No. 00-1567 

In the Supreme Court of the United States 

CORNELIUS P. YOUNG AND SUZANNE P. YOUNG, 
PETITIONERS 

v. 

UNITED STATES OF AMERICA 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE FIRST CIRCUIT 

BRIEF FOR THE UNITED STATES 

THEODORE B. OLSON 
Solicitor General 

Counsel of Record 

EILEEN J. O’CONNOR 

Assistant Attorney General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

PATRICIA A. MILLETT 

Assistant to the Solicitor 

General 

BRUCE R. ELLISEN 
THOMAS J. SAWYER 

Attorneys 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTIONS PRESENTED 

Whether the three-year time limit for establishing 
the priority and nondischargeability of income taxes 
under the Bankruptcy Code, 11 U.S.C. 507(a)(8)(A)(i), 
523(a)(1)(A), is tolled during the time an automatic stay 
in the debtors’ prior bankruptcy proceeding precluded 
the government from collecting those taxes. 

(I) 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 1 

Statutory provisions involved ..................................................... 
2 

Statement ........................................................................................ 5 

Summary of argument .................................................................. 
11 

Argument: 

The structure, legislative history, and purpose 

of the Bankruptcy Code and its Internal Revenue 

Code complement, along with traditional equitable 

principles, require tolling of the three-year lookback 

period ....................................................................................... 12 

A. The structure, history, and purpose of the 

relevant statutory provisions manifest 

Congress’s intent that the lookback period 

be tolled while the automatic stay is in effect ......... 
15 

1. The structure and history of the legislation 
15 

a. The 1996 compromise .................................. 
15 

b. The 1978 Bankruptcy Reform Act ............ 
18 

c. The 1980 Tax Code amendment ................ 
19 

2. The bankruptcy code reflects Congress’s 

intent that the three-year lookback period 

be tolled ................................................................... 

21 

a. Courts must consider statutory struc- 
ture and purpose .......................................... 
21 

b. Petitioners’ interpretation would 

create anomalies and inconsistencies ....... 

26 

B. Traditional principles of equitable tolling 

prevent the running of the three-year look- 
back period ..................................................................... 32 

(III) 

IV 

Table of Contents—Continued: 

Page 

1. Equitable tolling is appropriate because of 

the nature of the lookback period, the legal 

prohibition on governmental enforcement, 

congressional purpose, and the public 

interest .................................................................... 32 

a. The lookback period is the type of 

time limit that is subject to equitable 

tolling .............................................................. 35 

b. Debtors cannot claim a lack of dili- 
gence on the part of the government ....... 
39 

c. Congressional purpose and public 

policy support tolling ................................... 

39 

2. A uniform rule of tolling should be 

adopted .................................................................... 40 

Conclusion ....................................................................................... 43 

Appendix ......................................................................................... 1a 

TABLE OF AUTHORITIES 

Cases: 

American Pipe & Constr. Co. v. Utah, 414 U.S. 

538 (1974) ................................................................................. 

38 

Badaracco v. Commissioner, 464 U.S. 386 (1984) ....... 

36, 37 

Bailey, In re, 111 B.R. 151 (Bankr. W.D. Tenn. 

1988) ......................................................................................... 27 

Bair, In re, 240 B.R. 247 (Bankr. W.D. Tex. 1999) ............ 

22 

Bob Jones Univ. v. United States, 461 U.S. 574 

(1983) ........................................................................................ 24 

Bowen v. City of New York, 476 U.S. 467 (1986) ............. 

40 

Brickley, In re, 70 B.R. 113 (BAP 9th Cir. 1986) ............... 

38 

Brown v. Duchesne, 60 U.S. (19 How.) 183 

(1856) ........................................................................................ 36 

Burnett v. New York Cent. R.R., 380 U.S. 

424 (1965) ............................................................................. 39, 40 

V 

Cases—Continued: Page 

Chickasaw Nation v. United States, N0. 00-507, 

2001 WL 1488017 (Nov. 27, 2001) .............. 

2, 3, 24, 26, 31, 32 

Choteau v. Burnett, 283 U.S. 691 (1931) ............................ 

25 

Clark, In re, 184 B.R. 728 (Bankr. N.D. Tex. 1995) ....... 

22, 41 

Cross, In re, 119 B.R. 652 (Bankr. W.D. Wis. 1990) .......... 

27 

El AL Israel Airlines, Ltd. v. Tsui Yuan Tseng, 

525 U.S. 155 (1999) ................................................................ 

24 

Eysenbach, In re, 170 B.R. 57 (Bankr. W.D.N.Y. 

1994), revd on other grounds, 183 B.R. 365 

(W.D.N.Y. 1995) ..................................................................... 

27 

Gier, In re, 986 F.2d 1326 (10th Cir. 1993) .......................... 

42 

Green v. Bock Laudry Mach. Co., 490 U.S. 504 

(1989) ........................................................................................ 24 

Gregory v. Helvering, 293 U.S. 465 (1935) ........................ 

25 

Greyhound Corp. v. Mt. Hood Stages, Inc., 

437 U.S. 322 (1978) ................................................................ 

34 

Hallstrom v. Tillamook County, 493 U.S. 20 

(1989) .............................................................................. 

24, 33, 35 

Helvering v. Gregory, 69 F.2d 809 (2d Cir. 1934), 

aff’d, 293 U.S. 465 (1935) .................................................. 

24, 25 

Hernandez v. Commissioner, 490 U.S. 680 

(1989) ........................................................................................ 15 

Hollowell, In re, 222 B.R. 790 (Bankr. N.D. Miss. 

1998) ..................................................................................... 

22, 41 

Honda v. Clark, 386 U.S. 484 (1967) .............................. 

25, 36 

Hoppe, In re, 259 B.R. 852 (Bankr. E.D. Tex. 

2001) ......................................................................................... 21 

Huckfeldt, In re, 39 F.3d 829 (8th Cir. 1994) ...................... 

42 

Irwin v. Department of Veterans Affairs, 498 

U.S. 89 (1990) ........................................................... 

33, 34, 36, 38 

Johnson v. Home State Bank, 501 U.S. 78 (1991) .......... 

6, 24, 

32-33 

Katchen v. Landy, 392 U.S. 323 (1966) .............................. 
32 

McCormick v. United States, 680 F.2d 345 (5th 

Cir. 1980) ................................................................................. 38 

VI 

Cases—Continued: Page 

Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. 

Prot., 474 U.S. 494 (1986) .................................................... 

34 

Miller, In re, 199 B.R. 631 (Bankr. S.D. Tex. 1996) ....... 

22, 41 

Montoya, In re, 965 F.2d 554 (7th Cir. 1992) ...................... 

14 

Morgan, In re, 182 F.3d 775 (11th Cir. 1999) .................. 

14, 40 

Nassau Smelting & Refining Works, Ltd. v. 

Brightwood Bronze Foundry Co., 265 U.S. 269 

(1924) ........................................................................................ 36 

Padilla, In re, 222 F.3d 1194 (9th Cir. 2000) ....................... 

42 

Palmer, In re, 219 F.3d 580 (6th Cir. 2000) ..................... 

14, 41 

Pepper v. Litton, 308 U.S. 295 (1939) ....................... 

32, 33, 38 

Quenzer, In re, 19 F.3d 163 (5th Cir. 1993) ......................... 

14 

Richards, In re, 994 F.2d 763 (10th Cir. 1993) ................. 

14, 40 

Superintendent of Five Civilized Tribes v. 

Commissioner, 295 U.S. 418 (1935) ................................... 

25 

Taylor, In re, 81 F.3d 20 (3d Cir. 1996) ................................ 

14 

Toibb v. Radloff, 501 U.S. 157 (1991) ................................. 

6 

United States v. Beggerly, 524 U.S. 38 (1998) .................. 

35 

United States v. Brockamp, 519 U.S. 347 (1990) ... 

35, 41, 42 

United States v. Energy Res. Co., Inc., 495 U.S. 

545 (1990) ................................................................................. 

32 

United States v. Lee, 455 U.S. 252 (1982) .......................... 

15 

United States v. Locke, 471 U.S. 84 (1985) .............. 

24, 33, 35 

United States v. Monia, 317 U.S. 424 (1943) .................... 

31 

United States v. Noland, 517 U.S. 535 (1996) .............. 

39, 40 

United States v. Ron Pair Enters., Inc., 489 U.S. 

235 (1997) ................................................................................. 

26, 31 

United States Nat’l Bank of Oregon v. Independent 

Ins. Agents of Am., Inc., 508 U.S. 439 (1993) .................. 

24 

Waugh, In re, 109 F.3d 489 (8th Cir.), cert. denied, 

522 U.S. 823 (1997) ................................................................ 

14 

West, In re, 5 F.3d 423 (9th Cir. 1993), cert. denied, 

511 U.S. 1081 (1994) .............................................................. 

14 

Whittaker v. Whittaker Corp., 639 F.2d 516 

(9th Cir.), cert. denied, 454 U.S. 1031 (1981) .................... 38 

VII 

Cases—Continued: Page 

Wolin v. Smith Barney Inc., 83 F.3d 847 

(7th Cir. 1996) ......................................................................... 

41 

Zipes v. Trans World Airlines, Inc., 455 U.S. 385 

(1982) ........................................................................................ 35, 36 

Statutes and rules: 

Act of July 5, 1966, Pub. L. No. 89-496, 80 Stat. 270-271.... 

16 

Bankruptcy Code: 

11 U.S.C. 35(a) (1964) ....................................................... 

15 

Ch. 1, 11 U.S.C. 101 et seq.: 

11 U.S.C. 104(a)(4) (1964) ................................................ 

15 

11 U.S.C. 105(a) .................................................... 

2, 32, 33, 34 

11 U.S.C. 108 ...................................................................... 

7, 10 

11 U.S.C. 108(c) ................................................ 

2, 7, 18, 19, 20 

Ch. 3, 11 U.S.C. 301 et seq.: 

11 U.S.C. 362(a) ................................................................. 

2, 7 

11 U.S.C. 362(a)(4) ............................................................ 

7 

11 U.S.C. 362(a)(6) ............................................................ 

7, 8 

11 U.S.C. 362(c) ................................................................. 

7 

Ch. 5, 11 U.S.C. 501 et seq.: 

11 U.S.C. 507(a) ................................................................. 

3 

11 U.S.C. 507(a)(8) .................................................... 

5, 6, 8, 9 

11 U.S.C. 507(a)(8)(A)(i) ................................................... 

16 

11 U.S.C. 523(a) ................................................................. 

4 

11 U.S.C. 523(a)(1)(A) ............................................ 

5, 6, 9, 16 

11 U.S.C. 523(a)(1)(B) ....................................................... 

16 

11 U.S.C. 523(a)(1)(C) ....................................................... 

16 

11 U.S.C. 523(b) ................................................................. 

28 

Ch. 7, 11 U.S.C. 701 et seq. ............................................. 

passim 

11 U.S.C. 726(a)(1) ............................................................ 

20 

11 U.S.C. 727(a)(8) ........................................................ 

20, 28 

11 U.S.C. 727(a)(9) ........................................................ 

20, 28 

11 U.S.C. 727(b) ................................................................. 

4, 20 

Ch. 13, 11 U.S.C. 1301 et seq. ......................................... 

passim 

11 U.S.C. 1307 .................................................................... 

27 

11 U.S.C. 1307(a) ............................................................... 27 

VIII 

Statutes and rules—Continued: 
Page 

11 U.S.C. 1307(b) ............................................................... 

8 

11 U.S.C. 1307(c) ............................................................... 

27 

11 U.S.C. 1322(a)(2) .......................................................... 

6 

11 U.S.C. 1322(d) ............................................................... 

7 

11 U.S.C. 1326 .................................................................... 

6 

11 U.S.C. 1326(a)(2) .......................................................... 

9 

11 U.S.C. 1328(a) ............................................................... 

6, 7 

Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 

92 Stat. 2549 ............................................................................ 

17 

§ 108(c), 92 Stat. 2556-2557 .............................................. 

