Hawkins v. FTB, No. 11-16276 (9th Cir. 2014)Annotate this Case
Debtors, William M. "Trip" Hawkins - the cofounder of EA and his wife, filed a declaratory action against the IRS and the FTB seeking a determination that their unpaid taxes were covered by the bankruptcy plan discharge. The IRS and FTB counterclaimed, alleging that the tax debts were excepted from discharge under 11 U.S.C. 523(a)(1)(c). The district court and the bankruptcy court held that specific intent to evade taxes was not required in order to except a tax debt from discharge under section 523(a)(1)(C) and the courts relied in large part on debtors' spending beyond their income as the basis for denying tax debt discharge. The court held that the denial of discharge for willfully attempting, in any manner to evade or defeat a tax debt requires that the acts be taken with the specific intent to evade the tax. In this case, neither the district court nor the bankruptcy court had the benefit of the court's holding and therefore, the court vacated and remanded for the courts to reanalyze the case using a specific intent standard.