IN RE: THOMAS GIACCHI

Filing 10

MEMORANDUM. SIGNED BY HONORABLE JOSEPH F. LEESON, JR ON 9/30/15. 10/1/15 ENTERED AND COPIES MAILED, E-MAILED.(er, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
________________________________________
In Re: Thomas Giacchi,
Debtor.
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THOMAS GIACCHI,
Appellant,
v.
UNITED STATES OF AMERICA,
Appellee.
________________________________________

Civil Action No. 5:14-cv-1156
Bankruptcy No. 12-13292
Adv. No. 12-00465

MEMORANDUM

Joseph F. Leeson, Jr.
United States District Judge

I.

September 30, 2015

INTRODUCTION
This is a bankruptcy appeal.
Thomas Giacchi (“Giacchi”), appeals from a decision of the United States Bankruptcy Court

for the Eastern District of Pennsylvania entering judgment in favor of the United States of America
(“Appellee”), and against Giacchi, on Giacchi’s Amended Complaint following trial in this adversary
proceeding. Giacchi’s Amended Complaint sought relief, inter alia, to have the bankruptcy court
determine that Giacchi’s unpaid taxes for 2000, 2001, and 2002 were discharged in Giacchi’s
bankruptcy proceeding, and that if the taxes were not discharged that there were no unpaid taxes due
for the three years in question. The bankruptcy court found that the tax debt in question owed by
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Giacchi to the Internal Revenue Service was nondischargeable and that the tax assessments filed by
the Internal Revenue Service against Giacchi were accurate and correct.
II.

BACKGROUND
A.

Procedural History

Giacchi initiated this adversary proceeding against the United States of America seeking a
determination that his federal taxes for 2000, 2001, and 2002 had been discharged in bankruptcy. In
the event the taxes were not discharged, he sought a ruling that he owed no taxes for the three years
in question.
The bankruptcy court ruled that the taxes were not discharged under 11 U.S.C. § 523(a)(1)(B)
because Giacchi failed to file tax returns for 2000, 2001, and 2002. Specifically, the tax documents
filed were not “returns” within the meaning of § 523(a) and applicable nonbankruptcy law. The
bankruptcy court also held that the United States’ assessments of Giacchi’s taxes, as well as the
proofs of claim filed in the bankruptcy case, were correct. Giacchi filed the within appeal from the
bankruptcy court’s judgment.
B.

Brief Summary of Facts
(1)

Giacchi’s failure to timely file tax returns for 2000, 2001, and 2002

Giacchi failed to file federal tax returns for 2000, 2001, and 2002. The Internal Revenue
Service investigated his tax liability for those years and assessed tax against him. After the IRS made
tax assessments for each year, Giacchi subsequently filed documents he argues were tax returns. For
each year, each return showed that his total tax was lower than the IRS assessment. The IRS then
reduced the assessment for each year to equal the tax he claimed were his late filed tax returns.

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(2)

The IRS assesses tax for 2000 – after which Giacchi files a tax return

For 2000, the IRS completed its investigation on July 12, 2004, and assessed $45,849.20 of
tax. Trial Ex. D-1. On November 29, 2004, Giacchi filed a form purporting to be his income tax
return for 2000. Trial Ex. P-5. This document stated that Giacchi’s total tax for 2000 was $40,524.
Trial Ex. P-5, line 57. On May 16, 2005, the IRS abated $5,325.20 of the assessment, Trial Ex. D-1,
leaving an assessment of principal tax against Giacchi in the amount of $40,524, the exact figure
Giacchi reported in his tax document.
(3)

The IRS assesses tax for 2001 – after which Giacchi files a tax return

For 2001, the IRS completed its investigation of Giacchi’s tax liability on October 4, 2004,
and assessed $29,120 of tax. Trial Ex. D-2. Eight weeks later, on November 29, 2004, Giacchi filed a
form purporting to be his 2001 tax return. Trial Ex. P-6. This document stated that Giacchi’s total tax
for 2001 was $20,025. Trial Ex. P-6, line 58. On June 20, 2005, the IRS abated $9,095 of the
Assessment, Trial Ex. D-2, again leaving a principal tax assessment identical to the tax Giacchi
reported in his tax document, $20,025.
(4)

The IRS assesses tax for 2002 – after which Giacchi files a tax return

The IRS completed its investigation for 2002 without Giacchi’s tax return and on February 7,
2005, assessed $25,229.40 of tax. Trial Ex. D-3. Then, in June of 2006, more than a year after the
assessment was made against him, Giacchi filed a form purporting to be his 2002 tax return. Trial Tr.
21:14–19. This document stated that Giacchi’s total tax for 2002 was $19,678. Trial Ex. P-7, line 61.
On October 9, 2006, the IRS abated $5,551.40, Trial Ex. D-3, leaving a principal tax assessment of
$19,678, the same figure Giacchi reported in his tax document.

