Exclusive Remedy for Automatic Stay Violations Does Not Preclude §6503(h)(2) Tolling of Tax Penalty Collections

Introduction

The Second Circuit’s May 13, 2025 summary order in United States v. Colasuonno addressed two intertwined areas of law: the Bankruptcy Code’s automatic stay provision and the Internal Revenue Code’s tolling rule for tax penalty collection. Philip Colasuonno, a former part-owner of a company that failed to withhold and remit employment taxes, pled guilty to conspiracy under 18 U.S.C. § 371 and to aiding and assisting in filing a false tax return under 26 U.S.C. § 7206(2). While his Chapter 7 case was pending, the IRS assessed roughly $1.74 million in Trust Fund Recovery Penalties and filed a Notice of Federal Tax Lien. Colasuonno received his bankruptcy discharge on July 22, 2011. Ten years later, in December 2021, the United States sued to collect the penalties and interest. Colasuonno moved for judgment on the pleadings, arguing the complaint was time-barred because the IRS’s lien filing violated the automatic stay and therefore tolling under 26 U.S.C. § 6503(h)(2) should not apply.

The key issues were (1) whether § 6503(h)(2) tolled the ten-year statute of limitations for collection of the tax penalty from the date of the bankruptcy discharge plus six months, and (2) whether an alleged stay violation by the IRS defeats that tolling provision. The government had until January 22, 2022 (ten years plus six months from discharge) to sue, making its December 2021 complaint timely on its face.

Summary of the Judgment

The district court denied Colasuonno’s Rule 12(c) motion for judgment on the pleadings and granted summary judgment to the United States. On appeal, the Second Circuit affirmed. It held that:

Under 26 U.S.C. § 6503(h)(2), the statute of limitations for collecting a tax penalty is tolled during a Title 11 proceeding and for six months after the bankruptcy case closes or the taxpayer receives a discharge.
Colasuonno’s discharge on July 22, 2011 triggered tolling, extending the collection window to January 22, 2022. The government’s December 2021 complaint fell within that period.
Even if the IRS’s filing of the Notice of Federal Tax Lien during the bankruptcy case violated the automatic stay (11 U.S.C. § 362(a)), the exclusive remedy for such a violation is a damages action under 26 U.S.C. § 7433(e)(1) in the bankruptcy court—not a defense to tolling or to collection efforts.
Colasuonno abandoned any challenge to the district court’s conclusion on exclusive remedy by failing to address it in his appellate brief.

The court therefore affirmed the denial of Colasuonno’s motion and the grant of summary judgment to the United States.

Analysis

Precedents Cited

11 U.S.C. § 362(a) (Automatic Stay). Bars “any act to collect, assess, or recover” pre-petition claims against the debtor during the pendency of a Title 11 case.
26 U.S.C. § 6502(a)(1) & § 6671(a). Establish a ten-year statute of limitations for IRS collection of a tax or penalty assessment.
26 U.S.C. § 6503(h)(2). Tolling provision that suspends the ten-year period “for the period during which the Secretary is prohibited by reason of a case under Title 11 from collecting … and for collection, 6 months thereafter.”
26 U.S.C. § 7433(e)(1). Provides that a willful violation of the automatic stay by the IRS is remedied by an action for damages in the bankruptcy court.
Ass’n of Car Wash Owners Inc. v. City of New York, 911 F.3d 74 (2d Cir. 2018). Standard of review for Rule 12(c) motions, equating them to Rule 12(b)(6) dismissals.
L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419 (2d Cir. 2011). Clarified pleading standards on Rule 12(c) motions.
Debique v. Garland, 58 F.4th 676 (2d Cir. 2023), and Tripathy v. McKoy, 103 F.4th 106 (2d Cir. 2024). Established that issues not adequately briefed on appeal are forfeited.
Motorola Credit Corp. v. Uzan, 509 F.3d 74 (2d Cir. 2007). Discussed “manifest injustice” standard for disregarding forfeiture of arguments.

Legal Reasoning

The court began with the uncontroversial premise: once a tax penalty is assessed, the IRS has ten years under 26 U.S.C. § 6502(a)(1) to sue for collection. Colasuonno’s assessment date of April 21, 2011 meant the limitations period would ordinarily expire on April 21, 2021. However, § 6503(h)(2) tolls that period during a pending bankruptcy and for six months thereafter. Colasuonno was discharged on July 22, 2011, so the statute ran until January 22, 2022. The December 2021 suit by the United States fell within that window.

Colasuonno’s defense rested on the premise that the IRS violated the automatic stay by filing its lien notice in the county clerk’s office after the bankruptcy filing. Invoking fundamental notions of fairness, he argued that this stay violation should forfeit tolling. The court rejected that approach for two reasons:

Congress has specifically provided that any willful violation of the automatic stay by the IRS must be remedied in a damages action under 26 U.S.C. § 7433(e)(1). That exclusive remedy channeling principle precludes conversion of a stay violation into a tolling defense.
Colasuonno failed to contest or legally develop the district court’s statutory-text-based holding on appeal, thereby forfeiting any challenge to the exclusive remedy rule.

Impact

This decision clarifies that when the IRS assesses a tax penalty against a debtor in bankruptcy, the limitations period for collection is tolled under § 6503(h)(2) regardless of any misplaced assertion that an IRS stay violation should bar tolling. It reinforces the principle that statutory remedies are exclusive, channelling stay-violation claims into the bankruptcy court’s damage proceedings under § 7433(e)(1). Practitioners should note:

Creditors and debtors must look to § 7433(e)(1) for relief from IRS stay violations; they cannot interpose stay-violation arguments to defeat tolling or collection suits.
Chapter 7 debtors who receive a discharge must calculate the collection window as ten years plus six months post-discharge when taxes or penalties are assessed pre-petition.
On appeal, litigants who fail to address dispositive statutory-text rulings risk abandonment of their arguments.

Complex Concepts Simplified

Automatic Stay (11 U.S.C. § 362(a)): A court-ordered freeze that prohibits most collection actions against a debtor once a bankruptcy petition is filed.
Tolling: Pausing the running of a statute of limitations. Under 26 U.S.C. § 6503(h)(2), the clock stops during bankruptcy and resumes six months after case closure or discharge.
Notice of Federal Tax Lien: A public filing that notifies third parties of the government’s claim against a taxpayer’s property for unpaid taxes.
Rule 12(c) Motion (Judgment on the Pleadings): A motion arguing that even if all well-pleaded allegations are true, the opposing party is not entitled to relief, judged under the same standard as a Rule 12(b)(6) dismissal for failure to state a claim.
Exclusive Remedy Doctrine: A principle that where Congress designates a single remedy for a statutory violation, claimants may not pursue alternative remedies.

Conclusion

United States v. Colasuonno confirms that § 6503(h)(2) tolling of the IRS’s ten-year collection period remains effective even if the IRS inadvertently violates the bankruptcy stay by filing a lien. Debtors seeking to challenge collection actions on stay-violation grounds must pursue damages under 26 U.S.C. § 7433(e)(1) in bankruptcy court; they cannot convert such violations into defenses against tolling or collection suits. The decision underlines the exclusivity of statutory remedies, the importance of precise statutory interpretation, and the perils of forfeiting arguments by failing to brief them adequately on appeal.