Sixth Circuit Holds that State Court Judge’s Failure To Pay Taxes Was Willful for Purposes of Bankruptcy Discharge Rule

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Your bloggers have had lots on their plate this week, so we apologize for the lighter than usual coverage. Luckily, others, like Jack Townsend, who in addition to working with me to cover criminal tax in Saltzman and Book, has his own terrific blog, Federal Tax Crimes. Over there today he discusses United States v Helton, an unpublished Sixth Circuit opinion that addresses the exception for bankruptcy discharge in Bankruptcy Code Section 523(a)(1)(C) for a debt “with respect to which the debtor . . . willfully attempted in any manner to evade or defeat such tax.”  

The issue in these cases turns on what is needed to prove willfulness. In 2014 guest poster Lavar Taylor discussed the Ninth Circuit’s approach in What Constitutes An Attempt To Evade Or Defeat Taxes For Purposes Of Section 523(a)(1)(C) Of The Bankruptcy Code: The Ninth Circuit Parts Company With Other Circuits, Part 1 and Part 2  

Helton involves a Georgia state court judge who prior to his time on the bench ran up some pretty significant income tax debts. At the same time the taxpayer often frequented restaurants, drove a Mercedes, and made sizable charitable contributions. The case turned on whether Helton voluntarily and intentionally violated the duty to pay taxes.  According to the Sixth Circuit (internal cites omitted), “[t]hat element is met when the taxpayer has the financial means to meet his outstanding tax liabilities but makes a conscious decision not to apply those monies toward his tax debt.”

The opinion concluded that Helton’s “discretionary spending—lavish when compared to the pittance he allocated toward his taxes—amply supported the district court’s finding that Helton’s violation of his duty to pay taxes was voluntary and intentional.”

As the Sixth Circuit discusses, the excuse from the taxpayer, that he was busy with work and occasionally depressed, was not enough to escape the finding that he intentionally violated his tax paying duty. It was not necessary for the court to conclude that his lifestyle spending was undertaken specifically to avoid paying taxes.

About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

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