§ 11.3 TAX DISCHARGE
(a) Introduction
The extent to which a tax is discharged depends on (1) whether the debtor is an individual or a corporation, (2) the chapter under which the petition is filed, and (3) the nature and priority of the tax.
The dischargeability of tax fines and penalties and interest depends on the nature of the tax to which penalties and interest relate. If the tax is nondischargeable, interest and penalties will not be discharged.250 The converse is also true. The bankruptcy court has original, but not exclusive, jurisdiction to determine the dischargeability of tax claims.251
(b) Individual Debtors
Section 523(a) of the Bankruptcy Code provides that in a chapter 7 or chapter 11 proceeding involving an individual debt, all taxes that are entitled to priority are exempt from a discharge. Also exempt from discharge are prepetition taxes due for a period when the debtor failed to file a return, filed the return late and it was filed less than two years before the petition date, or filed a fraudulent return or willfully attempted in any manner to evade or defeat the tax due. When fraud is involved, the court may hold that the tax claim is nondischargeable.252 Any tax due that relates to failure to file a return or to other misconduct of the debtor will be considered nondischargeable if such tax qualifies for priority under Bankruptcy Code section 507. Some question exists as to whether a return filed late due to a reasonable cause would be considered nondischargeable. ...
