Kent Anderson

About Kent Anderson

Extensive experience in resolving Oregon State and Federal Tax disputes, including Tax driven Bankruptcy, Offer in Compromise, Installment Payment Agreements and Administrative Appeals. Lifelong resident of Oregon. Board of Directors of Eugene Ballet Company 1979 to 2007. Hobbies: Foreign Travel, Hiking, and Gourmet Cooking.

HB 2087 Legislative Update: Expanding and Improving Oregon’s Taxpayer Bill of Rights

House Bill 2087, introduced to the House Committee on Revenue in January, includes several important provisions that would give Oregon Taxpayers greater protections when dealing with the Department of Revenue’s collection unit. If passed, the bill would clarify and expand the existing Taxpayer Bill Of Rights by requiring the Department to provide taxpayers with a written and oral explanation of their rights and appeal procedures during the collection process. HB 2087 would also prohibit Department of Revenue collections personnel from contacting taxpayers who have a valid Power of Attorney for representation on file (except mailed notices).

Among the bill’s more transformative changes, the Department would be required to cancel any tax debt that has not been collected within 20 years of assessment. Although this is still double the IRS’s 10-year statute of limitations on collection, the new law would bring Oregon more in line with other states, such as California and Illinois, that have 20-year collection statutes. Another provision would obligate the Department to draft administrative rules setting forth the procedures used by the Department for reviewing and analyzing financial statements. Under the new standards, the Department would be required to consider the IRS collection financial standards when establishing payment agreements for past-due tax liabilities.

The first draft of HB 2087 includes some provisions that will likely be cut due to concerns about the state’s ongoing budget difficulties. For example, the bill calls for the creation of an administrative appeals office and a state taxpayer advocate, which would help prevent and resolve taxpayer hardships resulting from the Department’s collection activities, but with significant fiscal impact. Even without these provisions, the bill represents a huge step towards updating and improving the Taxpayer Bill of Rights.

The House Committee on Revenue held a hearing on the bill in early April, and a second version of the bill is expected soon. You can find the text of HB 2087 and track the bill’s progress on the legislature’s website’s HB 2087 page.

By |May 16, 2017|Categories: Uncategorized|

Judicial Conference Increases Dollar Amounts in Bankruptcy Cases

The Bankruptcy Code is full of specific dollar limitations and allowances. These figures include dollar limits on eligibility for use of Chapter 13 and many other amounts, such as the value of exemptions permitted to bankruptcy debtors under 11 USC §522. All of these dollar amounts are adjusted by the amount of change in the Consumer Price Index for All Urban Consumers in the manner set out in 11 USC §104(a), a part of the bankruptcy code. The adjustment occurs every three years on April 1st and is based on the amount of change that has occurred over the previous three years ending December 31 the year before the adjustment. Dollar amounts are rounded to the nearest $25 and the adjustment applies to other limits set forth in the bankruptcy code.

Well, it is that time of year for an announcement of the change and 2016 is a year when the changes are made as of April 1st. The Judicial Conference of the United States has just released a notice of the changes proposed to come into effect for cases filed after March 31, 2016. It looks like Chapter 13 cases will now be permitted for individuals with unsecured debts of no more than $394,725 and secured debts of no more than $1,184,200 for cases filed April 1, 2016, and later. This is an increase of more than $11,000, only about half the increase announced in 2013 for unsecured debt.   Secured debt increased by about $35,000 over the Chapter 13 limit imposed April 1, 2013.

In states where federal exemptions are allowed, such as Oregon, the federal homestead exemption will be increased from $22,975 to $23,675 per person. The federal exemption for a car will rise from $3,675 to $3,775. Under the statute, if the amount is increased it will go up by at least $25. While many states have opted out of federal exemptions and limit bankruptcy exemptions to those provided in state statute, many other dollar amounts apply to all cases filed in bankruptcy court. Federal exemptions were allowed in Oregon as of July 1, 2013. These new dollar figures will only come into play for filings after the effective date, but they may allow filings that were previously impermissible.

By |Feb 29, 2016|Categories: Bankruptcy|Tags: , |

Tax Relief in Bankruptcy?

