RESPONDENT: Illinois Dept. of Revenue
LOCATION: Denton County District Court
DOCKET NO.: 99-387
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Seventh Circuit
CITATION: 530 US 15 (2000)
ARGUED: Apr 17, 2000
DECIDED: May 30, 2000
A. Benjamin Goldgar - Argued the cause for the respondent
Lawrence G. Wallace - Argued the cause for the United States, as amicus curiae, by special leave of court, supporting the respondent
Robert Radasevich - Argued the cause for the petitioner
Facts of the case
In 1998, William Stoecker formed Chandler Enterprises, Inc., which purchased a plane out of state and moved it to Illinois. By the time the Illinois Department of Revenue, having discovered that the corporation had failed to file a use tax return or pay the tax on the plane, issued a notice of tax liability against the corporation and a notice of penalty liability against the debtor in the District Court, the corporation was defunct and Stoecker was in bankruptcy. Under Illinois law, any corporate officer who is responsible for filing tax returns and making payments, and who "willfully" fails to do so, is personally liable for a penalty "equal to the total amount of tax unpaid by the corporation." There was no proof that Stoecker was responsible for payment of the tax and the court ruled that while Chandler owed taxes on the plane, Stoecker should not be penalized. However, Illinois law shifted the burden of proof, both on production and persuasion, to the purportedly responsible officer, the trustee in bankruptcy, Thomas Raleigh, once a notice of penalty liability was issued. The Court of Appeals ruled in favor of the Department, holding that the burden of proof remained with Raleigh, just as it would have been on Stoecker had the proceedings taken place outside of bankruptcy, and finding that Raleigh had not satisfied the burden of persuasion.
Does the burden of proof on a tax claim in bankruptcy court remain with the trustee in a bankruptcy?
Media for Raleigh v. Illinois Dept. of RevenueAudio Transcription for Oral Argument - April 17, 2000 in Raleigh v. Illinois Dept. of Revenue
Audio Transcription for Opinion Announcement - May 30, 2000 in Raleigh v. Illinois Dept. of Revenue
William H. Rehnquist:
The opinion of the Court in No. 99-387, Raleigh v. The Illinois Department of Revenue will be announced by Justice Souter.
David H. Souter:
This case comes to us on writ of certiorari to the Court of Appeals for the Seventh Circuit.
The petitioner Raleigh is the trustee in bankruptcy for William Stoecker, the former President of Chandler Enterprises Incorporated, the corporation doing business in the Illinois.
Chandler bought an airplane out of State and failed to pay the Illinois use tax on the purchase.
When the State Department of Revenue discovered the omission, it issued a notice of liability to Chandler and the notice of penalty liability to Stoecker as a responsible corporate officer.
By doing that, the State in effect charged Stoecker with the liability for the corporation’s unpaid tax.
Stoecker however was by then in bankruptcy.
While Illinois Law puts the burden of proof on the taxpayer to disprove the validity of a penalty liability claim, the trustee in bankruptcy argued that bankruptcy should be governed by a uniform rule putting the burden of proof on creditors, including State tax authorities.
The Court of Appeals for the Seventh Circuit rejected the trustee’s argument, yet applied Illinois Law and placed the burden of proof on the trustee.
Because the evidence on either side was extremely limited, the trustee could not meet the burden and the liability was sustained.
In an opinion filed with the Clerk of Court today, we affirm.
The burden of proof is a substantive element of a creditor’s claim.
If the underlying law creating a tax claim puts the burden of proof on the taxpayer to show that he does not owe the tax claimed by the government, the burden of proof remains with the taxpayer if he files in bankruptcy.
While Congress may alter substantive aspects of creditor’s claims in bankruptcy, there is no indication that it is chosen to change the burden of proof in tax matters.
Our decision is unanimous.