On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. 94-06521)
BEFORE: GREENBERG, NYGAARD, and LAY, *fn* Circuit Judges
Robert Taylor filed a Chapter 13 petition in the Bankruptcy Court for the Eastern District of Pennsylvania on November 19, 1992. He had previously filed a Chapter 13 petition in Michigan. The Michigan bankruptcy petition was dismissed on August 26, 1991. In the Pennsylvania proceedings, the Internal Revenue Service filed an amended proof of claim for taxes from 1987 and 1988, *fn1 to which Taylor objected on the ground that the taxes at issue were not entitled to priority status because his petition in bankruptcy was filed more than three years after the due date of the relevant tax returns. *fn2
The IRS replied that the three-year lookback period under 11 U.S.C. Section(s) 507(a)(7)(A)(i) was suspended during the pendency of Taylor's Michigan bankruptcy, *fn3 when an automatic stay prevented the government from collecting his tax debt. See 11 U.S.C. Section(s) 362(a). The IRS argued that, excluding the period of the Michigan bankruptcy proceeding, less than three years had lapsed between the due dates of Taylor's returns and the filing of Taylor's bankruptcy petition in Pennsylvania. *fn4
The Bankruptcy Court issued an order adopting the IRS's position. The court held that the pendency of Taylor's Michigan bankruptcy proceeding tolled the three-year nondischargeability period for unpaid taxes. The district court affirmed, and Taylor appeals.
The parties do not dispute that, but for the suspension of the three-year lookback period during the pendency of Taylor's Michigan bankruptcy proceeding, the IRS's tax claims are no longer entitled to priority under Section(s) 507(a). Taylor contends that a strict construction of 11 U.S.C. Section(s) 507(a) warrants the conclusion that his earlier bankruptcy proceeding in Michigan did not suspend the three-year lookback period. Section 108(c) of the Bankruptcy Code suspends the limitations periods of certain non-bankruptcy statutes which create claims against a debtor in bankruptcy. 11 U.S.C. Section(s) 108(c). *fn5 Taylor urges that it is erroneous to apply Section(s) 108(c) and 26 U.S.C. Section(s) 6503(h) *fn6 to a concept other than collection or assessment and notes that Section(s) 507(a) solely addresses priority among claims. He suggests that, had Congress intended to grant governmental tax claims preferential treatment, it would have done so explicitly, because suspending the lookback period solely for the government creates inequities among unsecured creditors. Sections 507(a)(3) and (4), for instance, grant priority status to certain unsecured claims for wages or benefits earned or arising within 90 or 180 days prior to filing, respectively. But if a bankruptcy were dismissed, Taylor asserts, those expenses yet unpaid would lose their priority status upon the debtor's subsequent filing of a second bankruptcy petition. *fn7 It is asserted that the government should enjoy no such advantage.
We disagree. First, the fact that there is no explicit provision within Section(s) 507(a)(7)(A)(i) which tolls the three-year lookback provision during a period when an automatic stay is in effect under Section(s) 362 cannot defeat the statutory purpose of either the Bankruptcy Code or the Internal Revenue Code. To limit Section(s) 507(a) in this regard would lead to absurd results, as the government would lose its priority claim to back taxes as a result of the taxpayer's abuse of the bankruptcy process.
Taylor's proposed interpretation also ignores the overall statutory scheme behind a Chapter 13 proceeding. A bankruptcy court may not confirm a Chapter 13 plan unless it provides for "full payment . . . of all claims entitled to priority under section 507" of the Code. 11 U.S.C. Section(s) 1322(a)(2). Under the then controlling applicable terms of Section(s) 507, tax liabilities due not more than three years prior to the debtor's filing for bankruptcy were given seventh priority. Section(s) 507(a). The filing of the debtor's petition for relief triggers the automatic stay as to "any act to collect, assess, or recover a claim against the debtor that arose before the commencement" of the bankruptcy proceeding. Section(s) 362(a)(6). The stay remains in effect until the debtor obtains a discharge or the case is closed or dismissed. Section(s) 362(c)(2). No discharge can be issued in a Chapter 13 case until the debtor completes payments or is granted a hardship discharge. Section(s) 1328(b)(1). *fn8
The IRS was completely barred from collecting its pre-bankruptcy tax claims during the pendency of the automatic stay under Section(s) 362(a). No discharge occurred in the earlier Michigan bankruptcy proceeding. By excepting tax priorities from discharge, Congress intended to "discourage recourse to bankruptcy as a facile device for evading tax obligations." S. Rep. No. 1158, 89th Cong., 2d Sess. 3 (1966), reprinted in 1966 U.S.C.C.A.N. 2468, 2470 (describing the effect of similar provisions under former Bankruptcy Act). It would be an absurd result if a debtor, rather than obtaining a complete discharge by paying a priority claim, could avoid the three-year lookback period by voluntarily dismissing a bankruptcy proceeding and thereafter urging that a portion of the three-year period has lapsed. Surely Congress did not intend to tie the government's hands and then chide it for not throwing its stone.
Federal tolling provisions in general reflect a congressional concern that both creditors generally and the government in particular have adequate time to collect their debts. Section 108(c) of the Bankruptcy Code "extends the statute of limitations for creditors in actions against the debtor, where the creditor is hampered from proceeding outside the bankruptcy court due to the [automatic stay] provisions of 11 U.S.C. Section(s) 362." In re Brickley, 70 B.R. 113, 115 (Bankr. 9th Cir. 1986). Likewise, Section(s) 6503(h) of the Internal Revenue Code suspends the tax collection ...