18 

Bankruptcy Tax Act of 1980, Pub. L. No. 96-589, 

§ 6(a), 94 Stat. 3389 ................................................................ 

19 

Internal Revenue Code (26 U.S.C.): 

§§ 6301-6344 (1994 & Supp. V 1999) ................................... 

37 

§ 6501(a) (1994 & Supp. V 1999) ........................................ 

7 

§ 6502(a)(1) (Supp. V 1999) ................................................. 

7 

§ 6503 (1994 & Supp. V 1999) ............................................. 

4 

§ 6503(b) ................................................................................. 

10 

§ 6503(h) ......................................................................... 

8, 19, 20 

Fed. R. Bankr. P.: 

Rule 2003(a) ............................................................................ 

6 

Rule 4004 ................................................................................. 

6 

Rule 9014 ................................................................................. 

42 

Miscellaneous: 

Collier on Bankruptcy (Lawrence P. King ed., 15th ed. 
2001): 

Vol. 2 .................................................................................... 

33 

Vol. 4 .......................................................................... 
6, 14, 27 

Developments in the Law—Statutes of Limitations, 
63 Harv. L. Rev. 1177 (1950) ................................................ 33, 38 

H.R. 333, 107th Cong., 1st Sess. (2001) ................................. 

30 

H.R. Rep. No. 687, 89th Cong., 1st Sess. (1965) ........ 15, 17, 37 

IX 

Miscellaneous—Continued: Page 

H.R. Rep. No. 595, 95th Cong., 1st Sess. (1977) .................. 
15, 18, 

19, 35, 37 

S. Conf. Rep., 106th Cong., 2d Sess., 146 Cong. 
Rec. S11,708 (daily ed. Dec. 7, 2000) .................................. 

30 

S. Rep. No. 1158, 89th Cong., 2d Sess. (1966) .............. 
15, 16, 17 

S. Rep. No. 989, 95th Cong., 2d Sess. (1978) ................ 
passim 

S. Rep. No. 1106, 95th Cong., 2d Sess. (1978) ....... 
17, 18, 29, 31 

S. Rep. No. 1035, 96th Cong., 2d Sess. (1980) ...................... 
19 

Staff of Jt. Comm. on Taxation, 95th Cong., 2d Sess. 

Tax Aspects of S. 2266 (Bankruptcy Reform Act of 
1978) (Comm. Print 1978) ........................................ 17-18, 22, 31 

In the Supreme Court of the United States 

No. 00-1567 

CORNELIUS P. YOUNG AND SUZANNE P. YOUNG, 
PETITIONERS 

v. 

UNITED STATES OF AMERICA 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE FIRST CIRCUIT 

BRIEF FOR THE UNITED STATES 

OPINIONS BELOW 

The opinion of the court of appeals (Pet. App. 1a-11a) 
is reported at 233 F.3d 56. The opinion of the district 
court (Pet. App. 12a-13a) is unofficially reported at 
2000-2 U.S. Tax Cas. (CCH) ¶ 50,522. The opinion of 
the bankruptcy court (Pet. App. 14a-22a) is unofficially 
reported at 99-1 U.S. Tax Cas. (CCH) ¶ 50,553. 

JURISDICTION 

The court of appeals entered its judgment on Decem- 
ber 1, 2000. The petition for a writ of certiorari was 
filed on March 1, 2001, and was granted on September 
25, 2001. The jurisdiction of this Court rests upon 28 
U.S.C. 1254(1). 

(1) 

2 

STATUTORY PROVISIONS INVOLVED 

1. 11 U.S.C. 105(a) provides, in relevant part: 

The court may issue any order, process or judgment 
that is necessary or appropriate to carry out the 
provisions of this title. * * * 

2. 11 U.S.C. 108(c) provides: 

Except as provided in section 524 of this title, if 
applicable nonbankruptcy law, an order entered in a 
nonbankruptcy proceeding, or an agreement fixes a 
period for commencing or continuing a civil action in 
a court other than a bankruptcy court on a claim 
against the debtor, * * * and such period has not 
expired before the date of the filing of the petition, 
then such period does not expire until the later of— 

(1) the end of such period, including any sus- 
pension of such period occurring on or after the 
commencement of the case; or 

(2) 30 days after notice of the termination or 
expiration of the stay under section 362, 922, 1201, 
or 1301 of this title, as the case may be, with respect 
to such claim. 

3. 11 U.S.C. 362(a) provides, in relevant part: 

Except as provided in subsection (b) of this section, 
a petition filed under section 301, 302, or 303 of this 
title * * * operates as a stay, applicable to all 
entities, of –- 

* * * * * 

(6) any act to collect, assess, or recover a claim 
against the debtor that arose before the com- 
mencement of the case under this title. 

3 

* * * * * 

4. 11 U.S.C. 507(a) provides, in relevant part: 

The following expenses and claims have priority in 
the following order: 

* * * * * 

(8) Eighth, allowed unsecured claims of gov- 
ernmental units, only to the extent that such claims 
are for— 

(A) a tax on or measured by income or gross 
receipts— 

(i) for a taxable year ending on or before the 
date of the filing of the petition for which a return, if 
required, is last due, including extensions, after 
three years before the date of the filing of the 
petition; 

(ii) assessed within 240 days, plus any time 
plus 30 days during which an offer in compromise 
with respect to such tax that was made within 240 
days after such assessment was pending, before the 
date of the filing of the petition; or 

(iii) other than a tax of a kind specified in 
section 523(a)(1)(B) or 523(a)(1)(C) of this title, not 
assessed before, but assessable, under applicable 
law or by agreement, after, the commencement of 
the case. 

* * * * * 

4 

5. 11 U.S.C. 523(a) provides, in relevant part: 

(a) A discharge under section 727 * * * of this 
title does not discharge an individual debtor from 
any debt— 

(1) for a tax or a customs duty— 

(A) of the kind and for the periods specified in 
section 507(a)(2) or 507(a)(8) of this title, whether or 
not a claim for such tax was filed or allowed. 

* * * * * 

6. 11 U.S.C. 727(b) provides, in relevant part: 

Except as provided in section 523 of this title, a 
discharge under subsection (a) of this section dis- 
charges the debtor from all debts that arose before 
the date of the order for relief under this chapter 

* * *. 

7. 26 U.S.C. 6503 (1994 & Supp. V 1999) provides in 
relevant part: 

(b) Assets of taxpayer in control or custody of 
court 

The period of limitations on collection [of taxes] 
after assessment prescribed in section 6502 shall be 
suspended for the period the assets of the taxpayer 
are in the control or custody of the court in any 
proceeding before any court of the United States or 
of any State or of the District of Columbia, and for 6 
months thereafter. 

* * * * * 

5 

(h) Cases under title 11 of the United States Code 

The running of the period of limitations 
provided in section 6501 or 6502 on the making of 
assessments or collection [of taxes] shall, in a case 
under title 11 of the United States Code, be sus- 
pended for the period during which the Secretary is 
prohibited by reason of such case from making the 
assessment or from collecting and— 

(1) for assessment, 60 days thereafter, and 

(2) for collection, 6 months thereafter. 

* * * * * 

STATEMENT 

1. Under the Bankruptcy Code, income tax claims 
held by federal, state, and local governments enjoy 
priority for payment in bankruptcy proceedings if the 
tax returns from which those claims arise were due 
within three years of the filing of the bankruptcy 
petition. 11 U.S.C. 507(a)(8). Those same taxes are also 
protected from discharge. 11 U.S.C. 523(a)(1)(A). That 
means that, if the tax claim is not satisfied during the 
bankruptcy proceeding, the claim passes through the 
case and the government may seek to collect the taxes 
from the debtor after the automatic stay in the bank- 
ruptcy proceeding has been terminated. That three- 
year time limit is popularly known as the “three-year 
lookback period.” 
The Bankruptcy Code offers individual debtors two 
primary avenues of debt relief. First, individual debt- 
ors may seek a discharge of their debts under Chapter 7 
of the Bankruptcy Code, 11 U.S.C. 701 et seq. Under 
that Chapter, a debtor liquidates his non-exempt 

6 

assets, which are then distributed to creditors pursuant 
to a schedule of priorities. See 4 Collier on Bankruptcy 
¶ 700.01 (Lawrence P. King ed., 15th ed. 2001). Income 
taxes arising from returns due within the three years 
preceding the petition enjoy an eighth priority for 
distribution in such proceedings and are not subject to 
discharge. 11 U.S.C. 507(a)(8), 523(a)(1)(A). Because a 
debtor immediately relinquishes his assets to a trustee 
for distribution to his creditors, a Chapter 7 proceeding 
generally proceeds expeditiously to discharge, unless a 
creditor objects. See Fed. R. Bankr. P. 2003(a), 4004. 

In the alternative, a debtor may attempt to repay his 
debts by filing for reorganization under Chapter 13 of 
the Bankruptcy Code, 11 U.S.C. 1301 et seq. Chapter 13 
“provides a reorganization remedy for consumer 
debtors and proprietors with relatively small debts.” 
Johnson v. Home State Bank, 501 U.S. 78, 82 (1991). 
Individuals proceeding under Chapter 13 must adopt a 
repayment plan for their debts. That plan must, among 
other things, ensure the full payment of priority tax 
claims, which includes income taxes arising from re- 
turns due within the three years preceding the filing of 
the Chapter 13 petition, 11 U.S.C. 507(a)(8). See 11 
U.S.C. 1322(a)(2). Debtors are obligated to begin 
making monthly payments to a Chapter 13 trustee soon 
after the bankruptcy petition is filed, but none of that 
money is actually distributed to creditors until the plan 
is finally confirmed. 11 U.S.C. 1326. After completion 
of the repayment plan, a debtor obtains a discharge of 
any remaining unpaid debts provided for by the plan. 
11 U.S.C. 1328(a).1 

1 While individuals, as well as businesses, can pursue reorgani- 
zation under Chapter 11, Toibb v. Radloff, 501 U.S. 157, 160-166 
(1991), most individuals prefer Chapter 13’s simplified procedures. 

7 

Whether the debtor proceeds under Chapter 7 or 13, 
the filing of a bankruptcy petition triggers an “auto- 
matic stay” under 11 U.S.C. 362(a). The automatic stay 
prevents, among other things, the government from 
administratively or judicially collecting a debtor’s 
prepetition tax liabilities or filing a notice of federal tax 
lien. 11 U.S.C. 362(a)(4) and (6). The automatic stay 
continues in effect until the property sought by the 
creditor is no longer property of the estate, the case is 
closed or dismissed, or the debtor is granted a dis- 
charge. 11 U.S.C. 362(c). As a general rule, the auto- 
matic stay remains in effect much longer in a Chapter 
13 bankruptcy case than it does in a Chapter 7 pro- 
ceeding. That is because a debtor proceeding under 
Chapter 7 usually receives a discharge shortly after 
relinquishing control of his prepetition assets to the 
trustee. The stay in a Chapter 13 case remains in effect 
until the repayment plan is completed (and the debtor 
is thereby discharged), which generally occurs three to 
five years after the petition is filed. 11 U.S.C. 1322(d), 
1328(a). 

Because the automatic stay interrupts the ability of 
all creditors, including the federal government, to 
pursue actions against the debtor, Section 108 of the 
Bankruptcy Code, 11 U.S.C. 108, tolls those nonbank- 
ruptcy limitations periods until the later of either 
(1) the end of the nonbankruptcy limitations period, 
including any suspensions of the period provided by 
nonbankruptcy law, or (2) thirty days after the bank- 
ruptcy stay is ended. 11 U.S.C. 108(c). The Internal 
Revenue Code likewise suspends the running of its own 
three-year limitation period on tax assessments 
(26 U.S.C. 6501(a) (1994 & Supp. V 1999)) and ten-year 
time limit on collections (26 U.S.C. 6502(a)(1) (Supp. V 
1999)) for the time “during which the Secretary is 

8 

prohibited by reason of such case from making the 
assessment or from collecting.” 26 U.S.C. 6503(h). 