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(5)

Giacchi’s Chapter 7 bankruptcy case in 2010 and Chapter 13 bankruptcy
case in 2012

Giacchi filed a Chapter 7 bankruptcy petition in 2010, Trial Tr. 11:5-6, and received a
discharge on March 29, 2011, Tr. Ex. P-1. He filed a Chapter 13 bankruptcy case over a year later,
on April 2, 2012.
III.

ANALYSIS
A.

Giacchi’s post-assessment tax documents do not qualify as returns under 11
U.S.C. § 523(a)

A federal tax liability is subject to discharge only if the debtor filed a return with respect to
the tax. 11 U.S.C. § 523(a)(1)(B)(i).
Section 523(a) states, “[f]or purposes of this subsection, the term ‘return’ means a return that
satisfies the requirements of applicable nonbankruptcy law (including applicable filing
requirements).” 11 U.S.C. § 523(a). This definition was added by the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 (“BAPCPA”). 1 It is codified in an unnumbered paragraph at
the end of § 523(a), and is often referred to as the “hanging paragraph.” Income tax returns must be
filed by April 15 of the following year. 26 U.S.C. § 6072(a). Giacchi’s tax documents filed for 2000,
2001, and 2002 did not meet the requirements of applicable nonbankruptcy law because they were
filed too late – after the tax assessments had been made. Accordingly, the post-assessment filed tax
documents are not “returns,” and the tax liabilities for 2000, 2001, and 2002 are not discharged. As
such, under the hanging paragraph, his tax liabilities for the years at issue are excepted from
discharge. See In re Payne, 431 F.3d 1055, 1060 (7th Cir. 2005) (Easterbrook, J., dissenting); see also

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BAPCPA applies to cases filed on or after October 17, 2005. Robin J. Miller, Annotation, Validity, Construction
and Application of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 2005 A.L.R.
Fed. 2d 3 (2005).

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In re McCoy, 666 F.3d 924, 932 (5th Cir. 2012) (holding that late-filed state tax document cannot
qualify as a “return” under § 523(a)).
Giacci argues against this conclusion by reference to Collier on Bankruptcy. Giacchi’s Br. 8.
Collier opines that the term “applicable filing requirements,” as used in § 523(a), does not include the
requirement to file a return on time. Collier on Bankruptcy ¶ 523.07[3][b] (Alan N. Resnick & Henry
J. Sommer eds., 16th ed. 2013). Instead, this term “refers to considerations other than timeliness, such
as the form and contents of a return and the place and manner of filing.” Id. Collier cites two cases in
support of this view: Martin v. United States, 482 B.R. 635 (Bankr. D. Colo. 2012), and In re
Wogoman, 475 B.R. 239 (10th Cir. B.A.P. 2012). See Collier at ¶ 523.07 n.55e.
Neither of these cases is a reason to reject the interpretation of the hanging paragraph
articulated by Judge Easterbrook’s dissenting opinion in Payne or adopted by the Fifth Circuit in
McCoy. Martin held that “applicable filing requirements” did not include timeliness. 482 B.R. at 639.
But Martin was later reversed by the district court. See In re Martin, 500 B.R. 1, 2 (D. Colo. 2013),
aff’d sub nom. In re Mallo, 774 F.3d 1313 (10th Cir. 2014), cert. denied sub nom. Mallo v. I.R.S.,
135 S. Ct. 2889 (2015). On appeal, the district court noted that the United States did not argue that
“applicable filing requirements” included timeliness. 2 Id. at 7. For that reason, the district court

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The government did not advance this argument because it would lead to an overly harsh result: a taxpayer who
filed only one day late would be forever denied a discharge. Id. at 7. Indeed, in the case at bar, the court below agreed that
this rule could be overly harsh: “Under this approach, a debtor would never be able to discharge a federal income tax
obligation under Section 523(a)(1)(B) if the document that the debtor purports to be a return was tardily filed. That would
clearly constitute an absurd and incorrect result.” Giacci v. United States, Adv. No. 12-00465, slip op. at 2 n.2 (Bankr.
E.D. Pa. Jan. 9, 2014), ECF No. 73.

