McCoy filed for bankruptcy in 2007. She received a discharge in 2008. Later that year she filed a post-discharge adversary proceeding seeking to declare she was not liable to the State of Mississippi for pre—petition taxes due for 1998 and 1999.
The bankruptcy court dismissed McCoy’s complaint. The bankruptcy court reasoned that McCoy’s state tax returns were not “returns” eligible for discharge as McCoy did not file her 1998 and 1999 state tax returns by Mississippi’s April 15th deadline.
McCoy appealed to the District Court, which affirmed the Bankruptcy Court judgment. McCoy then appealed to the Fifth Circuit.
If a taxpayer files a return late, the taxes are nondischargeable if the return was filed less than two years prior to the filing of the bankruptcy petition. See 11 U.S.C. § 523 Returns filed on an automatic extension request are not a “return.” Furthermore under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), unless a state income tax return is filed under a safe harbor provision, a state income tax return that is filed late under the applicable non-bankruptcy state law is also not a return for bankruptcy purposes.
McCoy’s 1998 and 1999 returns did not comply with the filing requirements of applicable Mississippi tax law and were therefore, not “returns” for bankruptcy discharge purposes.
The Fifth Circuit upheld the District Court holding that McCoy’s state taxes for 1998 and 1999 were not discharged in bankruptcy.