2. a. Petitioners received from the IRS an extension 
of time in which to file their 1992 federal income tax 
return until October 15, 1993, and they filed their 
return within that extended period. Despite earning 
more than $160,000 in 1992, however, petitioners paid 
only about $13,000 of their acknowledged $28,578 tax 
liability. Pet. App. 15a-16a; J.A. 5-6. The United States 
was able to collect only a portion of the remaining past- 
due taxes before May 1, 1996. On that date, petitioners 
filed a Chapter 13 bankruptcy petition. Pet. App 2a. 
That filing triggered the Bankruptcy Code’s automatic 
stay, which barred the government from taking any 
further measures to collect the remaining unpaid taxes. 
11 U.S.C. 362(a)(6). 

Because petitioners’ Chapter 13 bankruptcy case was 
filed less than three years after October 15, 1993— 
when their tax return for the 1992 tax year was due— 
petitioners were required to submit a Chapter 13 plan 
that provided for full payment of the government’s 
claim. Pet. App. 15a. Although petitioners submitted 
such a plan, they failed to seek or obtain confirmation of 
that plan. Id. at 16a. Instead, on October 23, 1996— 
eight days after the three-year lookback period of 
Section 507(a)(8) expired—petitioners filed a notice of 
dismissal of their Chapter 13 bankruptcy case. See id. 
at 2a.2 In February 1997, the trustee filed his final 
report, which was approved by the bankruptcy court, 
and the Chapter 13 case was closed on March 13, 1997. 
Pet. App. 16a. When, as here, dismissal occurs before a 

2 Chapter 13 allows debtors to request that the bankruptcy 
court dismiss their cases voluntarily at any time. 11 U.S.C. 
1307(b). 

9 

Chapter 13 repayment plan is confirmed, any payments 
that were made by the debtors to the Chapter 13 
trustee are returned to the debtors. 11 U.S.C. 
1326(a)(2). As a result, the United States received no 
payments on its claim from the aborted Chapter 13 
proceeding. 

The day before the bankruptcy court entered its 
order closing petitioners’ Chapter 13 case, petitioners 
filed a second petition for relief in bankruptcy. Pet. 
App. 2a-3a, 16a. That petition sought discharge of all 
eligible debts under Chapter 7. The bankruptcy court 
granted that discharge on June 17, 1997. Id. at 3a.3 

b. Following the completion of the Chapter 7 case 
and the termination of the automatic stay, the govern- 
ment sought to collect the outstanding taxes owed by 
petitioners. Pet. App. 3a. In response, petitioners 
sought a determination from the bankruptcy court that 
their 1992 taxes, which were scheduled for full payment 
in the Chapter 13 case, were discharged in the Chapter 
7 case. Ibid. Petitioners asserted that the taxes were 
discharged in that second bankruptcy case because, by 
the time that case was commenced, more than three 
years had elapsed since the due date of their 1992 tax 
return. Because, in petitioners’ view, the three-year 
lookback period had elapsed, the 1992 taxes were not 
“priority” taxes under 11 U.S.C. 507(a)(8) and, conse- 
quently, were not excepted from discharge under 11 
U.S.C. 523(a)(1)(A). 

3 Because petitioners had no assets available to satisfy their 
creditors, their bankruptcy proceeding was characterized as a “no- 
asset” Chapter 7 case. Pet. App. 3a. According to the IRS, during 
fiscal year 2000, the IRS was listed as a creditor or potential 
creditor in more than 315,000 Chapter 7 bankruptcy cases. Nearly 
290,000 of those were no-asset cases. 

10 

The bankruptcy court rejected petitioners’ conten- 
tion. Pet. App. 14a-22a. The court “follow[ed] the well 
reasoned decisions in this circuit, as well as others” (id. 
at 19a), that the three-year lookback period was tolled 
during the period in which the automatic stay in the 
Chapter 13 bankruptcy case precluded the government 
from enforcing its claim. The court explained (id. at 
19a-20a) that the three-year lookback period of Section 
507(a)(8) operates as a statute of limitations and, as 
such, is tolled by the provisions of the Bankruptcy Code 
and Internal Revenue Code that toll the statutes of 
limitations for collection of tax claims when the auto- 
matic stay is in effect. Id. at 19a (citing 11 U.S.C. 108(c) 
and 26 U.S.C. 6503(b)). The court further emphasized 
that any other conclusion would result in “an absurd 
consequence unintended by Congress and would allow 
debtors to manipulate the bankruptcy system.” Pet. 
App. 20a. The court explained that, 

[a]lthough the Court imputes no bad faith on the 
Plaintiffs, it is worth noting that the Defendant’s 
claim was to be paid in full under the Plaintiff ’s 
Chapter 13 plan. Were the Court to allow this debt 
to be discharged, debtors could easily propose a plan 
to pay the Internal Revenue Service’s claim in full 
under Chapter 13, dismiss their Chapter 13 case and 
file Chapter 7 to discharge the tax debt. 

Ibid. “Such an easy loophole,” the court concluded, 
“cannot be allowed,” ibid., because it “would circumvent 
wholly the IRS’s three-year time period in which to 
collect taxes,” id. at 21a. 

The district court sustained the bankruptcy court’s 
ruling. Pet. App. 12a-13a. 

3. The court of appeals affirmed. Pet. App. 1a-10a. 
Deeming the three-year lookback period as “akin to a 

11 

statute of limitations” (id. at 8a), the court of appeals 
concluded that, even in the absence of an express 
statutory tolling provision, courts may adopt a tolling 
rule “to assure that the underlying aims of Congress 
are not frustrated by conduct that thwarts” the plain 
purpose of the statute. Id. at 8a. The court noted that 
“[v]irtually all of the circuit cases dealing with succes- 
sive bankruptcy petitions and the three-year lookback 
provision have chosen to” apply some type of tolling 
rule. Ibid. The court chose to “follow the majority view 
in favor of automatic tolling,” because that rule avoids 
“taxpayer manipulation” of the bankruptcy process and 
preserves the “full three years” that Congress gave the 
government “to assess and collect taxes.” Id. at 6a, 9a. 

SUMMARY OF ARGUMENT 

The court of appeals properly tolled the three-year 
lookback period for the collection of taxes in bankruptcy 
proceedings. The structure of the Bankruptcy Code 
and parallel provisions in the Internal Revenue Code 
manifest Congress’s intent that the automatic stay in 
bankruptcy cases not deprive the government of an 
adequate time in which to seek recovery from delin- 
quent taxpayers. The legislative history and the 
evolution of the relevant statutory provisions reconfirm 
Congress’s understanding of the statutes’ operation. 
The petitioners’ proposed construction, by contrast, 
lacks any rational policy justification and would intro- 
duce unworkable anomalies into the operation of the 
Bankruptcy Code. It is inconceivable that Congress 
intended to legislate a scheme under which procedural 
legerdemain, rather than the recency of a tax obligation 
or the government’s opportunity to pursue recovery, 
would dictate the defeasibility of an individual’s duty to 
pay his fair share of taxes. 

12 

Tolling is consistent not just with the structure, 
purpose, and history of the controlling statutory provi- 
sions, but also with traditional principles of equitable 
tolling. Bankruptcy courts have their roots in equitable 
practice, and Congress has specifically preserved the 
bankruptcy courts’ authority to issue equitable orders 
necessary to enforce the Bankruptcy Code’s provisions. 
Equitable tolling of the three-year lookback period is 
appropriate because the government is legally barred 
from enforcing its claim during the prior bankruptcy 
proceeding and thus will be denied the time Congress 
provided for enforcement in the bankruptcy context. 
The public interest also weighs heavily in favor of 
tolling because it will prevent individuals’ ready 
circumvention of their tax obligations and the attendant 
shifting of their tax burden to other taxpayers. 

ARGUMENT 

THE STRUCTURE, LEGISLATIVE HISTORY, AND 
PURPOSE OF THE BANKRUPTCY CODE AND ITS 
INTERNAL REVENUE CODE COMPLEMENT, ALONG 
WITH TRADITIONAL EQUITABLE PRINCIPLES, RE- 
QUIRE TOLLING OF THE THREE-YEAR LOOKBACK 
PERIOD 

Through the various Bankruptcy and Internal Reve- 
nue Code provisions governing the enforcement of tax 
claims in bankruptcy proceedings, Congress struck a 
delicate balance between the debtor’s obligation to pay 
his fair share of taxes, the debtor’s need for a fresh 
start unsaddled by stale claims, the claims of competing 
creditors, and the government’s need for a fair and 
adequate amount of time in which to prosecute unpaid 
tax claims. Petitioners, and countless debtors like 
them, have sought to unsettle that balance and escape 
payment of their taxes altogether through the mecha- 

13 

nism of serial bankruptcy filings. Debtors double-team 
the automatic stay and the prolonged proceedings 
under Chapter 13 to run down the government’s three- 
year window for enforcing tax claims, then dismiss 
their cases and refile under Chapter 7, whereupon the 
debtors argue that the government’s tax claims have 
been properly aged for discharge under the aegis of the 
automatic stay entered in the earlier bankruptcy pro- 
ceeding(s). Attempts to use this tax-avoidance scheme 
have been widespread, in the experience of the IRS and 
as evidenced by the scores of published cases on the 
issue.4 

Petitioners are unable to support their position by 
reference to congressional intent or the statutory pur- 
pose. Their only reference to congressional purpose 
focuses exclusively on the debtor’s interest in a fresh 
start and the general interests of other creditors; peti- 
tioners overlook entirely the great weight Congress 
placed on ensuring the government a three-year period 
in which to collect tax claims. Nor do petitioners 
attempt to justify their vision of bankruptcy law as 
sensible policy. It has no sound basis. They simply 

4 In an appendix to this brief, we provide a non-exhaustive list 
of some of the cases, beyond the court of appeals decisions dis- 
cussed in this brief, in which the IRS has had to litigate this issue. 
According to the Internal Revenue Service, it participates as a 
creditor or potential creditor in more than 500,000 bankruptcy 
cases annually. In fiscal year 2000, the IRS submitted approxi- 
mately 100,000 proofs of claim as a creditor in proceedings under 
Chapters 7, 11, and 13. The total value of those claims is estimated 
by the IRS to be $6 billion—$1.5 billion of which arises from 
Chapter 13 cases. While the IRS does not keep statistics tracking 
the use of this particular scheme, it advises that approximately 150 
cases are currently pending that involve the use by taxpayers of 
serial bankruptcy filings to obtain a discharge of taxes without 
allowing the IRS three full years in which to collect those taxes 

14 

insist that courts are bound rotely to apply the textual 
provisions on which they rely. As every court of 
appeals that has addressed the issue has held, however, 
the statute does not leave courts so disabled.5 Congress 
legislated against a backdrop of established statutory 
and equitable tolling principles that prevent expiration 
of the three-year lookback period under these circum- 
stances. 

