First Circuit Looks at One Day Rule Again

0 Flares 0 Flares ×

I have written many times about the one day rule adopted by the First Circuit in the case of In re Fahey, 779 F.3d 1 (2015).  You can find earlier posts here and here (discussing the bankruptcy court decision in Kriss) with links in those posts to the many earlier ones.  This rule prevents a debtor from obtaining a discharge of taxes for a tax year if the debtor filed his taxes even one day late.  As I have written on many occasions, the rule makes no sense to me and could not have been what Congress intended.

Kriss v. United States (In re Kriss), No. 21-1206, 2022 WL 17100572 (1st Cir. Nov. 22, 2022) offers the First Circuit the chance to take another look at the issue.  On the brief for Mr. Kriss is John Pottow, a professor at Michigan Law School who has taken up the sword on this issue to try to get the law back on the right path.  Unfortunately, both the facts and prior history of the case prevent the reversal of First Circuit precedent sought in this case.  It did seem to me, however, that the First Circuit acknowledged that it may have gotten the law wrong in Fahey.


Mr. Kriss failed to timely file his 1997 and 2000 tax returns.  The IRS assessed a liability against him for 1997 in March of 2003 using the substitute for return IRC 6020(b) procedures and in September of 2003 did the same for the year 2000.  The IRS began unsuccessful collection efforts.  The opinion states that Mr. Kriss submitted Forms 1040 for the two years in 2007 but does not say what liabilities were reported or, if he reported less than the amount assessed by the IRS using the substitute for return procedure, whether the IRS abated the amount due down to the liability reflected on the late filed Forms 1040.  Some balance due remained after the filing of the Forms 1040.

In 2012 Mr. Kriss filed a chapter 13 petition.  He remained in bankruptcy for the five year life of the plan receiving a discharge in 2017.  The bankruptcy and district courts, no doubt following the decision in Fahey, held that his discharge did not discharge the 1997 and 2000 taxes.

The First Circuit acknowledges that it has decided the issue of discharge in a late filed return; however, it notes that its decision in Fahey involved the taxes owed to Massachusetts and not to the United States.  It acknowledges that unlike Massachusetts, the IRS interprets the statutory provisions differently and considers “many late-filed federal returns to be returns within the meaning of section 523(a)(*).”

This sidesteps the issue Professor Pottow sought to litigate though giving a tip of the cap to those arguments:

Ultimately, we need not decide whether Fahey entirely applies to federal returns just as it applies to Massachusetts returns. Nor need we consider the cogent arguments well marshalled by Kriss on appeal for rethinking Fahey. Rather, even if Fahey does not control, Kriss loses because his much belated filings did not qualify as returns under section 523(a)(*) even under the alternative test put forward by Kriss in the bankruptcy court. See United States v. Lara, 970 F.3d 68, 78 (1st Cir. 2020) (“We need not decide which standard applies in this case, as [appellant’s] challenge fails under either standard.”); United States v. Burgos-Montes, 786 F.3d 92, 105 (1st Cir. 2015).

Mr. Kriss argues that his late filed returns meet the Beard test.  We have discussed that test here.  In essence his arguments seek to push aside any impact of section 523(*) and take the case back to the pre-2005 debate which the amendment to the statute was designed, though poorly written, to eliminate.  He argues that his late filing of the returns coming long after the IRS had already created substitutes for return was an honest and reasonable attempt to satisfy the filing requirement.  This is the argument accepted by the 8th Circuit in In re Colson, 446 F.3d 836 (8th Cir. 2006).  In the courts below he argued for a rejection of the one day rule based on the three circuit court decisions rejecting that rule: In re Justice, 817 F.3d 738 (11th Cir. 2016), In re Giacchi, 856 F.3d 244 (3d Cir. 2017), and In re Smith, 828 F.3d 1094 (9th Cir. 2016), all of which rejected the Colsen objective test.

Mr. Kriss changed his argument because he not only needed a rejection of the one day rule but he needed a rejection of the majority view that after the IRS has prepared a substitute for return it is too late for a debtor to meet the Beard test.  It is unfortunate that the facts of this case did not involve a taxpayer who filed late but before the IRS filed a substitute for return.  That would have presented a clean case for the First Circuit to reconsider its decision in the Fahey case.

The First Circuit rules against Mr. Kriss because the cases he cited rejecting the one day rule also reject granting a discharge in his circumstances and because he did not argue Colson below.  The Colson decision creates a test that is virtually impossible for the IRS to administer.  It sought a change in the statute trying to get a legislative rule that once it had made an assessment based on an unagreed substitute for return, the debtor could not later file a Form 1040 and have that treated as a return.  Instead, the IRS got legislative language that is unclear and has caused problems for the past 17 years.  The IRS has succeeded in convincing almost all courts that the Colson test does not work and is not the proper test.  It has succeeded in convincing the most recent circuits addressing the one day rule that such a rule is an improper interpretation of section 523(*).  It would be nice to have the Supreme Court weigh in on the issue and settle it once and for all in order to eliminate both circuit splits that exist.  Unfortunately, Mr. Kriss did not have the right facts nor make the right arguments below to bring this issue to the Supreme Court. 

The language of the First Circuit stating “nor need we consider the cogent arguments well marshalled by Kriss on appeal for rethinking Fahey,” makes me think that maybe it would reconsider Fahey if presented with the right facts properly argued below.  That would be good.  Even better would be a Supreme Court decision sustaining the position of the Third, Ninth and Eleventh Circuits.

Comment Policy: While we all have years of experience as practitioners and attorneys, and while Keith and Les have taught for many years, we think our work is better when we generate input from others. That is one of the reasons we solicit guest posts (and also because of the time it takes to write what we think are high quality posts). Involvement from others makes our site better. That is why we have kept our site open to comments.

If you want to make a public comment, you must identify yourself (using your first and last name) and register by including your email. If you do not, we will remove your comment. In a comment, if you disagree with or intend to criticize someone (such as the poster, another commenter, a party or counsel in a case), you must do so in a respectful manner. We reserve the right to delete comments. If your comment is obnoxious, mean-spirited or violates our sense of decency we will remove the comment. While you have the right to say what you want, you do not have the right to say what you want on our blog.

Speak Your Mind