The 9th Circuit Bankruptcy Appellate Panel decided a case recently with important consequences for delinquent taxpayers. On December 17, 2015, the Bankruptcy Appellate Panel handed down a decision in United States v. Martin that may advance a thorny problem toward resolution by the U.S. Supreme Court. The ruling, although of an interim nature, stated that a document filed by the taxpayer, intended as a tax return, should be considered a tax return and thus a dischargeable debt in bankruptcy. Bankruptcy lawyers and their clients with late tax returns should be well pleased.

The facts of the case are fairly common. Kevin and Susan Martin only got around to filing some missing tax returns after the IRS began collection on some involuntary tax assessments. The late-filed tax returns increased the Martins’ tax liability in some years, and decreased it in at least one tax year. After waiting the two years required by 11 U.S.C. §523(a)(1)(B)(ii) before a tax debt from a late-filed return can be discharged, the Martins filed bankruptcy.

A dispute arose when the IRS did not agree that the Martins’ tax debt had been discharged in the bankruptcy proceeding. To resolve the matter, the Martins filed an adversary proceeding in the bankruptcy court against the IRS. They took this action without the benefit of counsel, on a pro se basis. Bankruptcy Judge Richard Lee, sitting in the Eastern District of California, agreed with the Martins and ruled the tax was dischargeable. It was a well-reasoned opinion by the bankruptcy court that harmonizes the statutory language with the legislative intent of Congress. The reasoning carefully balances the “fresh start” of the debtors against the financial interests of the government.

The IRS did not share my enthusiasm for Judge Lee’s determination and appealed to the Bankruptcy Appellate Panel for the 9th Circuit. With the full weight of the federal government and the U.S. Attorney’s office arrayed against them, one would think the Martins would hire counsel to represent them in the Appellate Court. However, their win in the Bankruptcy Court encouraged them to go it on their own. Their briefs are just that, brief, and verify the pro se nature of this case. In fact, the Martins orally argued the case themselves before the Appellate Panel. The Martins won another round and the Bankruptcy Appellate Panel came back with a wonderful 28 page opinion, mostly in their favor. On the most important issue, the dischargeability of tax on late filed returns, this was an important win for bankruptcy debtors with outstanding tax liability.

Three circuits previously reached the opposite conclusion, holding that late-filed tax returns are no longer considered tax returns for bankruptcy discharge purposes. In the first of these decisions, McCoy v. Mississippi State Tax Commission, the 5th Circuit Appellate Court determined a late-filed state tax return to be disqualified from discharge by the 2005 amendment to 11 U.S.C §523(a)—specifically, the language included as part of a hanging paragraph appended to that section stating:

For the purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable non-bankruptcy law (including applicable filing requirements).

The 5th Circuit in McCoy found a timely filing requirement in the Mississippi state law and disqualified the McCoys’ late-filed tax return from discharge using this language.

I have discussed McCoy and two subsequent cases, Fahey and Mallo, from the 1st and 10th Circuits respectively, in another article “Trouble With Tax Debt in Bankruptcy.”  With these three Circuit Court opinions, the trend has not been looking good for delinquent taxpayers. Only the 8th Circuit, with the Colsen case decided based on pre-2005 amendment law, holds that a late return can be discharged if it otherwise meets bankruptcy discharge criteria.

The Martin opinion, containing a comprehensive analysis of just why the McCoy, Fahey, and Mallo decisions are wrong, is only a Bankruptcy Appellate opinion[i].  As such, it does not carry the weight of an opinion from the 9th Circuit Court of Appeals.  Bankruptcy judges in the 9th Circuit generally follow Bankruptcy Appellate Panel opinions, and will likely enter discharges in accord with the Martin decision unless and until it is overturned.  That may be a long time in coming[ii].

The Martin opinion is interesting because the Bankruptcy Appellate Panel, after 28 pages of discussion, actually returned the case to the Bankruptcy Court for further findings[iii]. This is based on a prior 9th Circuit case, In Re: Hatton, that held the debtor’s behavior must be taken into consideration when determining if the papers filed constitute a tax return for discharge purposes. In that earlier case, the 9th Circuit decided that in the case of a late tax return, there was a good faith requirement.  Thus, in the 9th Circuit, the definition of a tax return includes a requirement that the document filed by the debtor be a reasonable attempt to comply with tax laws.