5 See In re Palmer, 219 F.3d 580 (6th Cir. 2000) (case-by-case 
equitable tolling); In re Morgan, 182 F.3d 775 (11th Cir. 1999) (per 
curiam) (presumptive equitable tolling); In re Waugh, 109 F.3d 489 
(8th Cir.) (automatic tolling based on statutory structure), cert. 
denied, 522 U.S. 823 (1997); In re Taylor, 81 F.3d 20 (3d Cir. 1996) 
(automatic tolling based on statutory structure); In re Quenzer, 19 
F.3d 163 (5th Cir. 1993) (case-by-case equitable tolling may be 
available); In re West, 5 F.3d 423 (9th Cir. 1993) (automatic tolling 
based on statutory structure), cert. denied, 511 U.S. 1081 (1994); In 
re Richards, 994 F.2d 763 (10th Cir. 1993) (automatic equitable 
tolling); In re Montoya, 965 F.2d 554 (7th Cir. 1992) (automatic 
tolling based on statutory structure). A leading treatise writer 
agrees that tolling is appropriate. 4 Collier on Bankruptcy 
¶ 507.10[2][a], at 507-62 (Lawrence P. King ed., 15th ed. 2001) (“If, 
however, the debtor has been the subject of a bankruptcy case or 
cases during the three-year period, the three-year time period 
should be extended for the length of time that the automatic stay 
was in effect during the prior case or cases.”); see also ibid. (“The 
reason for extending the reach-back period is to prevent a debtor 
from manipulating the bankruptcy process to escape tax liabilities. 
Without some kind of tolling of the relevant reach-back periods 
during the pendency of a case, a debtor would be able to escape 
liability for tax obligations by filing and dismissing multiple 
cases.”). 

15 

A. The Structure, History, And Purpose Of The Rele- 
vant Statutory Provisions Manifest Congress’s 
Intent That The Lookback Period Be Tolled While 
The Automatic Stay Is In Effect 

1. The Structure and History of the Legislation. 

As this Court has long recognized, there is a “broad 
public interest in maintaining a sound tax system,” 
United States v. Lee, 455 U.S. 252, 260 (1982), and the 
collection of taxes is a compelling governmental 
interest, see Hernandez v. Commissioner, 490 U.S. 680, 
699-700 (1989). Recognizing the important public inter- 
ests at stake, Congress has taken measures to ensure 
that the government’s assessment and collection efforts 
will not be impeded by bankruptcy proceedings 

a. The 1966 compromise. 

The assessment and collection of taxes has long been 
the object of special protections within bankruptcy pro- 
ceedings. The rationale for such preferential treatment 
is that the taxing authority, whether state or federal, 
“is an involuntary creditor of the debtor” in that it 
“cannot choose its debtors, nor can it take security in 
advance of the time that taxes become due.” H.R. Rep. 
No. 595, 95th Cong., 1st Sess. 190 (1977). In addition, 
“it takes a taxing authority time to locate and pursue 
delinquent tax debtors.” Ibid. As a result, until 1966, 
unsecured tax claims were given priority over the 
claims of other unsecured creditors without regard to 
when the tax claims accrued. See 11 U.S.C. 35(a), 
104(a)(4) (1964); H.R. Rep. No. 687, 89th Cong., 1st 
Sess. 2 (1965); S. Rep. No. 1158, 89th Cong., 2d Sess. 2 
(1966). Tax debts were also not subject to discharge in 
bankruptcy regardless of their age. S. Rep. No. 1158, 
supra, at 2. 

16 

In the mid-1960s, Congress became concerned that 
tax claims were allowed to “accumulate and remain un- 
paid for long periods of time.” S. Rep. No. 1158, supra, 
at 4. As a result, the debtor’s “fresh start” was often 
burdened by “what may be an overwhelming liability 
for accumulated taxes.” Id. at 2. In addition, Congress 
noted that the existing treatment of taxes saddled 
private creditors with the economic fallout from the 
bankruptcy. In Congress’s view, it was only fair that 
“the Government as a creditor should bear part of the 
economic burden of business failures through the loss of 
some of its tax claims which it has allowed to accumu- 
late over a long period of years.” Id. at 4. 

Accordingly, in 1966, Congress decided that it was 
appropriate to impose “some time limit upon the extent 
of taxes excepted from discharge,” as well as on the 
time period for which tax claims retain priority over the 
claims of other creditors. S. Rep. No. 1158, supra, at 2, 

4. That time limit—the three-year lookback period— 
provides that income taxes shall have priority for 
payment and retain their nondischargeable status only 
if the tax returns were due within “three years before 
the date of the filing of the petition.” See Act of July 5, 
1966, Pub. L. No. 89-496, 80 Stat. 270-271; see also 11 
U.S.C. 507(a)(8)(A)(i), 523(a)(1)(A). Unless they qualify 
for special treatment under some other Bankruptcy 
Code provision (see, e.g., 11 U.S.C. 523(a)(1)(B) and 
(C)), tax claims falling outside the three-year window 
are to be paid pro rata alongside the general unsecured 
claims of other creditors and are fully dischargeable at 
the close of the case. S. Rep. No. 1158, supra, at 1. 
Congress anticipated that the balance it struck would 
“adequately safeguard[] the public’s interest in the 
collection of revenues while at the same time limiting 
the impact of long accumulated, unsecured tax claims 

17 

on general creditors.” H.R. Rep. No. 687, supra, at 4. 
In addition, Congress believed that “[t]he imposition of 
such a limitation” would spur “taxing authorities to act 
to prevent large accumulations of tax claims.” Ibid. 

Congress stressed, however, that the purpose of the 
legislation was not to “create a tax evasion device” or 
unduly impair the effectiveness of the government’s tax 
collection efforts. S. Rep. No. 1158, supra, at 3-4. In 
fact, Congress believed that, by borrowing the three- 
year lookback period from the Internal Revenue Code’s 
three-year statute of limitations on tax assessments, it 
would “discourage recourse to bankruptcy as a facile 
device for evading tax obligations.” H.R. Rep. No. 687, 
supra, at 3. 

b. The 1978 Bankruptcy Reform Act. 

During enactment of the Bankruptcy Reform Act of 
1978, Pub. L. No. 95-598, 92 Stat. 2549, Congress revis- 
ited and reaffirmed the choice of the three-year priority 
and nondischargeability window accorded tax claims in 
the 1966 compromise legislation. The three-year look- 
back period, in Congress’s view, fairly balanced the 
competing interests of 

(1) general creditors, who should not have the 
funds available for payment of debts exhausted by 
an excessive accumulation of taxes for past years; 
(2) the debtor, whose “fresh start” should likewise 
not be burdened with such an accumulation; and 
(3) the tax collector, who should not lose taxes which 
he has not had reasonable time to collect or which 
the law has restrained him from collecting. 

S. Rep. No. 1106, 95th Cong., 2d Sess. 5 (1978); see also 
S. Rep. No. 989, 95th Cong., 2d Sess. 13-15 (1978); Staff 
of Jt. Comm. on Taxation, 95th Cong., 2d Sess., Tax 

18 

Aspects of S. 2266 (Bankruptcy Reform Act of 1978) 2-3 
(Comm. Print 1978). 

Congress understood that the three-year lookback 
period “gives the taxing authority three years to 
pursue delinquent debtors and obtain secured status,” 
and, “[i]f a debtor files bankruptcy before that three- 
year period has run, the taxing authority is given a 
priority [in bankruptcy] in order to compensate for its 
temporarily disadvantaged position.” H.R. Rep. No. 
595, supra, at 190. That compromise fairly protected 
the interests of the taxpaying public at large, Congress 
concluded, because otherwise, “[t]o the extent that 
debtors in bankruptcy are freed from paying their tax 
liabilities, the burden of making up the lost revenues 
must be shifted to other taxpayers.” S. Rep. No. 1106, 
supra, at 5. Congress thus reaffirmed its intent to 
avoid creating “[a]n open-ended dischargeability policy 
[that] would provide an opportunity for tax evasion 
through bankruptcy, by permitting discharge of tax 
debts before a taxing authority has an opportunity to 
collect any taxes due.” H.R. Rep. No. 595, supra, at 
190. 

To ensure that the delicate balance it struck between 
taxing authorities and taxpayers/debtors would be 
preserved, Congress added Section 108(c) to the Bank- 
ruptcy Code in 1978. See 92 Stat. 2556-2557. Section 
108(c) tolls the limitations period for a nonbankruptcy 
cause of action that has not yet run at the time the 
debtor’s petition is filed. 11 U.S.C. 108(c). Congress 
crafted Section 108(c) “to minimize the administrative 
problems governmental tax authorities face, or may 
face, in collecting taxes in bankruptcy proceedings” and 
to “protect the right of governmental units (and other 
creditors) to collect debts which are not discharged in 
the bankruptcy proceeding” S. Rep. No. 989, supra, at 

19 

14-15. Section 108’s purpose was to ensure that the 
time limitations on collecting a taxpayer’s obligations 
would be suspended during the period in which an auto- 
matic stay in bankruptcy proceedings precluded en- 
forcement of the government’s claim, so that the taxing 
authority would have “adequate time to collect nondis- 
chargeable taxes following the end of the title 11 
proceedings.” Id. at 30-31. In fact, Congress stressed 
that “[t]he priority should apply if assessment or 
collection is stayed” because “the taxing authority has 
not had an adequate opportunity to assess or collect the 
taxes.” H.R. Rep. No. 595, supra, at 191 

c. The 1980 Tax Code Amendment. 

Two years after the Bankruptcy Code was enacted, 
Congress inserted a counterpart to the bankruptcy 
tolling provision (11 U.S.C. 108(c)) into the Internal 
Revenue Code. See Bankruptcy Tax Act of 1980, Pub. 
L. No. 96-589, § 6(a), 94 Stat. 3389. Section 6503(h) tolls 
the Internal Revenue Code’s time limits on the assess- 
ment and collection of taxes during the period that a 
debtor is under the protection of the bankruptcy court. 
26 U.S.C. 6503(h). That amendment was deemed 
necessary to ensure that, 

[if] the Internal Revenue Service is prohibited for a 
period of time by reason of a bankruptcy case from 
assessment or collection of tax (for example, because 
of the automatic stay under new 11 U.S. Code sec. 
362(a)(6)), the running of the period of limitations is 
suspended for assessment, for the prohibition period 
and for 60 days thereafter; and for collection, for the 
prohibition period and for six months thereafter. 

S. Rep. No. 1035, 96th Cong., 2d Sess. 50-51 (1980). 

20 

Thus, taken as a whole, (i) the Chapter 13 require- 
ment that debtors fully pay tax claims falling within the 
three-year lookback period (11 U.S.C. 1322(a)(2)), 
(ii) the Chapter 7 rules (11 U.S.C. 726(a)(1), 727(b)) re- 
quiring that those same tax claims be accorded priority 
for payment and be immune from discharge (and thus 
fully collectible post-bankruptcy), and (iii) the comple- 
mentary tolling provisions in 11 U.S.C. 108(c) and 26 
U.S.C. 6503(h), textually embody Congress’s intent that 
income tax claims falling within the three-year lookback 
period either be satisfied within or preserved through 
the bankruptcy case. Indeed, it was only on those 
terms that Congress decided, in the 1966 legislative 
compromise, to forgo the priority and nondischargeabil- 
ity previously accorded to all tax claims regardless of 
age. 

Congress, moreover, took steps to restrict the oppor- 
tunities for serial bankruptcy filings and to ensure that 
they would not disrupt the three-year lookback period. 
Chapter 7 discharges must be separated by six years, 
which is twice the length of the lookback period. 
11 U.S.C. 727(a)(8). A Chapter 7 discharge may not 
follow a Chapter 13 discharge by less than six years, 
unless the debtor in the Chapter 13 proceeding paid all 
of his unsecured claims or paid 70% of them and the 
plan represented his “best effort” to pay those credi- 
tors. 11 U.S.C. 727(a)(9). See also 11 U.S.C. 727(a)(8) 
(Chapter 11 and Chapter 7 discharges must be sepa- 
rated by six years). Thus, in Congress’s view, the 
Bankruptcy Code that it enacted adequately secured 
implementation of its intent that non-stale tax claims be 
paid. 

21 

2. The Bankruptcy Code Reflects Congress’s Intent 

that the Three-Year Lookback Period Be Tolled. 

a. Courts must consider statutory structure and 

purpose. 

