James A. Sowers v. State Board of Equalization of the State of California

We are called upon here to examine the jurisdiction of the bankruptcy court over a state imposed tax fraud penalty.

In 1974, appellant came under investigation by the California State Board of Equalization (the Board) for tax deficiencies. The probe resulted in a deficiency assessment of $12,535.13 which included a penalty of $2,342.02 for “fraud or/and attempt to evade” taxes under Cal.Rev. & Tax Code § 6485.

Thereafter, on November 7, 1974, appellant filed a voluntary petition in bankruptcy under Chapter XI of the Act. In the proceedings in bankruptcy, the judge made a determination of the amount of taxes due and also found that “[tjhis court has no jurisdiction to determine the fraud penalty.”

The appellant appealed from the order of the bankruptcy judge to the district court solely on the portion of the judgment which held that the bankruptcy court did not have jurisdiction to redetermine the tax evasion penalty in the proceedings. The district court affirmed the bankruptcy court’s opinion and order.

The only question remaining for review in this court is one of law, and it is whether the bankruptcy court under section 2a(2A) of the Act (11 U.S.C. § lla(2A)), has…