The Martins are not yet home free. Some of the delinquent tax returns were not filed until months after they were prepared, signed, and delivered by their accountant. To meet the good faith requirement, as expressed in Hatton, the debtors must convince the bankruptcy judge they had good reason for their delay in filing tax returns or, at least, had no improper motive.

More interesting than the remand issue is the fact that the decision of the Bankruptcy Appellate Panel is not yet appealable, because the remand order is not technically a final order. The ultimate decision on dischargeability will depend on findings of the bankruptcy court if the case is returned to the Bankruptcy Appellate Panel. Doubtless, this frustrates the Internal Revenue Service and may provide a window of opportunity for delinquent taxpayers to discharge their tax debts in the 9th Circuit.

[i] The Bankruptcy Appellate Panel (BAP) is composed of three bankruptcy judges. It is an optional avenue of appeal from a bankruptcy court decision and must be agreed upon by all parties to the appeal.  While persuasive, a BAP opinion is only clear binding authority in the specific case for which a decision is made.  The Court of Appeals is superior to the Bankruptcy court and its opinions are binding authority on all district courts and bankruptcy courts in the circuit.

[ii] The 9th Circuit Court of Appeals is currently considering a case with very similar facts. The euphoria over United States v. Martin could be short-lived if the 9th Circuit see the issue differently.

[iii] The BAP remanded the case to the bankruptcy judge for further findings. The record before the court on appeal contained no evidence on something the court considered an important issue.

Food Trucks in a Denver Park

The Quiero Arepas  food truck , one of thirty food trucks and carts at a downtown Denver park.

The Quiero Arepas food truck , one of thirty food trucks and carts at a downtown Denver park.

While in Denver to attend the IRS Nationwide Tax Forum, I went out for lunch. The hotel concierge told me of an event held in a local park with 30 different food trucks. This fit my interest in the unique and unusual.The trucks were at the downtown park on Tuesday and Thursday; I went by myself on Tuesday, and came back with my wife, Nicole, on Thursday. We didn’t have time to sample food from all the trucks, so we probably missed some terrific offerings. That said, here is a list of favorites from our two visits.

food-truck_01_225x300

Queiro Arepas.

Queiro Arepas
This widely recommended food truck serves Venezuelan food based on arepas.
The arepa is a flat “bread” made from ground corn. Made from scratch in the truck, the aprepa dough is formed into a patty that is grilled, baked, split open and stuffed with a variety of ingredients. I had one filled with plantain black beans, cabbage, avocado, salsa and braised beef. It was called Pabellon and was delicious.

food-truck_03_cropStill Smokin Fusion BBQ
This truck served pulled pork sandwiches and various home-smoked pork dishes. I had a taco with peach and sweet cabbage slaw, and mojo marinated pulled pork with a peach chipotle barbecue sauce. Nice sauce with a little bite. Good flavor in the pork.

food-truck_04Pavlo’s Taste of Ukraine
This was a truck featuring Ukrainian food. I overheard him tell people that his ninety-one-year-old grandmother taught him how to cook. I chose a dish of potato and cheese vareniki (also called pierogi) with cooked onions on top. Again, this was very tasty.

food-truck_06
Aiko Pops Popsicle
Coconut curry Popsicle. Spicy coconut; yummy and refreshing.

The Rolling Italian
Place provolone, mozzarella, Monterey jack, cheddar, and Parmesan cheeses together on a grill at a special temperature for a fabulous grilled cheese pizza. Top the pizza with your choice of with sausage, peppers, onion, ham, and eggplant. The business is a food truck called The Rolling Italian. Their tiny cannoli were also delightful.

Ba-Nom-a-Nom
Vegan frozen soft-serve type treats, made to order from frozen fruit. No sugar added to these delightful cold deserts. Nicole and I sampled the blackberry, banana, pineapple and the mango pineapple flavors.