Despite Congress’s concerted legislative efforts, by 
the mid-1980s, debtors had devised a means of skirting 
Congress’s requirement that tax claims falling within 
the lookback period be paid, through the serial filing 
and dismissal before discharge of Chapter 13 and 
Chapter 7 bankruptcies. Most frequently, debtors 
would file a Chapter 13 petition, which would trigger 
the automatic stay and halt the government’s tax 
collection efforts. The lengthy proceedings under 
Chapter 13 would allow the debtor to exhaust the gov- 
ernment’s three-year lookback period and then dismiss 
the Chapter 13 case before discharge. In cases where 
dismissal took place before a plan was confirmed, as 
occurred here, money paid to the trustee to satisfy the 
tax claim generally would be returned to the debtor. In 
addition, because the debtor’s dismissal would predate 
the entry of a discharge in the Chapter 13 proceeding, 
the statutory requirement that the debtor wait six 
years before proceeding under Chapter 7 would be 
circumvented, and the debtor could file a Chapter 7 
petition claiming a full discharge of the allegedly now- 
stale tax claims.6 

6 Petitioners’ assertion (Br. 28) that debtors “find it difficult to 

* * * tread water” in Chapter 13 proceedings for three years is 
belied by the facts of this case, their earlier acknowledgment (Br. 

22) that “reorganization cases can last years,” and the abundance 
of Bankruptcy Court and court of appeals cases dealing with 
precisely such circumstances. See note 4, supra; App., infra, 1a-4a. 
See also, e.g., In re Hoppe, 259 B.R. 852, 856 (Bankr. E.D. Tex. 
2001) (“[P]ublic policy concerns and simple notions of fairness 
suggest that the Bankruptcy Code was not promulgated as a 

22 

Relying primarily on the fact that none of the 
relevant statutory provisions explicitly require tolling 
of the lookback period, petitioners argue that the 
Bankruptcy Code mandates a full discharge and the 
“shift[ing] to other taxpayers” (Tax Aspects of S. 2266 
at 2) of their unpaid tax claims. It is clear, however, 
that all of the relevant statutory provisions contem- 
plate that such tolling will occur, either by providing for 
analogous tolling explicitly or by according special 

means to thwart creditors, such as the IRS, by the filing of 
successive petitions and was not designed to allow debtors to 
create a scheme of bypassing the [C]ode’s non-dischargeability 
provisions by filing a petition, letting the priority period expire, 
dismiss their case, and refile again (in order to discharge the 
taxes), thereby making themselves unreachable by the IRS.”) 
(internal quotation marks omitted); In re Bair, 240 B.R. 247, 253 
(Bankr. W.D. Tex. 1999) (“If the Debtors had not filed a second 
bankruptcy 193 days after dismissal of the Chapter 13 case, the 
IRS would have been able to collect the taxes due within the 
limitations periods and without having to confront the 
dischargeability issue. This Court will not allow the Bankruptcy 
Code to be utilized as an implement to evade creditors simply by 
the timing of successive bankruptcy filings.”) (citations omitted); 
In re Hollowell, 222 B.R. 790, 792 (Bankr. N.D. Miss. 1998) (“In the 
opinion of the court, the dismissal and refiling were done 
purposeley [sic] to circumvent the effect of the two year 
limitations period.”); In re Miller, 199 B.R. 631, 634 (Bankr. S.D. 
Tex. 1996) (“[I]t appears that the Second Bankruptcy was filed to 
thwart the IRS’ notice of intent to levy; and consequently to shield 
themselves from any meaningful attempt to address their 1986 tax 
liability via the protection of the automatic stay.”); In re Clark, 184 
B.R. 728, 732 (Bankr. N.D. Tex. 1995) (“While homestead fore- 
closure prevention motivated, to some extent, the filing of the four 
bankruptcies * * * it appears that such bankruptcies were 
likewise used to shield Debtors from any attempt to meaningfully 
address, in any bona fide manner whatsoever, their 1987-88 tax 
liability.”). 

23 

status to tax claims based on the amount of time the 
government has had to enforce them. 

Indeed, the manner in which Congress structured the 
relevant Code provisions gave Congress no reason to 
assume that separately tolling the lookback period was 
necessary. The lookback period is triggered only by the 
actual filing of a bankruptcy petition. The ripeness of 
tax claims is measured from the time of that petition’s 
filing. In addition, the bankruptcy process that the 
petition commenced, whether under Chapter 7 or 
Chapter 13, would by its very terms require full 
satisfaction or preservation of all tax claims falling 
within the lookback period. Finally, the complementary 
tolling provisions in the Bankruptcy and Internal 
Revenue Codes were designed to preserve the three- 
year enforcement window for the government during 
the bankruptcy proceeding. It is only the unanticipated 
use of premature Chapter 13 dismissals, coupled with a 
follow-up second bankruptcy filing, that has created the 
current tax evasion problem. 

The asserted gap in the tax-specific provisions of the 
Bankruptcy Code that petitioners seek to exploit thus 
is not a result of congressional oversight or avoidance of 
a problem that was either known or reasonably fore- 
seeable to Congress at the time it passed the Code. 
Nor is it a product of deliberate congressional omission 
or of legislative neglect. It is the result of debtors’ 
creativity in claiming loopholes in a statutory scheme 
that Congress labored to protect from such circum- 
ventions. There is a limit to how many contingencies 
Congress can be expected to anticipate and how many 
holes it may foresee the need to plug in advance in the 
laws it enacts. This Court accordingly has recognized 
that statutes must be construed in light of their overall 
structure, history, and purpose. See Chickasaw Nation 

24 

v. United States, No. 00-507, 2001 WL 1488017, at *5 
(Nov. 27, 2001) (construing statute in light of its overall 
structure, purpose, and “common sense”); El Al Israel 
Airlines, Ltd. v. Tsui Yuan Tseng, 525 U.S. 155, 169 
(1999) (construing law in light of its “text, purpose, and 
overall structure”).7 
Indeed, “[i]t is a well-established canon of statutory 
construction that a court should go beyond the literal 
language of a statute if reliance on that language would 
defeat the plain purpose of the statute.” Bob Jones 
Univ. v. United States, 461 U.S. 574, 586 (1983). Courts 
retain the authority to “fill[] a gap left by Congress’ 
silence.” United States v. Locke, 471 U.S. 84, 95 (1985). 
See also, e.g., Chickasaw Nation, 2001 WL 1488017, at 

*7 (reading statutory provision as surplusage rather 
than adopting an interpretation that “would conflict 
with the intent embodied in the statute Congress 
wrote”); Hallstrom v. Tillamook County, 493 U.S. 20, 
28-29 (1989) (noting that there are “rare cases [in 
which] the literal application of a statute will produce a 
result demonstrably at odds with the intentions of its 
drafters”); Green v. Bock Laundry Mach. Co., 490 U.S. 
504, 509 (1989) (disregarding a statute’s “plain language 

7 See also United States Nat’l Bank of Oregon v. Independent 
Ins. Agents of Am., Inc., 508 U.S. 439, 455 (1993) (“Statutory con- 
struction ‘is a holistic endeavor’ ” that must take into account not 
just text, but also a statute’s “structure[] and subject matter.”); 
Johnson v. Home State Bank, 501 U.S. 78, 83 (1991) (question of 
statutory construction under Bankruptcy Code is “to be resolved 
by reference to the text, history, and purpose of the Bankruptcy 
Code”) (internal quotation marks omitted); see also Helvering v. 
Gregory, 69 F.2d 809, 810-811 (2d Cir. 1934) (L. Hand, J.) (“[T]he 
meaning of a [statute] may be more than that of the separate 
words, as a melody is more than the notes.”), aff ’d, 293 U.S. 465 
(1935). 

25 

command[]” where “that literal reading would compel 
an odd result”); id. at 527-528 (Scalia, J., concurring) 
(finding it “entirely appropriate to consult all public 
materials, including the background of [the rule] and 
the legislative history of its adoption, to verify that 
what seems to us an unthinkable disposition * * * was 
indeed unthought of, and thus to justify a departure 
from the ordinary meaning”). 

Honda v. Clark, 386 U.S. 484 (1967), illustrates the 
principle. There the Court held that a time limit for 
filing claims under the Trading with the Enemy Act, 
which was modeled on the Bankruptcy Act (id. at 495- 
496), was subject to tolling. Even though the statutory 
text there, as here, was silent, the Court held that “the 
statutory scheme itself requires tolling the limitation 
period during the pendency of [related] litigation,” id. 
at 500. The Court deemed it sufficient to adopt such a 
construction that tolling was “much more consistent 
with the overall congressional purpose” and was “no- 
where eschewed by Congress.” Id. at 501; see also id. 
at 498 (tolling comports with the “repeated and 
uncontested expressions of congressional intent to 
facilitate and expand the rights of American creditors 
having an interest in these assets”). 

A focus on legislative purpose is particularly appro- 
priate when addressing taxpayer efforts to manipulate 
statutory terms to circumvent their tax obligations. In 
Gregory v. Helvering, 293 U.S. 465 (1935), a taxpayer 
created a sham corporation to avoid paying taxes on a 
stock distribution. This Court held that, although the 
transaction fell within the letter of the law, it was “in 
fact an elaborate and devious form of conveyance 
masquerading as a corporate reorganization,” and it 
therefore fell “outside the plain intent of the statute.” 
Id. at 470; see also Superintendent of Five Civilized 

26 

Tribes v. Commissioner, 295 U.S. 418 (1935) (upholding 
taxation where congressional intent reasonably clear); 
Choteau v. Burnet, 283 U.S. 691 (1931) (same). Peti- 
tioners’ manipulation of the Code likewise would 
frustrate Congress’s intent to give the government a 
full three years to collect taxes and would impose an 
irrational operation on the statute by transforming it 
into a road map for tax-avoidance. 

Further, what petitioners advocate, reduced to its 
essence, is a holding that, through omission, Congress 
enacted an implicit exemption from recent income taxes 
for individuals who play their procedural cards right in 
bankruptcy. This Court, however, recently “warn[ed] 

* * * against interpreting federal statutes as pro- 
viding tax exemptions unless those exemptions are 
clearly expressed.” Chickasaw Nation, 2001 WL 
2488017, at *7. 

b. Petitioners’ Interpretation Would Create 

Anomalies and Inconsistencies. 

In United States v. Ron Pair Enterprises, Inc., 489 
U.S. 235 (1989), this Court explained that courts may 
confine their construction of the Bankruptcy Code to 
the statutory text only “as long as the statutory scheme 
is coherent and consistent.” Id. at 240. But the con- 
struction petitioners propose is neither coherent nor 
consistent with other Code provisions. 

As an initial matter, there is no rational basis for 
concluding that Congress, after formulating a carefully 
balanced compromise of tax liabilities and legislating a 
number of provisions designed to effectuate that bal- 
ance, simultaneously intended to permit ready circum- 
vention of those tax liabilities through serial bank- 
ruptcy filings. The balance that Congress struck 
guaranteed federal, state, and local taxing authorities 

27 

three years to collect income taxes; petitioners’ position 
would permit discharge of those taxes before the 
government has the benefit of those three years. Yet 
petitioners offer no rational basis for concluding that 
Congress intended to take away with one hand what it 
gave with the other.8 

In addition, petitioners’ construction would create 
untenable anomalies and inconsistencies within the 
Bankruptcy Code. First, under Section 1307 of the 
Bankruptcy Code, a debtor or the bankruptcy court 
may convert a case from a Chapter 13 proceeding to a 
Chapter 7 proceeding. 11 U.S.C. 1307(a) and (c). If the 
case is converted, however, the lookback period con- 
tinues to be measured from the time of the filing of the 
original petition, rather than from the conversion date.9 
Petitioners offer no explanation for why taxes should 
remain nondischargeable when cases are formally con- 
verted, but suddenly be rendered dischargeable 

8 Petitioners’ argument (Br. 21-25) that the IRS can sometimes 
successfully collect taxes during an earlier bankruptcy proceeding 
proves the point. The proceedings to which petitioners refer are 
completed bankruptcies where the taxes are paid as required by 
Chapter 13 or given priority and protected from discharge under 
Chapter 7. This shows that the provisions Congress enacted, when 
carried to completion, work to preserve priority tax claims as Con- 
gress intended. When a Chapter 13 proceeding is dismissed before 
confirmation of a plan, as occurred here, however, all of the interim 
payments that the debtor made to the trustee (see Pet. Br. 22) are 
returned to the debtor. The government, as in this case, is unable 
to collect a penny on its debt. 

