Tuesday, May 29, 2018

New York Times: Another Taxi Driver in Debt Takes His Life. That’s 5 in 5 Months.

On a corner of 86th Street and East End Avenue in Manhattan on Sunday, three posters for a missing man were still hanging on a lamp post about a block from the East River.

That was where the police found the man’s parked taxicab, the biggest investment of his life. The man, Yu Mein Chow, had taken out a loan seven years ago to buy a $700,000 medallion that gave him the right to operate a cab.

Mr. Chow, 56, who lived in Queens and went by the nickname “Kenny,” disappeared on May 11. His body was found floating in the East River about nine miles south, near the Brooklyn Bridge, on Wednesday. Friends and family members believe Mr. Chow jumped to his death, adding to a string of apparent suicides of traditional taxi and livery drivers in the city. It marked the fifth suicide in just over five months. The medical examiner has not yet determined a cause of death.

New York City’s cab industry, dependent on the market value of the once-coveted taxi medallion, has been upended by the proliferation of Uber and other ride-sharing services. Drivers have been demanding changes at City Hall to protect their livelihood, but at least five cabbies have buckled under the strain of debt since December as others describe working 12- and 14-hour shifts to make up for the lost income. One driver shot himself in February outside City Hall after leaving a message on Facebook blaming the industry’s demise on politicians.

On Sunday, Richard Chow, Mr. Chow’s older brother, went to the street where the police found the taxi as part of a vigil that drew dozens of the driver’s friends and fellow cabbies on a bleak afternoon. He climbed the stone steps of nearby Carl Schurz Park and headed toward the iron fence on an esplanade that overlooks the river. “I loved my brother. He was very hard working. He loved his family,” Mr. Chow managed to say before his voice broke and his eyes teared up. “That’s all I want to say.”

The medallion system was created to limit the number of cabdrivers, but ride-sharing apps have rendered it useless, said Bhairavi Desai, executive director of the New York City Taxi Workers Alliance. Last year, data showed that more people used Uber than yellow cabs in the city. Once sold for more than $1 million, taxi medallions are now selling for as little as $175,000, according to data collected by the Taxi and Limousine Commission.

Ms. Desai said she has been transformed into a part-time counselor to despondent drivers who call her in the wee hours of the morning and a part-time eulogist who talks to family and friends to share the stories of the deceased.

Born in Burma, Yu Mein Chow did not immediately take up taxi driving as a profession when he first moved to the United States as a young man. He became a jeweler, Ms. Desai said.

When the business he worked for closed, she said, “He had to reinvent himself. That’s when he started to drive a taxi cab.”

Mr. Chow bought a medallion in 2011, just as Uber was beginning to operate in New York City. By last year, Mr. Chow was realizing that his $700,000 investment was not paying off. He could not afford his daughter’s college education. He could not afford the medical bills after his wife was diagnosed with cancer, Ms. Desai said.

Ms. Desai said Mr. Chow went to make a payment on his medallion loan a few days before he went missing. His credit card was declined.

On Sunday, mourners bowed their heads three times to honor their friend. Richard Chow grabbed a red flower and a white flower and walked toward the iron fence that divides the city from the choppy waters of the East River. More people followed, and together they threw flowers into the river.

Behind them, new posters they had hung on a pole read: “Rest in Peace. Beloved father, husband, brother, friend, NYC taxi driver.”

Copyright 2018 The New York Times Company.  All rights reserved.

Tuesday, May 22, 2018

New York Magazine: Driven to Despair

By Jessica Bruder

On a Monday morning in early February, Neil Weiss sat at his kitchen table in Cherry Hill, New Jersey, nursing a cup of coffee while checking messages on his iPad.

A text had arrived at 5:25 a.m. “Making it count.”

Weiss — the 51-year-old owner and editor of Black Car News, a trade publication serving drivers of New York’s 84,000 “for hire” black cars — wasn’t sure what that meant. The sender was Doug Schifter, 61, who had driven taxis and black cars in New York City for over four decades. Starting in 2014, he had also written a column called “The Driver’s Seat” for Weiss. Over the course of more than 45,000 words, Schifter had gone from griping about traffic tickets and pedestrians “running amok” to thundering about the impending collapse of the industry, which would cause “massive pain and problems for hundreds of thousands of people.” He lambasted politicians for letting Uber and other app-based services flood the market with new drivers, ratcheting up competition and depressing wages. And he begged his fellow workers to band together to demand dignity and a fair day’s pay.