Osteria Francescana, Number Two in the World

Osteria Francescana. in Modena, Italy, the restaurant of highly energetic and inventive Italian chef, Massimo Bottura is rated second in the world by the Diners Club–sponsored 50 Best Restaurants Academy. Chef Bottura the subject of the Chef’s Table TV program first episode, has been referred to as the best chef in the world.  At the present time, he is without doubt the most famous and readily recognized chef in Italy.  We expected great things from our meal and were not disappointed.

We booked a room at Salloto Della Arte, a small but beautifully appointed bed-and-breakfast just one block from the restaurant. After an adventure finding parking in this old town section of Modena, we settled in to our elegant room. We took a brief tour of the city before dinner. At 8:30, we went to the restaurant where we were warmly welcomed by what must have been a half-dozen restaurant staff. As is the case with most high-end restaurants, Osteria Francescana has more than 50 staff members at work on any given night.

The menu we were presented had several options: An à  la carte section; an experimental tasting menu, and a more traditional tasting menu with dishes described in poetic, if not particularly helpful terms. We were unsure of which tasting menu would provide the best experience.  Our waiter, when presented with our dilemma, suggested a merger of items from the two tasting menus to provide us with the restaurant’s current “favorites.” This third, off-the-menu option would include a special wine paring to accompany these select dishes. This seemed an ideal resolution.

Photograph of two rabbit macaroons on a warmed white platter.

Oseria Francescana amuse-bouche: Rabbit Macaroons, the second and Nicole’s favorite of three small bites.

We started out our meal with bread and local beer: a refreshing golden ale with a light floral, hoppy tang. An amuse-bouche arrived. It consisted of three small bites, first, “Tempura with Carpione,” then, a “Rabbit Macaroon,” third, “Baccalà on a Tomato Pillow.” The tempura, of aula (a small freshwater fish) and a batter charged with nitrous oxide, was topped with a savory ‘ice cream’ made primarily from onions, vinegar, raisins and pine nuts. The rabbit macaroon was prepared with a rabbit mousse between two light, airy crackers. We both enjoyed the first two bites. The baccalà, featured in the third bite, is made from salt cured cod; I enjoyed my helping, and Nicole’s as well. The beer complemented these delightful morsels nicely.

The first plate, poetically named “Treasures from the Sea: Sustainable and Salvaged,” was made with an assortment of seafood and vegetables in a pork broth aspic. It was served with 2013 Trebbiano d’Abruzzo, a dry white wine with nice floral notes made exclusively from the trebbiano grape.  This is a common grape of Emilia-Romagna, also notable as one of the two grapes used for production of traditional balsamic vinegar.  I was again blessed with a double helping, as Nicole is not fond of unusual fish dishes and was happy to share her portion with me.

A crab, painted on the plate from dried, pulverized crab shell; the crab body is made of eggplant; crab meat, squid, fish roe, with capers and fresh herbs, cover the eggplant slice.

From Goro to Hokkaido

Next, “From Goro to Hokkaido” was placed before us.  This was another poetic name from the menu that turned out to be a beautiful dish. A crab was painted onto the plate from dried, pulverized crab shell. The base of the crab body was created from eggplant. The crab meat, some squid, fish roe, and other ocean delicacies were arranged on top of the eggplant slice with capers and various fresh herbs. The Trebbiano d’Abruzzo was continued with this dish. We both loved the creative presentation and wonderful flavors.

The “Delta of the Po Ravioli” was unique. The filling was made from cotechino, a Modenese delicacy that is the primary component of a local pork sausage of the same name. Our ravioli contained boiled pigskin (cotechino), pork and three types of lentils. The egg pasta ravioli were cooked in Lambrusco, a regional wine made from a grape of the same name, and this dish was accompanied with another crisp white wine.

Striped Red Mullet Livornese

Striped Red Mullet Livornese

We were served a French Vouvray with the “Striped Red Mullet Livornese.” The minerality of this wine, made from the Chenin blanc grape, complimented the intense tomato and fish flavors of this beautifully presented dish. An abstract of asparagus, prosciutto and peas tagliolini, dressed with threads of black truffle followed with the same delightful Vouvray wine.

Photograph of a spoon heaped with a leek preparation topped with chiffonade.

Ostera Francescana Palate Cleanser: A silky leek preparation topped with black truffle chiffonade.