9 See In re Eysenbach, 170 B.R. 57 (Bankr. W.D.N.Y. 1994), 
rev’d on other grounds, 183 B.R. 365 (W.D.N.Y. 1995); In re Cross, 
119 B.R. 652 (Bankr. W.D. Wis. 1990); In re Bailey, 111 B.R. 151 
(Bankr. W.D. Tenn. 1988); see also 4 Collier on Bankruptcy, supra, 
¶ 507.10[2][a], at 507-61; id. ¶ 523.07[2][a], at 523-529. 

28 

through the de facto conversion accomplished by dis- 
missal and refiling. 

Petitioners counter (Br. 13) that Section 523(b) of the 
Bankruptcy Code permits discharge of debts in a later 
bankruptcy that were “excepted from discharge” in an 
earlier proceeding. 11 U.S.C. 523(b). That provision, 
however, actually undercuts petitioners’ argument. 
Section 523(b), by its terms, applies only when the 
earlier bankruptcy proceeding was prosecuted to a 
conclusion, resulting in an actual discharge. Once such 
a discharge occurs, the six-year time limits on filing 
second bankruptcy petitions are triggered. See 11 
U.S.C. 727(a)(8) and (9). That intervening six years, of 
course, would far surpass the three years available to 
the Internal Revenue Service under the lookback pro- 
vision and would render any lingering tax claims dis- 
chargeable. Rather than support petitioners’ position, 
then, Section 523(b) demonstrates that Congress 
expected tax claims to be discharged through serial 
filings only where the government had been afforded 
ample time to pursue its tax claims free from the 
automatic stay in the intervening years. 

Second, as petitioners note (Br. 16-17), the 240-day 
time limit on collection of taxes subject to an “offer in 
compromise” with the Internal Revenue Service is 
tolled during pendency of the offer in compromise. 

10 

Congress added that tolling provision in 1978 when it 
learned that taxpayers were using the offer in com- 

10 An “offer in compromise” is an administrative agreement be- 
tween the taxpayer and the Service in which the Service agrees to 
collect less than the entire amount of taxes due because a taxpayer 
is unable to make full payment, and the taxpayer agrees to either 
the immediate payment of that compromised amount or to pay that 
amount over time. 

29 

promise process—just as petitioners are using serial 
bankruptcy filings here—to circumvent the three-year 
lookback period. “[S]ome taxpayers,” the Senate 
Report explained in words that echo the problem here, 
“have submitted a formal offer in compromise, dragged 
out negotiations with the taxing authority until the tax 
liability would lose priority under the three-year 
priority period, * * * and then filed in bankruptcy 
before the governmental unit could take tax[] collection 
steps.” S. Rep. No. 989, supra, at 70-71; see also S. Rep. 
No. 1106, supra, at 15 n.11. 

Petitioners insist that Congress’s inclusion of that 
tolling provision for taxes subject to an offer in 
compromise, and the absence of a parallel tolling pro- 
vision in the three-year lookback provision, demon- 
strates an intended dichotomy between “which taxes 
are dischargeable and which are not” (Pet. Br. 17). But 
Congress already drew that line in 1966 based on the 
age of the taxes and the length of time available to the 
IRS to collect, not on the procedural posture of the 
bankruptcy proceedings. There is no rational basis for 
concluding, as petitioners posit, that Congress amended 
the Code in 1978 to subdivide those taxes into truly 
nondischargeable taxes (those subject to an offer in 
compromise) and nondischargeable taxes that could be 
readily circumvented through serial filings (those not 
subject to such an offer). Nor have petitioners identi- 
fied any reason why Congress, after the 1978 amend- 
ment, would have wanted to perpetuate the tax 
liabilities of debtors who, prepetition, cooperate with 
the IRS in a good faith effort to meet their tax obliga- 
tions through an offer in compromise, while rewarding 
those who undertake no such efforts with a procedural 
release from nondischargeability. Rather, Congress 
amended the Code in 1978 to shore up the various 

30 

statutory provisions preserving liability for ripe tax 
claims by barring the one tax avoidance scheme that 
was brought to its attention. S. Rep. No. 989, supra, at 
71 (“This rule closes [that] loophole.”). 

11 

Third, petitioners’ approach would create a disincen- 
tive for debtors to fulfill their obligations under Chap- 
ter 13. Following a holding by this Court that taxes can 
be readily discharged through the medium of serial 
filings and well-timed dismissals, debtors’ counsel will 
likely advise their clients that completing the Chapter 
13 process will perpetuate their tax liabilities, whereas 
an appropriately timed dismissal and refiling under 
Chapter 7 will absolve the debtor of tax liabilities. The 
proposed interpretation thus would reward those who 
attempt to evade their taxes, while financially penaliz- 

11 Congress has attempted explicitly to remedy the problem 
presented in this case. A bill passed Congress last year that was 
“intended to strongly limit the practice of using bankruptcy filings 
and the automatic stay that arises under section 362 to abuse the 
bankruptcy process” and to codify the court decisions tolling the 
three-year lookback period. S. Conf. Rep., 146 Cong. Rec. S11,708 
(daily ed. Dec. 7, 2000), available at 2000 WL 1796598 (section-by- 
section explanation of H.R. 2415). That bill, which also contained a 
variety of controversial, unrelated provisions, was pocket-vetoed. 
As we advised the Court in our brief at the petition stage, the 
House and Senate have passed bills again this year that would 
codify the rule that the three-year lookback period is tolled for the 
period of an automatic stay entered in a prior bankruptcy pro- 
ceeding. See H.R. 333, 107th Cong., 1st Sess. § 705 (2001); S. 420, 
107th Cong., 1st Sess. § 705 (2001). The House and Senate ap- 
pointed conferees to resolve the differences between the compet- 
ing bankruptcy reform bills, none of which pertain to the tolling 
issue. The conferees were originally scheduled to meet on Septem- 
ber 12, 2001, but that meeting was postponed due to the events of 
September 11th. On November 7, 2001, the conferees held their 
first meeting. We will continue to advise the Court of any legisla- 
tive developments pertinent to this case. 

31 

ing those who see their Chapter 13 proceedings 
through to the end. 

Nor can petitioners substantiate their contention (Br. 
13-16) that Congress intended the result they advance. 
That is because their analysis tells only half of the 
legislative story. Petitioners’ argument focuses en- 
tirely on the debtor’s interest in a fresh start and the 
general interests of other creditors. See ibid. But the 
entire purpose of the 1966 tax compromise was to strike 
a three-way balance between the interests petitioners 
identify and the preservation of federal and state tax 
claims, based on their recency and the government’s 
opportunity for enforcement. See S. Rep. No. 1106, 
supra, at 5; S. Rep. No. 989, supra, at 13-15; Tax As- 
pects of S. 2266, supra, at 2-3. Because petitioners’ 
argument ignores one of the most pressing concerns 
underlying the relevant statutory provisions, it lacks 
any solid grounding in congressional intent. 

In short, relying solely on the absence of particular 
language in the statutory text, petitioners have ex- 
ploited a perceived lacuna in the Bankruptcy Code. 
Allowing that asserted discontinuity to begin and end 
the construction of the statute, however, would be in- 
consistent with the overall structure of the Bankruptcy 
Code, would conflict with “other section[s] of the Code,” 
would be “in clear conflict with state or federal laws of 
great importance,” and is belied by the legislative 
history. Ron Pair, 489 U.S. at 243, 245; see also id. at 
249 (O’Connor, J., concurring) (“The notion that be- 
cause the words of a statute are plain, its meaning is 
also plain, is merely pernicious oversimplification.”) 
(quoting United States v. Monia, 317 U.S. 424, 431 
(1943) (Frankfurter, J., dissenting)). Further, peti- 
tioners’ argument forgets that the canons of statutory 
construction on which they rely “are not mandatory 

32 

rules” and “need not be conclusive.” Chickasaw 
Nation, 2001 WL 1488017, at *7. Rather, they are 
“designed to help judges determine the Legislature’s 
intent”; “other circumstances evidencing congressional 
intent can overcome their force.” Ibid. In this case, the 
statutory structure, reasonable operation of the statute 
as a whole, congressional intent, and the legislative 
history unite to defeat petitioners’ focus on a con- 
gressional failure to anticipate a blatant manipulation of 
statutory language. 

B. Traditional Principles Of Equitable Tolling 

Prevent The Running Of The Three-Year 
Lookback Period 

1. Equitable Tolling is Appropriate Because of 

the Nature of the Lookback Period, the Legal 

Prohibition on Governmental Enforcement, 

Congressional Purpose, and the Public 

Interest. 

Bankruptcy courts are courts of equity and, as such, 
may exercise general equitable powers in a manner 
consistent with the Bankruptcy Code. 

12 Congress, 
moreover, expressly granted bankruptcy courts the 
broad power to issue “any order * * * that is 
necessary or appropriate to carry out the provisions of 
this title.” 11 U.S.C. 105(a). In Johnson v. Home State 

12 See United States v. Energy Res. Co., Inc., 495 U.S. 545, 549 
(1990) (noting the “traditional understanding that bankruptcy 
courts [are] * * * courts of equity”); Katchen v. Landy, 382 U.S. 
323, 336 (1966) (“[T]he proceedings of bankruptcy courts are 
inherently proceedings in equity.”); Pepper v. Litton, 308 U.S. 295, 
305 (1939) (bankruptcy courts’ equitable powers “have been in- 
voked to the end that fraud will not prevail, that substance will not 
give way to form, that technical considerations will not prevent 
substantial justice from being done”). 

33 

Bank, supra, this Court indicated that the “broad 
equitable power” accorded bankruptcy courts by 
Section 105(a) empowers them to combat abuses that 
arise from serial bankruptcy filings. 501 U.S. at 88. 
That role is consistent with the historical understand- 
ing that, “[i]n the exercise of its equitable jurisdiction 
the bankruptcy court has the power to sift the circum- 
stances surrounding any claim to see that injustice or 
unfairness is not done in administration of the bankrupt 
estate.” Pepper v. Litton, 308 U.S. 295, 307-308 (1939). 

13 

One of the most familiar components of equity juris- 
prudence is the doctrine of equitable tolling. Courts 
have long recognized that, “[w]here the plaintiff is 
prevented from filing timely suit by force of law, it is 
manifestly unjust to penalize him by barring the suit,” 
and courts accordingly “have consistently implied a 
suspension of the limitations statute for the period of 
prohibition.” Developments in the Law—Statutes of 
Limitations, 63 Harv. L. Rev. 1177, 1233 (1950). 
Indeed, this Court has held that time limits in federal 
statutes for filing claims are presumptively subject to 
equitable tolling. See, e.g., Irwin v. Department of 
Veterans Affairs, 498 U.S. 89, 95 (1990) (“Time require- 
ments in lawsuits between private litigants are cus- 
tomarily subject to ‘equitable tolling.’ ”); Hallstrom, 493 
U.S. at 27; Locke, 471 U.S. at 94 n.10 (“Statutory filing 
deadlines are generally subject to the defenses of 
waiver, estoppel, and equitable tolling.”). So venerable 

13 See also 2 Collier on Bankruptcy, supra, ¶ 105.01[2], at 105- 

8.1 (“The equitable origins of the bankruptcy power suggest sub- 
stantial leeway to tailor solutions to meet the diverse problems 
facing bankruptcy courts. Section 105 gives the bankruptcy court 
the power to fill in gaps and further the statutory mandates of 
Congress in an efficient manner.”). 