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declined to adopt the argument. 3 Id. The Wogoman court expressed skepticism about the argument,
but did not definitively reject it:
Fortunately, we do not have to conclusively define the boundaries of the hanging
paragraph in this case because it does not involve a tax return that was merely filed
“late.” Here, we are presented with debtors, who without any reason justifying the
delay, did not file their 2001 return until August 2006, after the IRS had completed the
burdensome process of determining their tax liability . . . . Regardless of whether the
hanging paragraph creates a much more restrictive rule than the . . . test developed by
courts pre-BAPCPA, the 2001 return filed by the [debtors] post-assessment does not
meet the applicable filing requirements, and therefore, their 2001 tax liability is
excepted from discharge.
475 B.R. 239, 249 (10th Cir. B.A.P. 2012).
For other reasons too, Giacchi’s post-assessment tax documents do not constitute “returns”
within the meaning of § 523(a). Before BAPCPA added the hanging paragraph, courts applied a fourpart test to determine whether a late-filed tax return qualified as a “return” under § 523(a). See In
re Wogoman, 475 B.R. at 245. To constitute a return under this test, known as the Beard test, a
document must meet four requirements: “(1) it must purport to be a return; (2) it must be executed
under penalty of perjury; (3) it must contain sufficient data to allow calculation of tax; and (4) it must
represent an honest and reasonable attempt to satisfy the requirements of the tax law.” 4 Id. (quoting
In re Hindenlang, 164 F.3d 1029 (6th Cir. 1999)). For an otherwise proper return that was filed late,
the fourth requirement is the critical one. Id. at 246.
A return filed after the Internal Revenue Service has done its own investigation and assessed
tax does not represent an honest and reasonable attempt to satisfy the requirements of the tax law. See
In re Payne, 431 F.3d 1055 (7th Cir. 2005); Moroney v. United States, 352 F.3d 902 (4th Cir. 2003);
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Instead, the district court applied the test as it existed prior to BAPCPA and held that the debtor’s late-filed tax
documents did not qualify as tax returns because they were filed after the IRS had already made assessments for the years
in issue. Id.
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This test was first stated by the Tax Court in Beard v. Commissioner, 82 T.C. 766 (1984), aff’d, 793 F.2d 139
(6th Cir. 1986), and is thus often called the “Beard test.” See Wogoman, 475 B.R. at 245-46.

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United States v. Hindenlang, 164 F.3d 1029 (6th Cir. 1999); see also United States v. Hatton, 220
F.3d 1057 (9th Cir. 2000) (denying taxpayer a discharge because taxpayer did not attempt to cure his
failure to file return until after IRS had already assessed tax). A tax return no longer serves any tax
purpose once the Internal Revenue Service has assessed the tax. Hindenlang, 164 F.3d at 1034-35.
At trial, Giacchi had the opportunity to prove that his tax documents served a tax purpose,
even though they were filed after the IRS had already assessed tax. He advanced only one such
purpose: his post-assessment tax documents informed the IRS that he actually owed less tax than
assessed by the IRS. Trial Tr. 111–12. The IRS did abate tax so that its assessments matched the
total tax figures Giacchi reported on his tax documents. 5 However, that outcome as a result of
Giacchi’s tax documents was not a legitimate tax purpose under the Beard test.
Giacchi’s asserted tax purpose is the same one identified by the debtor in Moroney. 352 F.3d
at 906. However, the Fourth Circuit held that this did not constitute a legitimate tax purpose:
The relevant inquiry is whether Moroney made an honest and reasonable effort to
comply with the tax laws, and not whether Moroney’s eventual effort had some effect
on his tax liability. Under Moroney’s approach, the availability of discharge would
turn on the IRS’s accuracy in assessing taxes, rather than on Moroney’s sincerity and
diligence in complying with the tax code. In effect, Moroney failed to provide the IRS
with the very information it needed to accurately assess his taxes, and now he seeks to
benefit from the IRS’s resulting imprecision (which was hardly surprising, given
Moroney’s lack of assistance). Moroney’s approach would only discourage the IRS
from abating debtors’ tax liabilities—especially when any adjustment, no matter how
small, would lead to a discharge of the entire tax liability, no matter how large.
Id. The bankruptcy court below applied this reasoning and held that Giacchi’s tax documents did not
serve a legitimate tax purpose. Giacci, Adv. No. 12-00465, slip op. at 3 n.5 (Bankr. E.D. Pa. Jan. 9,

