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United States v. Bush
United States District Court, S.D. Indiana, Indianapolis Division
November 18, 2016
UNITED STATES OF AMERICA, Appellant,
DONALD WAYNE BUSH, and KIMBERLY ANN BUSH, Appellees.
ORDER ON BANKRUPTCY APPEAL
J. McKINNEY, JUDGE.
bankruptcy appeal is narrow. The issue before the Court is
whether Bankruptcy Judge Carr appropriately found that tax
penalties Debtors/Appellees Donald and Kimberly Bush
(collectively, “Debtors” or
“Appellees”) may owe for the tax years 2009, 2010
and 2011. For the reasons stated herein, the opinion of the
Bankruptcy Court is AFFIRMED.
THE BANKRUPTCY COURT'S DECISION
Carr addressed the issue as follows:
The Court and the parties refer to the issue to be decided
herein - the dischargeability of tax penalties Debtors may
owe for tax years 2009, 2010 and 2011 - as the
“Cassidy issue.” In Cassidy v.
C.I.R., 814 F.2d 477, 481 (7th Cir. 1987)
(“Cassidy I”), the Seventh Circuit Court
of Appeals wrote:
Moreover, subsection 523(a)(7)(A) mandates that fraud
penalties are nondischargeable if the underlying tax with
respect to which the penalty was imposed is also
nondischargeable. S. Rep. No. 989 at 79, U.S. Code Cong.
& Admin. News 1976, p. 5864. Because the taxpayer's
deficiencies are nondischargeable, his tax penalties are
[Footnote omitted.] Arguably, if Cassidy I is
binding precedent, then the IRS might prevail because Debtors
have conceded that their taxes owed for tax years 2009, 2010
and 2011 are nondischargeable and that there is no dispute as
to the amounts of such taxes.
However, the binding nature of the ruling in Cassidy
I was “disclaimed” by the Seventh Circuit in
Matter of Cassidy, 892 F.2d 637, 640 (7th Cir. 1990)
(“Cassidy II”). In Cassidy II,
the court wrote:
If this action is barred by the earlier litigation, it must
be on the strength of this Court's opinion in Cassidy
I. But for a ruling to have preclusive effect, it must
be necessary to the decision. … United States v.
Crawley, 837 F.2d 291 (7th Cir. 1988), defines dicta as
that portion of an opinion not entitled to the full weight
usually given judicial decisions, including any portion not
necessary to the outcome of the case. The portion of
Cassidy I which concerned the dischargeability of
the debt was, unfortunately, dicta.
[Internal citations omitted.]
After Cassidy II, other courts in this circuit have
considered the interpretation of § 523(a)(7)(A) and (B)
to be an “open issue, ” not controlled by
Cassidy I, and have looked “to other
jurisdictions for guidance”. Roberts v. United
States (In re Roberts), 129 B.R. 171, 172-73 (C.D. Ill.
1991) (“Illinois Roberts”). See also
Torres v. Illinois Dep't of Revenue (In re Torres),
143 B.R. 183, 188-89 (Bankr. N.D.Ill. 1992); and Carlen
v. Dep't of the Treasury Internal Revenue Serv. (In re
Carlen), 1991 WL 424977 at *27 (Bankr. N.D. Ind. 1991).
The Court agrees - it is bound by Cassidy II's
determination that Cassidy I's
“ruling” is dicta, and therefore Cassidy
I has no preclusive impact. Accordingly, the Court will
start its analysis with the plain language of §
523(a)(7)(A) and (B). In re Crane, 742 F.3d 702, 708
(7th Cir. 2013) (“We begin with the language
of the statute. When the language of the statute is plain, we
enforce it according to its terms.”).
Section 523 provides:
(a) A discharge under section 727 … of this title does
not discharge an individual ...
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