Tolling The 2-Year Period Prescribed At 11 U.S.C. § 523(A)(1)(B)(ii) For Discharge of Taxes

By Morgan D. King, Esq. Dublin, CA

Late-filed and more than 2 years before filing bankruptcy

Does a prior bankruptcy, to the extent it’s automatic stay overlaps the running of the 2-year period, stop the clock on the two-year period?

Nothing in the Bankruptcy Code provides that anything tolls the 2-year period.

Prior bankruptcy tolls the 3-year and the 240-day periods for the time the stay is in effect plus 90 days. 11 U.D.C. § 507(a)(8)(G) (“hanging paragraph”)

Prior rule – nothing suspends the clock on the 2-year period. New IRS position – automatic stay of the period stops the clock based on equitable tolling and 11 U.S.C. § 108(c).

Equitable tolling is based on the aphorism the Code allows the IRS two years to collect the taxes before they become dischargeable. First used in Young v. United States, 535 U.S. 43 (S.Ct., 2002) (plus 6 months).

Rule: a statute of limitations is tolled by equitable tolling. The two-year period is a statute of limitations.

Rule adopted in Putnam v. United States

Main arguments against:

  1. 523(a)(1)(B)(ii) is not a statute of limitations. IRS does not lose ability to collect after the period expires; it depends on if or when the taxpayer filed bankruptcy. Is it a “statute of repose”?
  2. Congress addressed tolling in BAPCPA amendments that specifically addressed both the 2-year rule and tolling, and did not include the 2-year period. Hence, lack of adding tolling to the 2-year rule suggests legislative intent to not toll the 2-year period.

Putnam rejects both theories.


morgan-kingMorgan D. King is a member of the California Bar and has been practicing over 40 years. He received his BA in Political Science from U.C. Berkeley, and his JD from U.C. School of Law, Davis, Ca. King has written four articles for legal journals on the topic, The McCoy Rule, and lectured on it for various organizations of consumer bankruptcy attorneys. He presented the topic of discharging taxes in consumer bankruptcy cases at the annual NACBA convention for 17 years, and received NACBA’s Distinguished Service Award iin 2003. He is a member of the California State Bar Tax Section. In addition to 27 published articles on various issues in consumer bankruptcy law, he is the author of the “bible” on discharging taxes, King’s Discharging Taxes in Consumer Bankruptcy Cases, as well as Fees & Ethics, the Fundamentals of Consumer Bankruptcy Law, and the Guide to Practice Under BAPCPA, and on the topic of delinquent tax remedies, King’s Guide to IRS Offers-in-Compromise, and King’s Guide to IRS Collection Due Process. He hosts an annual 2-day seminar on discharging taxes under his own King Bankruptcy Academy marque. On the topic of the McCoy rule, he has posted a web page,, with links to key cases and articles.

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