34 

is the practice that even waivers of sovereign immunity 
are presumed to incorporate the practice. Irwin, 498 
U.S. at 95. That is because the assumption that 
Congress intended equitable tolling to be available in a 
statute “is likely to be a realistic assessment of legis- 
lative intent as well as a practically useful principle of 
interpretation” of statutes. Ibid.; see also Midlantic 
Nat’l Bank v. New Jersey Dep’t of Envtl. Prot., 474 
U.S. 494, 501 (1986) (“The normal rule of statutory 
construction is that if Congress intends for legislation 
to change the interpretation of a judicially created 
concept, it makes that intent specific. * * * The Court 
has followed this rule with particular care in construing 
the scope of bankruptcy codifications.”). 

14 

Finally, the equitable tolling doctrine can appropri- 
ately be applied to the three-year lookback period even 
if the Court concludes that the statute, standing alone, 
does not require tolling. See Greyhound Corp. v. Mt. 
Hood Stages, Inc., 437 U.S. 322, 336-337 & n.21 (1978); 
see also id. at 338 (Burger, C.J., concurring). 

14 Petitioners contend (Br. 28) that the availability of equitable 
tolling under Section 105(a) is not properly before the Court be- 
cause the lower courts did not rely on that Section of the Code. 
The government, however, presented the argument to the bank- 
ruptcy court, and repeated that argument to the court of appeals. 
See Mem. of Law in Supp. of the United States’ Mot. for Summ. J. 
11-13; Gov’t C.A. Br. 31-37. We also discussed the argument in our 
brief at the petition stage before this Court. See Gov’t Br. 2, 13-14. 
Furthermore, the petitioners, in their certiorari petition, and the 
government, in its acquiescence, both broadly framed the issue 
presented in this case as whether tolling of the three-year lookback 
period was appropriate, without excluding consideration of any 
particular statutory provision or other source of authority. 

35 

a. The lookback period is the type of time limit that is 

subject to equitable tolling. 

The lookback period is the type of time requirement 
that courts traditionally have found to be subject to 
equitable tolling. Indeed, in many respects, it is the 
functional equivalent, in the unique context of bank- 
ruptcy proceedings, of a statute of limitations or a 
“[s]tatutory filing deadline[]” (Locke, 471 U.S. at 94 

n.10). First, the lookback period “prevent[s] the 
pressing of ‘stale’ claims,” which is “the end served by a 
statute of limitations.” Zipes v. Trans World Airlines, 
Inc., 455 U.S. 385, 394 (1982). Second, the lookback 
period is measured from the due date of the legal 
obligation to file the tax return. See Hallstrom, 493 
U.S. at 27 (statutes of limitations are generally “trig- 
gered by the violation giving rise to the action”). 
Furthermore, Congress discussed the lookback period 
as tantamount to a limitations period for collecting the 
unpaid tax. See, e.g., H.R. Rep. No. 595, supra, at 190 
(“The Bankruptcy Act gives the taxing authority three 
years to pursue delinquent debtors and obtain secured 
status.”). Third, by authorizing discharge of stale 
claims, the lookback period forecloses such claims 
virtually as completely as a time bar on filing suit. 
Fourth, nothing in the lookback period’s phraseology or 
structure suggests that Congress intended to foreclose 
tolling. 

15 

15 “Equitable tolling is not permissible where it is inconsistent 
with the text of the relevant statute.” United States v. Beggerly, 
524 U.S. 38, 48 (1998). See also United States v. Brockamp, 519 
U.S. 347, 350 (1997) (equitable tolling not available where unique 
language and design of statutory provision was designed to 
foreclose it). 

36 

The lookback period is thus comparable to the other 
types of nontraditional time limits, both within and 
outside bankruptcy, to which equitable tolling has been 
applied. See, e.g., Irwin, 498 U.S. at 92, 95 (equitable 
tolling applied to requirement that Title VII suit be 
filed within 30 days of receipt of notice of final action by 
the Equal Employment Opportunity Commission); 
Zipes, 455 U.S. at 393 (timely filing of a Title VII claim 
with the Equal Employment Opportunity Commission 
is a “requirement that, like a statute of limitations, is 
subject to waiver, estoppel, and equitable tolling”); 
Honda, 386 U.S. at 494-500 (time limit for filing claims 
under the Trading with the Enemy Act, which was 
modeled on the Bankruptcy Act, is subject to equitable 
tolling); cf. Nassau Smelting & Refining Works, Ltd. v. 
Brightwood Bronze Foundry Co., 265 U.S. 269, 273 
(1924) (failure of creditor to prove claim within one-year 
statutory period does not preclude its participation in a 
composition plan). 

Moreover, construing the lookback period as the type 
of statutory time limit traditionally subject to equitable 
tolling comports with the general principle that time 
limits “sought to be applied to bar rights of the Gov- 
ernment[] must receive a strict construction in favor of 
the Government.” Badaracco v. Commissioner, 464 
U.S. 386, 391 (1984); see also Brown v. Duchesne, 60 
U.S. (19 How.) 183, 195 (1856) (“Neither will the court, 
in expounding a statute, give to it a construction which 
would in any degree disarm the Government of a power 
which * * * would enable individuals to embarrass it, 
in the discharge of the high duties it owes to the 
community—unless plain and express words indicated 
that such was the intention of the Legislature.”). That 
is particularly true when the time limit “bar[s] the 
collection of taxes otherwise due and unpaid.” Bada- 

37 

racco, 464 U.S. at 392 (internal quotation marks 
omitted). 

Petitioners counter (Br. 17) that the three-year 
period substantively defines which taxes are discharge- 
able. They are mistaken. For the federal government, 
the source of the substantive right to collect the taxes is 
the Internal Revenue Code. See generally 26 U.S.C. 
6301-6344 (1994 & Supp. V 1999). When Congress 
adopted the three-year lookback period in the Bank- 
ruptcy Code, it did so not to alter the government’s 
substantive right to the taxes (whether within or 
outside bankruptcy). Rather, it enacted the lookback 
period to establish a time frame that would “adequately 
safeguard[] the public’s interest in the collection of 
revenues” within the bankruptcy context. H.R. Rep. 
No. 687, supra, at 4. See also S. Rep. No. 989, supra, at 
31 (lookback period gives government “adequate time 
to collect nondischargeable taxes”); H.R. Rep. No. 595, 
supra, at 190 (the three-year lookback “gives the taxing 
authority three years to pursue delinquent debtors”). 
Indeed, a House Report emphasized that “[t]he priority 
should apply if assessment or collection is stayed” 
because “the taxing authority has not had an adequate 
opportunity to assess or collect the taxes.” H.R. Rep. 
No. 595, supra, at 191. Congress, in fact, chose the 
three-year “time limit” because it “coincides with the 
3-year statute of limitations for assessments in Federal 
income tax cases.” H.R. Rep. No. 687, supra, at 2. 

Even if the time limit were deemed to be “substan- 
tive,” courts have often applied equitable tolling to such 
time limits in the narrow circumstances where an 
official prohibition or analogous event beyond the 
party’s control—such as the automatic stay—prevents 
pursuit of the claim. “The proper test is not whether a 
time limitation is ‘substantive’ or ‘procedural,’ but 

38 

whether tolling the limitation in a given context is 
consonant with the legislative scheme.” American Pipe 
& Constr. Co. v. Utah, 414 U.S. 538, 557-558 (1974). 

16 

As discussed earlier, tolling of the lookback period is 
wholly “consonant with the legislative scheme.” Ibid. 

Thus, the three-year lookback period (i) is phrased 
like a time limit on collection through the medium of 
bankruptcy proceedings, because “[t]he sole function of 
assigning priority to certain tax claims is to enhance the 
government’s ability to collect those claims” (In re 
West, 5 F.3d 423, 426 n.7 (9th Cir. 1993), cert. denied, 
511 U.S. 1081 (1994)), (ii) operates like a time limit in 
practice since “collectibility is obviously useless if the 
tax debt has been discharged” (In re Brickley, 70 B.R. 
113, 115 (BAP 9th Cir. 1986)), and (iii) is expressly 
modeled on another statute of limitations. The look- 
back time period thus sounds in terms that are tradi- 
tionally subject to equitable tolling. See Pepper, 308 
U.S. at 305 n.11 (equitable tolling of time limit on when 
claims can be proved against the bankrupt estate). 

b. Debtors cannot claim a lack of diligence on the part 

of the government. 

Equitable tolling is appropriate “in situations where 
the claimant has actively pursued his judicial reme- 
dies.” Irwin, 498 U.S. at 96. For purposes of the 
statutory provisions at issue here, Congress itself has 
defined, through the three-year lookback period, the 
appropriate time frame within which the government 
can reasonably be expected to enforce its tax claims in 
bankruptcy. All cases in which equitable tolling of the 

16 See also McCormick v. United States, 680 F.2d 345, 349 (5th 
Cir. 1980); Whittaker v. Whittaker Corp., 639 F.2d 516, 527-528 (9th 
Cir.), cert. denied, 454 U.S. 1031 (1981); Statutes of Limitations, 
supra, 63 Harv. L. Rev. at 1235 & n.478. 

39 

lookback period is sought will, by definition, involve 
claims for which the government has been denied the 
lookback period’s three years. During the pendency of 
earlier bankruptcy proceedings, it would be the 
operation of the automatic stay, rather than any foot 
dragging on the part of the government, that would 
prevent timely enforcement of the tax claim. In short, 
serial bankruptcy filings present prototypical circum- 
stances for the application of equitable tolling, because 
the government “has not slept on [its] rights, but, 
rather, has been prevented from asserting them.” 
Burnett v. New York Cent. R.R., 380 U.S. 424, 429 
(1965). 

c. Congressional purpose and public policy support 

tolling. 

Equitable tolling is wholly consonant with congres- 
sional intent. See Burnett, 380 U.S. at 427 (“[T]he basic 
inquiry” in determining whether equitable tolling is 
available “is whether congressional purpose is effectu- 
ated by tolling.”). Congress’s desire to preserve ripe 
tax claims and to ensure either their satisfaction within 
bankruptcy or their preservation through bankruptcy 
emanates from every corner of the Bankruptcy Code. 
Equitable tolling would likewise advance the strong 
public policy interest in protecting the government’s 
claim to taxes and ensuring that all citizens bear their 
fair share of the tax burden. 

Petitioners’ reliance on United States v. Noland, 517 
U.S. 535 (1996), is thus misplaced. In Noland, this 
Court held that bankruptcy courts may not employ 
equitable subordination to reorder the payment priori- 
ties established by Congress in the Bankruptcy Code. 
Id. at 540-541. The Court explained that, to subordi- 
nate the tax penalty, would “run[] directly counter to 

40 

Congress’s policy judgment that a postpetition tax 
penalty should receive the priority of an administrative 
expense.” Id. at 541. The application of equitable 
tolling to the lookback period, by contrast, fully imple- 
ments congressional intent and preserves the payment 
priority and nondischargeability status that Congress 
afforded ripe tax claims. 

2. A Uniform Rule of Tolling Should Be Adopted. 

Equitable tolling should apply uniformly in all cases 
where the automatic stay entered in a debtor’s earlier 
bankruptcy proceeding denied the government its full 
three years to pursue the tax claim. This Court has 
found adoption of such uniform tolling rules to be 
appropriate where their application is “fair to both 
plaintiff and defendant, carries out the purposes of the 
[statute], and best serves the policies of uniformity and 
certainty underlying the federal limitation provision.” 
Burnett, 380 U.S. at 435-436; see also Bowen v. City of 
New York, 476 U.S. 467, 479-480 (1986) (adopting class- 
wide rule of equitable tolling). 

