Young v. United States

Background

The Youngs, a married couple, failed to pay about $15,000 in federal income tax for 1992. Their return was due October 15, 1993 (they had an extension). The IRS assessed the tax January 3, 1994. The Youngs made small payments, then filed for Chapter 13 bankruptcy on May 1, 1996. They later dismissed that Chapter 13 and filed a Chapter 7 petition on March 12, 1997, receiving a discharge in June 1997. The IRS sought the 1992 tax; the Youngs argued the debt was discharged because the return's due date was more than three years before the Chapter 7 filing.

Reasoning

The Court asked whether the Bankruptcy Code’s three‑year lookback for tax debts is tolled while a prior bankruptcy is pending. The Court concluded the lookback is a limitations period and is subject to traditional equitable tolling. Because the earlier Chapter 13 petition imposed an automatic stay that blocked the IRS from protecting its claim, that period is excluded from the three years. The Court rejected arguments that other statutory text forbids tolling and explained that specific provisions that mention tolling do not displace equitable tolling here. The judgment of the First Circuit was affirmed.

Real world impact

The decision prevents debtors from using back‑to‑back bankruptcy filings to run down the three‑year window and erase recent tax debts. It leaves the IRS able to have recent tax claims treated as nondischargeable when an earlier bankruptcy paused collection. Affected debtors and tax collectors nationwide must account for tolling when planning filings.