Nilsen, 542 B.R. 640, 643 (Bankr. D. Mass. 2015). The court then treated the pending motions as motions for summary judgment pursuant to Federal Rule of Civil Procedure 12(d). Id. at 643.

         On December 14, 2015, the United States Bankruptcy Court for the District of Massachusetts granted summary judgment in favor of the United States and the Department. [2] Id. at 649. Two weeks later, Nilsen filed a notice of appeal and later elected to transfer his appeal to the United States District Court for the District of Massachusetts. See Order Transfer Appeal Dist. Ct., ECF No. 1. On February 1, 2016, the case was assigned to this session of the Court. Nilsen filed his brief on June 10, 2016, Br. Appellant, Johan Nilsen (“Appellant's Br.), ECF No. 10, and later that month, the Department and the United States independently filed briefs, Br. Def./Appellee Massachusetts Dep't Revenue (“Dep't's Br.”), ECF No. 11; Br. Appellee United States of America (“United States' Br.”), ECF No. 12.

         B. Factual Background

         The material facts of this case are undisputed. See In re Nilsen, 542 B.R. at 642; Appellant's Br. 2; Dep't's Br. 2. Nilsen owes the Department and the IRS income taxes, penalties, and interest for the periods at issue. Bankr. R. 11. The filing timeline is as follows: for the years 2000 through 2005, 2007, and 2009, Nilsen filed his IRS Form 1040s and Massachusetts Form 1s on August 23, 2010. Bankr. R. 163 (Affidavit of Nilsen). On March 12, 2012, Nilsen filed his federal and state forms for 2010. Id. Both the federal and state annual income tax filing deadline for a previous tax year is on or before April 15 of the following year. 26 U.S.C. § 6072(a); Mass. Gen. Laws ch. 62C, § 69(c).

         On March 20, 2015, Nilsen filed a voluntary Chapter 7 bankruptcy petition. Bankr. R. 18. Under Schedule F of the petition, Nilsen owes $28, 434 and $217, 529 to the Department and the IRS, respectively. Id. at 29. While some of Nilsen's debts were discharged once his petition was granted, his tax debt remained. See Id. at 51-52. After this determination, Nilsen initiated an adversary proceeding, Id. at 11, seeking the inclusion of those tax debts initially excepted from discharge, Id. at 40. The Bankruptcy Court concluded that Nilsen's tax debt was not dischargeable, and Nilsen subsequently appealed that decision to this Court. Id. at 153.

         II. ANALYSIS

         This Court has jurisdiction over bankruptcy proceedings “arising under title 11, or arising in or related to cases under title 11[, ]” 28 U.S.C. § 1334(b), and over appeals of a Bankruptcy Court's final judgment, Id. § 158(a). Nilsen properly elected to proceed in district court pursuant to 28 U.S.C. § 158(c)(1)(B). See Order Transfer Appeal Dist. Ct.

         A. Standard of Review “On appeal from a judgment in an adversary proceeding, a district court reviews conclusions of law de novo, but ought accept the bankruptcy judge's finding of fact unless they were clearly erroneous.” Perkins v. Massachusetts Dep't of Revenue, 507 B.R. 45, 48 (D. Mass. 2014), aff'd sub nom. In re Fahey, 779 F.3d 1, 10 (1st Cir. 2015) (internal quotation marks and citation omitted). Additionally, the district court may “‘affirm the bankruptcy court order on any ground apparent from the record on appeal.'” Id. (internal quotation marks and citation omitted). As the issue on appeal is purely legal, see Appellant's Br. 2; Dep't. Br. 5, this Court's review is de novo.

         B. Legal Framework

         The aim of a bankruptcy proceeding is to provide debtors with a “fresh start.” Grogan v. Garner, 498 U.S. 279, 286 (1991). In accordance with this aim, when a debtor files a petition under section 727 of the Bankruptcy Code, “the court shall grant the debtor a discharge, ” 11 U.S.C. § 727, subject ...


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