U.S. Court of Appeals 6th Circuit Case Summaries: February 21, 2014.

Byline: Michigan Lawyers Weekly Staff

(February 13, 2014) Bankruptcy Debt under Michigan Single Business Tax not dischargeable The responsible corporate officer of a now-defunct corporation remains individually liable for the corporation's unpaid Michigan Single Business Tax even though he received a Chapter 7 bankruptcy discharge. Overview "Despite the fact that Gaetano Rizzo filed for bankruptcy protection and received a general discharge, the Michigan Department of Treasury (Treasury) persisted in its claim that Rizzo owed Treasury more than $70,000 in unpaid Michigan Single Business Tax (SBT). "According to Treasury, Rizzo was personally liable for the unpaid tax because a company for which he had been the responsible corporate officer had failed to pay it, thereby triggering Rizzo's obligation to pay under applicable state statutes. "Treasury argues that Rizzo's personal liability for the tax deficiency is nondischargeable in bankruptcy because it is a debt for an 'excise tax,' as defined in 11 U.S.C. s. 507(a)(8)(E). Rizzo concedes that the unpaid SBT is an 'excise tax' deficiency as to the now-defunct company of which he was formerly an officer, and he also does not dispute that he was personally liable for the company's unpaid tax under the relevant state statutes. "Nevertheless, Rizzo argues that, because he had only derivative - rather than primary - liability for the unpaid SBT, his obligation to pay it is not a debt for an 'excise tax' and is consequently not excepted from discharge under s. 507(a)(8)(E). "Both the bankruptcy court and the district court disagreed with Rizzo and dismissed his adversary action. "Because Michigan's tax statutes simply confer derivative liability upon Rizzo for precisely the same excise tax deficiency that was assessed against the company, we affirm." Analysis "Although Rizzo admits that the unpaid SBT is a nondischargeable 'excise tax' debt for purposes of s. 507(a)(8)(E) as to the Company, he contends that his personal liability for the Company's SBT tax deficiency is not a debt for an 'excise tax.' "Because the term 'excise tax' is not defined in the Bankruptcy Code, courts determining its meaning have typically resorted to dictionary definitions. ... "The consensus is that 'excise tax' as used in s. 507(a)(8)(E) generally refers to '(a] tax imposed on the manufacture, sale, or use of goods (such as a cigarette tax), or on an occupation or activity (such as a license tax or an attorney...

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