As a palate cleanser, we were presented soup spoons heaped with a luscious, silky leek preparation, topped with a black truffle chiffonade. This was so delicious that we actually considered asking for a second helping.

The Damijan Podversic Ribolla Gialla, a crisp, acidic Pinot Grigio, was served with perhaps the most famous dish created by chef Buttora. “The Five ages of Parmigiano-Reggiano” presents this Italian cheese in five different stages. First, a 24-month old cheese demi-soufflé, then a warm milky cream sauce made from 30-month old cheese, a chilled foam of 36-month cheese, and a Parmigiano cracker made from crusts of a 40-month cheese, finally the crust of a 50-month cheese is turned into light ethereal bubbles as a finishing touch. Bottura describes this dish as a white-on-white portrait of the Emilia-Romagna countryside.

“The Crunchy Part of Lasagne,” another signature dish for the restaurant and chef Bottura, was served with an intense, crisp rosé that was fragrant with aromas of strawberry and red fruits. It is difficult to describe this dish but it represents the “essence” of lasagne.  It looks like a crumpled Asian cracker infused with basil and tomato flavors. The cracker is dressed with a Parmigiano béchamel and is sitting atop a succulent sous-vide cooked ragu. It is justly famous and represents everybody’s favorite part of the fresh cooked lasagna: the crispy corner.

Photograph of a slice of veal, darkly caramelized on the outside, on a white plate, spattered with red green, and brown pastes of vegetable and herb purée.

Oseria Francescana: Beautiful, Psychedelic, Spin-painted Veal, Not Flame Grilled.

We moved on to a full bodied red wine, a Nero D’Avola from Sicily, served with the “Beautiful, Psychedelic, Spin-painted Veal, Not Flame Grilled.” This was another sous-vide cooked dish that was darkly caramelized on the outside and painted with colorful and seemingly random (although carefully calibrated) pastes of vegetable and herb purée. The sous-vide method of cooking is done by immersing a sealed package in a closely controlled water bath. Meat can be cooked for hours or even days using this technique without losing flavor or texture.

Two Foie Gras Ice Cream Bar with Traditional Balsamic Vinegar from Modena, Served on a chilled silver platter

Osteria Francescana: Foie Gras Ice Cream Bars with Traditional Balsamic Vinegar from Modena

“The Foie Gras Ice Cream Bar with Traditional Balsamic Vinegar from Modena” was exactly as described. An unusual dish, served with a golden botrytis sweetened Picolit wine. Botrytis is a fungus sometimes called “noble rot” that dries out and enhances the sweetness of grapes, such as the Picolit grape, that are then used to make dessert wines. The intense syrupy and fruity wine paired beautifully with the rich foie gras and balsamic vinegar flavored ice-cream.

Sparkling Muscat was served with a salad made up of herbs and flowers. This was followed by the famous “Oops! I Dropped the Lemon Tart” desert, a dish first created when the pastry chef dropped a freshly prepared lemon tart. It is now a signature dish and work of art on a plate.  Another desert dish described with the name Vignola (a town 20 km from Modena), is an incredibly complex chocolate cherry preparation that we both found delicious and unusual. All this was followed with beautiful petits fours to complete the meal.

Chef Bottura talked with us and explained many of the dishes personally.  We brought the chef a gift and, in exchange, were given a cookbook personally inscribed by Massimo and his principal kitchen staff.  As a special treat, we had our picture taken in the kitchen with the star chef and he key staff.

By |Jun 17, 2015|Categories: Food Adventures|

Trouble in Bankruptcy Discharge of Tax Debt

One often used technique for resolving unpaid personal income tax debt is now in doubt.  Practitioners should take care in advising delinquent return filers that bankruptcy may be available, after a two year waiting period, to discharge the tax debt.

Whether or not a tax obligation is dischargeable in bankruptcy is, in part, determined by 11 U.S.C. § 523(a)(1). That statute provides:

A discharge under section 727, 1141, 1228(a), 1228(b), or1328(b) of this title does not discharge an individual debtor from any debt—

(1) for a tax or a customs duty—

(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;

(B) with respect to which a return, or equivalent report or notice, if required—

(i) was not filed or given; or

(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition;

This language has long been interpreted to meant that a tax return must of have been filed more than two years prior to commencement of the bankruptcy case for the tax debt to be dischargeable.