“We are facing extinction,” he wrote. “The time to organize is NOW!”

That morning, Schifter had posted what appeared to be a fresh column on Facebook. Weiss skimmed parts of it. Maybe, he figured, the early-morning text — “Making it count” — had been Schifter’s way of telling his editor he’d made a new commitment to writing. So at 10:07 a.m., Weiss texted him back: no words, just a big thumbs-up.

Soon after, the phone rang. It was a reporter from the New York Post. “Do you have a comment about what happened to Doug Schifter?” she asked Weiss.

“What do you mean?” he said.

Just after sunrise, the reporter told him, Schifter had pulled up to the east gate of City Hall in a black car. Then, without so much as unbuckling his seat belt, he had parked, pointed a shotgun at his face, and pulled the trigger.

Weiss said he couldn’t talk. He hung up the phone and wept.

At the time of his death, Doug Schifter had driven — over 44 years and 4.5 million miles — the equivalent of more than 180 times around the Earth. He drove everything from a yellow Chevy Caprice to black Lincoln Town Cars, luxury SUVs, 80,000-pound tractor-trailers, and RVs. Like many drivers, he regaled his family with tales of having chauffeured the famous (Billy Crystal, Henry Winkler, Marc Anthony) and the otherwise notable (an ambassador, a CBS sportscaster, Michael Bloomberg’s daughters).

Schifter had been driving since his late teens. Growing up in Canarsie, he had been an introvert, quiet and reserved; his family liked to brag that, by age 4, he could read and comprehend the New York Times. While other kids gathered in the streets for pickup games of stickball and skelly, Doug, a big kid with thick glasses in dark plastic frames, preferred the company of books. What sort of books? 

“The kind with paper in ’em,” jokes George Schifter, one of Doug’s two younger brothers, now a retired Air Force veteran. “I’m serious. He read everything.”

That didn’t make high school easy. After flunking gym prevented him from graduating, Doug realized he could earn more money driving a cab than helping out at his father’s service station on Flatlands Avenue in Canarsie, a few blocks from where he grew up. He got a taxi license and moved out of his parents’ house.
In those days, a 40-hour week at the wheel was enough to pay the bills. Though he soon got his GED, the road became Schifter’s life, eclipsing all else. He lived alone. He didn’t date. In the early 1980s, he bought his own taxi medallion — back then they cost around $55,000 — and got a yellow cab, which he rented half-time to another cabbie. “I was a street legend,” he later boasted on Facebook. 

“Douglas took pride — a tremendous amount of pride — in his driving skills,” George recalls. “He could go from Kennedy airport to lower Manhattan in 19 minutes. And he had to use the sidewalk a few times.”

In the 1990s, after selling his yellow-cab medallion, Schifter started driving Lincoln Town Cars for a black-car service called XYZ. Driving a black car was a big step up from being a cabbie. When the market was strong, cabbies could make $30,000 a year, while black-car drivers could take home $100,000. “Ten years ago, the earning potential for the black-car industry was still decent,” Weiss says. “It was solid because you had all these corporate clients.” Black cars drove titans of finance and white-shoe attorneys. They didn’t rely on the vagaries of customers hailing them on the street. Doug’s work wardrobe reflected his new station: fine linen jackets and tailored shirts, a full-length wool coat for winter. “He dressed to the nines,” George says. “Sharp, you know?”

Like being a cabbie, driving a black car came with a built-in community — a fraternity of drivers who bonded over lives lived behind the wheel. While he was working for a service called Dial Car — a booming Brooklyn operation founded before the city even began handing out permits for black cars — Schifter became friends with Sultan Faiz, an Afghan refugee who lived in Flushing with his wife and daughter. At six-foot-four, with a serious expression, Schifter could come off as intimidating. 