This is such a case. As the Tenth Circuit observed in 
In re Richards, 994 F.2d 763 (1993), the relevant 
equitable considerations tilt so strongly in favor of the 
government that a universal rule of equitable tolling, 
rather than case-by-case application, is appropriate. Id. 
at 764. 

17 Because equitable tolling would give the 
government only the amount of enforcement time that 
Congress promised it in the Bankruptcy Code, cases 
are unlikely to arise where the government will not 
have been sufficiently diligent to merit tolling. 

17 The Eleventh Circuit also appears to apply a presumption 
that tolling is appropriate if the debtor’s earlier bankruptcy case 
prevented the government from collecting taxes during the three- 
year lookback period. See Morgan, 182 F.3d at 780. 

41 

Furthermore, tolling does not afford the government 
any time beyond what Congress prescribed to enforce 
the tax claim, so it is not unfair to debtors. Nor will the 
congressional purpose or public interest calculation 
change demonstrably from case to case. In addition, 
adopting a case-by-case approach to tolling would tend 
to encourage serial bankruptcy filings by debtors in the 
hope that a bankruptcy court ultimately will find, for 
whatever reason, that the equities favor discharge of 
their claim. See United States v. Brockamp, 519 U.S. 
347, 352 (1997) (“Tax law, after all, is not normally 
characterized by case-specific exceptions reflecting 
individualized equities.”). 

The Sixth Circuit considered case-by-case tolling to 
be appropriate because it thought that the bad faith or 
manipulative intent of the debtor was determinative. 
See In re Palmer, 219 F.3d 580, 587 (6th Cir. 2000). 
Courts within the Fifth Circuit similarly seem to permit 
tolling only when the debtor has acted in a calculated 
manner in dismissing and re-filing bankruptcy cases or 
when the debtors have taken action to shield them- 
selves from any meaningful attempt to address their 
tax liability via the protection of the automatic stay. 
See, e.g., In re Hollowell, 222 B.R. 790 (Bankr. N.D. 
Miss. 1998); In re Miller, 199 B.R. 631 (Bankr. S.D. Tex. 
1996); In re Clark, 184 B.R. 728 (Bankr. N.D. Tex. 
1995). In so holding, however, those courts have con- 
fused the doctrines of equitable estoppel and equitable 
tolling. The former requires as a predicate bad faith or 
obstructive conduct on the part of the litigation target. 
See Wolin v. Smith Barney Inc., 83 F.3d 847, 852 (7th 
Cir. 1996) (“In the case of equitable estoppel, which 
requires active misconduct by the defendant, the plain- 
tiff is not required to be diligent.”), cited with approval 
in Brockamp, 519 U.S. at 349. Equitable tolling, by 

42 

contrast, turns upon the claimant’s exercise of due 
diligence and the disruption occasioned by events 
beyond the party’s control. Ibid. 

18 

In sum, because the government’s tax collection 
efforts were thwarted by the petitioners’ serial bank- 
ruptcy filings, the government has not yet had the 
three years Congress afforded it for such efforts. 
Furthermore, no equitable or public policy interests are 
advanced by rewarding the serial filing of uncompleted 
bankruptcies. This Court therefore should hold that 
the three-year lookback period is tolled during earlier 
bankruptcies. 

18 Petitioners repeat the Sixth Circuit’s error when they sug- 
gest (Br. 28) that equitable tolling is unnecessary because the gov- 
ernment can seek to dismiss “bad faith” bankruptcy filings through 
the rules governing contested matters. See Fed. R. Bankr. P. 
9014. In any event, the lengthy and elaborate proceedings that 
surround such contests make them a clumsy vehicle for expedi- 
tiously reviving the government’s ability to pursue or preserve tax 
claims. See In re Gier, 986 F.2d 1326, 1328 (10th Cir. 1993) (iden- 
tifying eleven “nonexhaustive” factors to be considered in deciding 
whether to dismiss for bad faith). Furthermore, some courts have 
indicated that a dismissal solely for “bad faith” is not available 
under Chapter 7. See In re Huckfeldt, 39 F.3d 829, 832 (8th Cir. 
1994) (dismissal must be “for cause”); In re Padilla, 222 F.3d 1194, 
1192 (9th Cir. 2000) (same). The ability of the government to have 
abusive serial filings dismissed is thus far less certain than peti- 
tioners suggest. 

43 

CONCLUSION 

For the foregoing reasons, the judgment of the court 
of appeals should be affirmed. 

Respectfully submitted. 

THEODORE B. OLSON 
Solicitor General 

EILEEN J. O’CONNOR 

Assistant Attorney General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

PATRICIA A. MILLETT 

Assistant to the Solicitor 

General 

BRUCE R. ELLISEN 
THOMAS J. SAWYER 

Attorneys 

DECEMBER 2001 

APPENDIX 

The following is a non-exhaustive list of cases in 
which the federal government has litigated the tolling 
issue presented in this case: 
Brustman v. United States, 99-1 USTC ¶50,348 (BAP 
9th Cir. 1998); 

In re Gurney, 192 B.R. 529 (BAP 9th Cir. 1996); 

In re Brickley, 70 B.R. 113 (BAP 9th Cir. 1986); 

In re Savini, 260 B.R. 689 (D.N.J. 2001); 

United States v. Messer, No. 00 CIV. 2553 DLC 
2000 WL 991337 (S.D.N.Y. July 19, 2000); 

In re Offshore Diving & Salvaging, Inc., 242 B.R. 987 
(Bankr. E.D. La.), aff ’d, 99-2 USTC ¶ 50,994 (E.D. La. 
1999); 

In re Saunders, 240 B.R. 636 (S.D. Fla. 1999); 

United States v. Gilmore, 226 B.R. 567 (E.D. Tex. 1998); 

In re Pastula, 227 B.R. 794 (E.D. Mich. 1997); 

In re Brent, 212 B.R. 311 (C.D. Ill. 1997); 

Bosarge v. United States, 96-2 USTC ¶50,566 (S.D. Ala. 
1996); 

In re Ramos, 208 B.R. 655 (W.D. Tex. 1996); 

In re Miller, 199 B.R. 631 (S.D. Tex. 1996); 

Acosta v. IRS, 184 B.R. 544 (W.D. Tenn. 1995); 

In re Eysenbach, 183 B.R. 365 (W.D.N.Y. 1995); 

Solito v. United States, 172 B.R. 837 (W.D. La. 1994); 

In re Grogan, 158 B.R. 193 (E.D. Calif. 1993), aff ’d 168 

B.R. 382 (BAP 9th Cir. 1994); 

(1a) 

2a 

In re Linder, 139 B.R. 950 (D. Colo. 1992); 

In re Deitz, 116 B.R. 792 (D. Colo. 1990); 

In re Molina, 99 B.R. 792 (S.D. Ohio 1988); 

In re Pattalochi, 269 B.R. 60 (Bankr. D. Wyo. 2001); 

In re Fiels, 260 B.R. 362 (Bankr. D. Md. 2001); 

In re Hoppe, 259 B.R. 852 (Bankr. E.D. Tex. 2001); 

In re Evoli, 258 B.R. 839 (Bankr. M.D. Fla. 2001); 

In re Schultz, 86 A.F.T.R.2d ¶ 5027 (Bankr. D.N.H. 
2000); 

In re Hamrick, 259 B.R. 224 (Bankr. M.D. Ga. 2000); 

In re Morgan, 255 B.R. 247 (Bankr. N.D. Ga. 2000); 

In re Kaiser, 242 B.R. 643 (Bankr. N.D. Ohio 1999); 

In re Bair, 240 B.R. 247 (Bankr. W.D. Tex. 1999); 

In re Barton, 236 B.R. 613 (Bankr. W.D. Va. 1999) 

In re Burt, 237 B.R. 914 (Bankr. N.D. Miss. 1999); 

In re Avila, 228 B.R. 63 (Bankr. D. Mass. 1999); 

In re Tarullo, 85 AFTR2d ¶2000-459 (Bankr. N.D.N.Y. 
1999); 

In re Kelly, 99-2 USTC ¶51,002 (Bankr. C.D. Cal. 1999); 

In re Thompson, 99-2 USTC ¶51,007 (Bankr. N.D. Ga. 
1999); 

In re Seawright, 1999 WL 1495417 (Bankr. D.N.J. 
1999); 

In re Tarullo, No. 97-12412, 1999 WL 1424988 (Bankr. 

N.D.N.Y. 1999); 

In re Seawright, 1999 WL 1495417 (Bankr. D.N.J. 
1999); 

3a 

In re Fontes, 228 B.R. 3 (Bankr. N.D. Ala. 1998); 

In re Daniel, 227 B.R. 675 (Bankr. N.D. Ind. 1998); 

In re Hollowell, 222 B.R. 790 (Bankr. N.D. Miss. 1998); 

In re Thomas, 222 B.R. 742 (Bankr. E.D. Pa. 1998); 

In re Blakely, 219 B.R. 722 (Bankr. S.D. Miss. 1998); 

In re Collins, 223 B.R. 372 (Bankr. M.D. Fla. 1997); 

In re Little, 216 B.R. 769 (Bankr. E.D.N.C. 1997); 

In re Zecco, 211 B.R. 109 (Bankr. D. Mass. 1997); 

In re Rangel, 209 B.R. 744 (Bankr. D. Colo. 1997); 

In re McMillan, 204 B.R. 835 (Bankr. M.D. Ga. 1996); 

United States v. Colvin, 203 B.R. 930 (Bankr. N.D. Tex. 
1996); 

In re Darden, 202 B.R. 715 (Bankr. E.D. Va. 1996); 

In re Cowart, 199 B.R. 799 (Bankr. M.D. Fla. 1996); 

In re Strickland, 194 B.R. 888 (Bankr. D. Idaho 1996); 

In re Macko, 193 B.R. 72 (Bankr. M.D. Fla. 1996); 

In re Dodson, 191 B.R. 869 (Bankr. D. Or. 1996); 

In re Shedd, 190 B.R. 692 (Bankr. M.D. Fla. 1996); 

In re Tibaldo, 187 B.R. 673 (Bankr. C.D. Cal. 1995); 

In re DiCamillo, 186 B.R. 59 (Bankr. E.D. Pa. 1995); 

In re Clark, 184 B.R. 728 (Bankr. N.D. Tex. 1995); 

In re Turner, 182 B.R. 317 (Bankr. N.D. Ala. 1995), 
opinion on reconsideration, 195 B.R. 476 (1996); 

In re Gore, 182 B.R. 293 (Bankr. N.D. Ala. 1995); 

In re Sirman, 171 B.R. 403 (Bankr. M.D. Fla. 1994); 

4a 

In re Harris, 167 B.R. 680 (Bankr. M.D. Fla. 1994); 

In re Teeslink, 165 B.R. 708 (Bankr. S.D. Ga. 1994); 

In re Reed, 165 B.R. 959 (Bankr. N.D. Ga. 1993); 

In re Bowling, 147 B.R. 383 (Bankr. E.D. Va. 1992); 

In re Ringdahl, Bankr. L. Rep. (CCH) ¶74,082 (Bankr. 

M.D. Fla. 1991); 

In re Ross, 130 B.R. 312 (Bankr. D. Neb. 1991); 

In re Wise, 127 B.R. 20 (Bankr. E.D. Ark. 1991); 

In re Stoll, 132 B.R. 782 (Bankr. N.D. Ga 1990); 

In re Bryant, 120 B.R. 983 (Bankr. E.D. Ark. 1990); 

In re Davidson, 120 B.R. 777 (Bankr. D.N.J. 1990); 

In re Florence, 115 B.R. 109 (Bankr. S.D. Ohio 1990); 

In re Quinlan, 107 B.R. 300 (Bankr. D. Colo. 1989); 

In re Carter, 74 B.R. 613 (Bankr. E.D. Pa. 1987);