## Facts

- Leroy Charles Griffith owned and controlled several Subchapter S corporations in the adult-entertainment business, with corporate income flowing through to him for federal income tax purposes.
- An IRS audit determined substantial underpayments of federal income taxes for multiple tax years between 1969 and 1978.
- In Tax Court litigation, the court found underpayments but declined to impose civil fraud penalties because the government did not prove fraud by clear and convincing evidence.
- After the Tax Court confirmed significant liabilities, Griffith engaged in post-assessment restructuring and asset transfers.
- A new corporation was formed shortly after the Tax Court decision, with ownership placed in Griffith’s longtime companion.
- Business assets and operations were shifted in ways the bankruptcy court found were designed to place assets beyond the IRS’s reach while Griffith continued to benefit from them.
- Griffith filed a Chapter 7 petition and brought an adversary proceeding seeking a declaration that his federal income tax liabilities were dischargeable.
- The bankruptcy court held the tax debts nondischargeable under 11 U.S.C. § 523(a)(1)(C) based on a willful attempt to evade or defeat payment; the district court affirmed.

## Issues

1. Whether 11 U.S.C. § 523(a)(1)(C) renders a tax debt nondischargeable when a debtor willfully attempts to evade or defeat payment of a tax, even without a willful attempt to evade or defeat assessment.
2. Whether the bankruptcy court clearly erred in finding that Griffith’s post-assessment conduct constituted a willful attempt to evade or defeat payment of his tax liabilities.

## Decision

- The en banc Eleventh Circuit affirmed the judgment that Griffith’s federal income tax debts were nondischargeable.
- The court held that § 523(a)(1)(C) applies to willful attempts to evade or defeat payment of a tax, not merely conduct aimed at evading assessment.
- The court concluded that the bankruptcy and district courts did not clearly err in finding that Griffith willfully attempted to evade payment, based on the totality of his post-assessment transactions and continued enjoyment of the assets’ benefits.

## Legal Principles

- Under 11 U.S.C. § 523(a)(1)(C), a tax debt is excepted from discharge if the debtor either (a) made a fraudulent return or (b) willfully attempted in any manner to evade or defeat the tax, including by evading payment.
- The phrase “in any manner” indicates Congress intended broad coverage of evasive conduct; the statutory text is not limited to evasion of assessment.
- “Willfully attempted” requires a voluntary, conscious, and intentional effort to evade or defeat tax obligations; mere nonpayment, standing alone, is insufficient.
- Willfulness may be proven by circumstantial evidence, including patterns associated with concealment or asset-shielding arrangements (often evaluated through “badges of fraud”).
- Appellate review of the bankruptcy court’s determination of willful evasion is deferential; factual findings are reviewed for clear error.

## Conclusion

The Eleventh Circuit held that § 523(a)(1)(C) bars discharge of federal tax debts when a debtor intentionally engages in conduct aimed at evading payment, and it upheld the finding that Griffith’s post-assessment transfers and restructurings amounted to such a willful attempt.


In re Griffith, 206 F.3d 1389 (11th Cir. 2000) (en banc)