In 2005, for the first time Congress created a definition of “return.”  Language was inserted, in a hanging paragraph, as part of the Bankruptcy Abuse Prevention and Consumer Protection Act:

 . . . the term “return” means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law. 11 USC § 523(a)(*).

In 2012, the 5th Circuit decided McCoy v. Mississippi State Tax Commission (In re McCoy), 666 F.3d 924 (5th Cir. 2012).  That decision, relying on the new definition of return and focusing on the parenthetic language “including applicable filing requirements”, held that an untimely filed state tax return was not a “return” for bankruptcy discharge purposes.  Now, two more circuits have rendered similar opinions.

The McCoy case was based on the language of Mississippi state law.  However, a second case, Mallo v. Internal Revenue Service (In re Mallo), 774 F.3d 1313 (10th Cir. 2014) came up with the same result by applying 26 U.S.C. § 6072(a) language “shall be filed on or before” a particular date as an “applicable filing requirement.”  Thus, the federal income tax return that was filed late, despite the intervening delay of more than two years between the tax filing and commencement of the bankruptcy case, disqualified the document filed as a “return” for bankruptcy discharge purposes.

The third opinion, Fahey v. Mass. Dep’t of Revenue (In re Fahey), 2015 U.S. App. LEXIS 2458, has followed this line of analysis and has similarly determine that a tax return, filed one day late, will never qualify the resulting debt as dischargeable in bankruptcy.  Although a dissenting opinion by Judge Thompson argues for a debtor friendly interpretation of the new provision, the majority is emphatic in its plain language analysis that prohibits discharge of the tax due on a late filed return.

While the same question is currently pending in other circuits, three times is clearly the charm for the purpose of ringing alarm bells in the tax practitioner community.  In the past, those of us who have worked to clean up tax delinquencies have generally considered bankruptcy a possible alternative strategy.  Tax problems created by the lack of our clients’ diligence in timely complying with income return filing requirements would be well advised to seek another avenue for resolving the debt.

Before this unfavorable interpretation of the 2005 legislation, a typical non-filer may have been told to file the missing returns and then wait two years to file bankruptcy; with the promise that the unpaid tax will be discharged and the problem solved.  This advice can no longer be given without strong qualification.

While the 9th Circuit has yet to address the timeliness issue in determining whether or not a late tax filing constitutes a return for bankruptcy discharge purposes, three other circuits have ruled decisively against the taxpayer on this issue and it would be imprudent to assume a different result in this circuit.

There remain two other avenues for converting an unfiled return into a future dischargeable debt. The tax court offers one alternative and a collaborative effort with the IRS to prepare a tax return pursuant to 26 U.S.C. § 6020(a) provides another. A stipulated resolution in the U.S. Tax Court should meet the requirements of “a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal.” It will now be even more important to file a timely Tax Court complaint in response to a Statutory Notice of Deficiency. The language “a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986” suggests the second route to a dischargeable tax debt for a delinquent taxpayer.

The practice of preparing a return pursuant to section 6020(a) has become so uncommon as to render it an unlikely alternative. Yet one case cited by the majority in Fahey shows a bankruptcy court willing to construe an IRS assessment made after the submission of information by the taxpayer as meeting the requirements of that statute. See In re Kemendo, 516 B.R. 434 (Bankr. S.D. Tex. 2014). If a substitute for return is pending, it may be helpful to supply information to the IRS in order to assist in the calculation of any tax due.

The ABA Taxation Section has made a formal recommendation to Congress for a change in 11 U.S.C. § 523(a) to remedy this problem. It is recommends that the phrase “other than timeliness” be added to the parenthetical language so that it would read “(including applicable filing requirements other than timeliness).” The National Taxpayer Advocate supports a change of this nature and, in its 2014 Report to Congress, recommends amendment of the bankruptcy code in order to ”provide that a late-filed tax return may be considered a return for purposes of obtaining a bankruptcy discharge.”

By |Feb 23, 2015|Categories: Bankruptcy, Tax Law|Tags: , , |