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Giacchi argues that he proved the IRS used the numbers from his tax documents to prepare its proof of claim.
Giacchi’s Br. 11. There was never any question about whether the IRS used Giacchi’s numbers, though. Counsel for the
United States noted in his opening statement at trial, “the United States will show that the assessments almost precisely
equal the amounts of tax that Mr. Giacchi reported on his tax return forms for the years in question.” Trial Tr. 8:21–24.

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2014), ECF No. 73. No persuasive argument has been presented on appeal for rejecting the Moroney
reasoning. 6
Giacchi’s post-assessment tax documents do not qualify as “returns” under 11 U.S.C. §
523(a). For that reason, Giacchi’s federal tax liabilities for 2000, 2001, and 2002 are excepted from
discharge.
B.

The Bankruptcy Court is affirmed in its finding that the tax assessments are accurate
and correct

Tax assessments by the Internal Revenue Service are presumed to be correct. Francisco v.
United States, 267 F.3d 303, 319 (3d Cir. 2001); Resyn Corp. v. United States, 851 F.2d 660, 662–63
(3d Cir. 1988); accord United States v. Balice, 505 F. App’x 142, 146 (3d Cir. 2012). Once the IRS
shows that the taxes were assessed, by introducing certified records of the assessments, the burden
shifts to the taxpayer to show that the assessments are incorrect. Balice, 505 F. App’x at 146; United
States v. Byock, 130 F. App’x 594, 595 (3d Cir. 2005); Psaty v. United States, 442 F.2d 1154, 1159
(3d Cir. 1971). The taxpayer cannot carry this burden simply by showing the assessments are
“erroneous in some respects.” Francisco, 267 F.3d at 319 (quoting United States v. Janis, 428 U.S.
433 (1976)). The taxpayer must prove the correct amount of his tax liability. 7 Id. This allocation of
the burden of proof under the tax law governs tax litigation in bankruptcy court. See Raleigh v.
Illinois Dep’t of Revenue, 530 U.S. 15, 26 (2000).

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Instead, Giacchi says only that there is something improper about the IRS using his postassessment tax
documents to decrease his liability while also maintaining that the tax documents have no legitimate tax purpose.
Giacchi’s Br. 10–11.
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Francisco v. United States was a tax refund action. That is, the taxpayers paid the assessment and then sued for a
refund. 267 F.3d 303, 306 (3d Cir. 2001). Accordingly, the Third Circuit explained that “the taxpayer bears the burden of
proving the amount he is entitled to recover.” Id. at 319 (quoting United States v. Janis, 428 U.S. 433 (1976)). This
burden of proof is the same whether the taxpayer is seeking a refund of taxes already paid or the government is seeking to
collect taxes owed. Psaty v. United States, 442 F.2d 1154, 1158–60 (3d Cir. 1971).

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The government proved that the IRS assessed taxes against Giacchi for the years in question.
Trial Exs. D-1, D-2, D-3. The assessments of principal tax matched the total tax Giacchi himself
reported on his tax return forms. 8 Giacchi did not present evidence or argument that his principal tax
liabilities for the years in question were less than the amounts assessed. 9
Instead, Giacchi argued that his current outstanding liabilities for these tax years are lower
than the amounts the government claims. Giacchi’s argument was based on his assumption that the
IRS had collected $25,856 that the certified transcripts do not show. 10 Giacchi did not testify or offer

