RALEIGH v. ILLINOIS DEPT. OF REVENUE

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Case Basics
Docket No. 
99-387
Petitioner 
Raleigh
Respondent 
Illinois Dept. of Revenue
Opinion 
Advocates
(Argued the cause for the petitioner)
(Argued the cause for the respondent)
(Argued the cause for the United States, as amicus curiae, by special leave of court, supporting the respondent)
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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.

Question 

Does the burden of proof on a tax claim in bankruptcy court remain with the trustee in a bankruptcy?

Conclusion 
Decision: 9 votes for Illinois Dept. of Revenue, 0 vote(s) against
Legal provision: Bankruptcy Code, Bankruptcy Act or Rules, or Bankruptcy Reform Act of 1978

Yes. In a unanimous opinion delivered by Justice David H. Souter, the Court held that "[w]hen the substantive law creating a tax obligation puts the burden of proof on a taxpayer, the burden of proof on the tax claim in bankruptcy court remains where the substantive law put it (in this case, on the trustee in bankruptcy)." The Court concluded that the bankruptcy estate's obligation to the Department was established by the state's tax code and that the Bankruptcy Code made no provision for altering the burden on a tax claim, and its silence said that no change was intended.

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RALEIGH v. ILLINOIS DEPT. OF REVENUE. The Oyez Project at IIT Chicago-Kent College of Law. 04 April 2014. <http://www.oyez.org/cases/1990-1999/1999/1999_99_387>.
RALEIGH v. ILLINOIS DEPT. OF REVENUE, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/1990-1999/1999/1999_99_387 (last visited April 4, 2014).
"RALEIGH v. ILLINOIS DEPT. OF REVENUE," The Oyez Project at IIT Chicago-Kent College of Law, accessed April 4, 2014, http://www.oyez.org/cases/1990-1999/1999/1999_99_387.