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In re Yuska

United States Bankruptcy Appellate Panel of the Eighth Circuit

May 8, 2017

In re: David Eugene Yuska, Debtor
v.
Iowa Department of Revenue, Defendant-Appellee David Eugene Yuska, Plaintiff- Appellant

          Submitted: April 19, 2017

         Appeal from United States Bankruptcy Court for the Northern District of Iowa - Cedar Rapids

          Before SALADINO, Chief Judge, KRESSEL and NAIL, Bankruptcy Judges.

          Kressel, Bankruptcy Judge.

         David Eugene Yuska appeals from an order of the bankruptcy court [1]granting the Iowa Department of Revenue's motion for summary judgment and dismissing his adversary proceeding. We affirm.

         BACKGROUND

         Yuska filed a Chapter 13 bankruptcy petition on September 29, 2014. The case was later converted to a Chapter 7 case. On February 9, 2015, Yuska filed a complaint against the Iowa Department of Revenue, asking the bankruptcy court to set aside the department's tax assessments for tax years 2004-2013.

         The department filed an answer and asserted defenses of issue and claim preclusion among others. It also filed a motion asking the bankruptcy court to abstain from hearing the constitutional question and the legality of the department's assessment procedure. It filed another motion asking the court to dismiss Yusuka's claim regarding the 2007 tax assessment based on claim preclusion because on November 29, 2012, an administrative law judge already decided the issue and Yuska did not appeal that decision. It later moved for summary judgment of the entire proceeding arguing that there were no genuine issues of material fact about the amount of taxes assessed.

         Yuska filed numerous responses to the department's motions. Yuska made general legal argument as to the constitutionality of the Iowa income tax statute. He argued that the income tax statute was unconstitutional under Article VII, Section 7 of the Iowa constitution. He argued that Iowa Code 422.5 that imposes taxes is unconstitutionally vague because it does not state the object of the tax as required by the constitution but instead another section of Chapter 422 provides the object. He also argued that the department improperly relied on information from the Internal Revenue Service because that information doesn't show that it was derived from the United States Internal Revenue Code and he doesn't owe income tax under the Internal Revenue Code. He also argued that he is no longer a citizen because he renounced his U.S. citizenship and Iowa residency and appeared in court on behalf of "ens legis, " a legal entity that does not owe taxes.

         After many continued hearings and extensions for submissions requested by Yuska and granted by the bankruptcy court, the court held a hearing on April 26, 2016 and took the matter under advisement. On May 12, 2016, before the court made a determination of the motion, Yuska filed a motion to file new evidence. The court denied the motion and entered an order stating that no further briefing or supplements would be considered by the court.

         In its July 6, 2016 order, the bankruptcy court concluded that there were no genuine issues of material fact. Yuska resided in Iowa and received rental income, wages, salaries, interest, dividends, capital gains and other income while living in Iowa for the tax years in question, but he did not pay Iowa income taxes.

         The bankruptcy court concluded that, in Iowa, an administrative determination is given the same preclusive effect as the judgment of a court. The court held that Yuska's claim that he does not owe income tax liability for 2007 is barred by claim preclusion because the bankruptcy court cannot determine the taxes or the legality of the 2007 tax liability that have been decided by the administrative law judge. The court also held that Yuska's challenge to the department's right and authority to tax or the department's assessment procedure is barred by issue preclusion because those arguments were also considered and rejected by the administrative law judge.

         The bankruptcy court also considered and rejected Yuska's other legal arguments. The court held that Yuska's argument that the income tax statute is unconstitutional because it does not state the object to which the tax is to be applied and required looking to multiple sections to find the tax and object, unpersuasive because Iowa income statute has been upheld by the Iowa Supreme Court as constitutional.

         The court also rejected Yuska's argument that the department did not properly calculate his tax liability because he doesn't owe any taxes under the Internal Revenue Code. The court held that the "Iowa income tax uses the federal taxable income number to determine the amount of tax owing" and Yuska's "Iowa tax liability is not tied to his federal tax liability." The court also held that the fact that Yuska declared that he renounced his U.S. citizenship does not excuse tax liability and is ...


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