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There are only three differences between the assessments and the figures Giacchi reported on his tax documents.
First, for tax year 2000, Giacchi reported that he had $26,455 in federal income tax withheld during the tax year. Trial Ex.
P-5, line 58. The certified transcript, however, shows that Giacchi had only $26,452 in federal income tax withheld during
the tax year. Trial Ex. D-1. Giacchi did not testify or present any evidence beyond the bare purported tax return that the
withholding was anything other than the $26,452 reflected in the IRS certified transcript. Giacchi’s bare tax document is
insufficient to rebut the presumption that the certified transcript is correct.
Second, also for tax year 2000, Giacchi reported that he had $3,382 in excess social security tax withheld during
the tax year. Trial Ex. P-5, line 61. The certified transcript, however, does not show any such withholding. Trial Ex. D-1.
Giacchi did not testify or present any evidence beyond the bare tax document that he actually had $3,382 in excess social
security tax withheld. Giacchi’s bare tax document is insufficient to rebut the presumption that the certified transcript is
correct.
Third, for tax year 2001, Giacchi initially reported that his total tax was $20,025. Trial Ex. P-6, line 58. Then, he
filed amended tax return documents reporting that his total tax was actually $27 less, $19,998. Trial Ex. P-6a. The
certified transcript, however, shows that the IRS assessed principal tax—not including interest and penalties—of $20,025.
Trial Ex. D-2. Giacchi did not testify or present any evidence beyond the bare amended tax return document that his total
tax was anything other than the $20,025 reflected in the IRS certified transcript. Giacchi’s bare amended tax return
document is insufficient to rebut the presumption that the certified transcript is correct.
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The three differences described in footnote 9 above are the only areas where Giacchi arguably presented
evidence or argument that his principal tax liabilities were other than what the IRS had assessed.
10
Giacchi’s calculations of his current outstanding liabilities are shown in Trial Exhibit P-10. On cross
examination, Giacchi testified about his assumption:
Q.

Is it correct that on Page 1 of Exhibit P-10 next to the line marked Tax Collected by IRS from Inception
you assumed that the IRS calculate, collected $25,856 for tax year 2000?

A.

That would be my assumption, yes.

Q.

Okay. And that assumption means that you had a balance due from the IRS for that tax year of $15,169,
is that correct?

A.

That’s correct.

Q.

And that $15,169 appears again on the second page of Exhibit P-10, is that correct?

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other evidence that he had in fact paid this amount, or that the IRS had collected it from him
involuntarily. The certified transcripts do not reflect such a payment or collection. Giacchi’s
assumption is insufficient to rebut the presumption that the certified transcripts correctly reflect the
assessments and payments.
The bankruptcy court rejected Giacchi’s argument that his tax liabilities were lower than the
United States claimed because the court was unable to understand Giacchi’s confusing calculations.
Giacci, Adv. No. 12-00465, slip op. at 4 n.6 (Bankr. E.D. Pa. Jan. 9, 2014), ECF No. 73. Giacchi
argues that the learned bankruptcy judge could not understand because “he tried to apply Aristotelian
A.

That’s correct.

Q.

And you calculated your adjustments for tax year 2000 based on that $15,169, is that correct?

A.

That’s correct.

Q.

Okay. The same thing is true for tax year 2001, is that correct?

A.

That’s correct.

Q.

And you found, you came up with the numbers that you assumed the IRS collected by subtracting the
amount shown on Exhibit P-2, which is a Notice of Federal Tax Lien, or, rather, a facsimile copy of a
Notice of Federal Tax Lien, is that correct?

A.

That’s correct.

Q.

You subtracted that figure from the amount shown on the Government’s proof of claim as due for
principal tax for the various years, is that correct?

A.

That’s correct.

MR. DUNN: Objection. I think that counsel has the subtraction backwards.
MR. RUSSELL: He subtracted 25,000 from zero for tax year 2000.
BY MR. RUSSELL:
Q.

Is that correct, to come up with a collection of $25,000?

A.

Well, the, the amount on the proof of claim is zero for that particular year and the amount of the lien
was 25 and change. Therefore, my assumption was when I did the calculations is that the Government
had, had to have collected $25,856 for that number to go to zero.

Trial Tr. 92–94.

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logic to the higgledy-piggledy Tax Code, and that degraded the rest of his findings.” Giacchi’s Br.
12. This is incorrect. Giacchi simply failed to prove that his tax liabilities were anything other than
the amounts assessed. He submitted confusing calculations that relied on an unproven assumption
that Mr. Giacchi had paid—or the IRS had collected from him involuntarily—substantially more tax
than the evidence showed.
IV.

CONCLUSION
For the reasons set forth hereinabove, the Court affirms the Bankruptcy Court’s Order of

January 9, 2014, in all respects. An appropriate Order follows.

BY THE COURT:

/s/ Joseph F. Leeson, Jr.________________
JOSEPH F. LEESON, JR.
United States District Judge

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