“But if you ask him for the shirt off his back, he will give it to you,” Faiz recalls. “At the same time, he would not allow anybody to take his kindness as weakness. For that principle, I loved him.” As they idled in taxi holding pens at the airport, waiting for a fare, Schifter and Faiz would sit in each other’s passenger seats talking about food and religion (Faiz is Muslim; Schifter was Jewish). Whenever one of them clocked in, he would scan the dispatch list for the radio number of the other — 410 for Schifter, 248 for Faiz. Faiz’s daughter, Aisha, called Schifter “Uncle Doug.”

In 2004, with the money he made driving a black car, Schifter bought a split-level house nestled at the edge of a state forest in the Poconos, 110 miles west of Manhattan. He made the place his sanctuary, setting up a hammock on the back deck and building a library of 400 cookbooks. He made ice cream, baked bread, and marinated meat for barbecue, an obsession for which he’d amassed three smokers, a kamado-style ceramic grill, a commercial deli slicer, and a vacuum sealer. He loved sharing new dishes with his fellow drivers; once he drove all the way from the Poconos to Queens to deliver some halal fried chicken he’d prepared for Faiz, who had been hospitalized with an autoimmune disease.

Living so far from the city was hard. Commuting to midtown took two and a half hours — on the rare occasions that there wasn’t any traffic. One winter morning in 2005, Schifter was up and preparing for work at 2 a.m. He’d been housebound, getting over a nasty cold, and he was eager to get on the dispatcher’s list for morning fares. As he left the house in the dark, he didn’t see the black ice coating the front path. He slipped, bumping down eight stairs and shattering his right hip.

Schifter yelled for help, but no one came — his house was out in the woods, and his nearest neighbors were likely fast asleep. Lying alone in the cold, he dialed 911 on his cell phone. He spent the next 45 minutes waiting for an ambulance.

The surgery went well but laid him up for 90 days, leaving him with little to do but sit and watch the bills roll in. There were huge medical expenses, along with car, mortgage, and insurance payments. 

Since he wasn’t driving, he had no income, and Schifter hadn’t prepared for a time when he couldn’t work. “Money always burned a hole in his pocket,” George recalls. “He was always giving it away.”

Schifter’s family chipped in to cover the shortfall, but he felt ashamed about taking help from his brothers and mother. “It was the last thing on earth I wanted to happen,” he later wrote. “The despair was overwhelming.”

Then things got worse. Scared of falling further behind on the bills, Schifter hurried back to work before he’d fully healed from the hip replacement. A week after he started driving again, as he stopped at a red light in Times Square, his car was rear-ended. The crash reinjured his hip. That meant another six weeks off. Schifter was forced to declare bankruptcy. Once he was back on his feet, he began working harder than ever. “He lived in his vehicle,” George recalls. Unable to spare the time to drive home to the Poconos, Schifter slept in his car most nights, parking at a rest stop near the next morning’s job. He kept two suits in rotation, making frequent visits to a dry cleaner. He showered at truck stops.

Over the next decade, the parade of health problems continued. A gastric bypass to control his diabetes led to an abdominal infection; his body took five months to heal. Doctors found a cancerous tumor in his large intestine and performed surgery to remove it. A driver backed into his car in a Dunkin’ Donuts parking lot, rupturing a disc in Schifter’s neck. He couldn’t afford surgery. The pain was exacerbated by long hours in the driver’s seat. “He had to work through that,” George says.
For a black-car driver like Schifter, it was not a good time to stumble into a financial crisis. Not long after its founding in 2009, a San Francisco start-up called Uber went looking for new markets to conquer with its app-based ride service — and New York’s antiquated, dysfunctional taxi system made it the perfect target for disruption.

The number of taxi medallions — the de facto operating permits issued for yellow cabs — had stagnated at around 13,500, roughly unchanged since the Great Depression. That was good for drivers, who never had to look long for a fare; great for medallion owners, whose share of the yellow-cab monopoly appreciated faster than New York real estate; and not so great for riders, who often couldn’t hail a cab when they needed one, especially if they were anywhere beyond midtown or downtown Manhattan. Passengers could take a “for-hire vehicle” — including livery cabs, limos, and black cars like the one Schifter drove. But those rides had to be prearranged by phone and could be costly.
Uber seized on the opportunity. In May 2011, it launched in New York with 100 cars and three promises: a living wage for drivers, a better experience for riders, and big returns for investors. The pitch worked. Over the next six years, as the company blazoned the city with an ad campaign offering drivers the ultimate gig-economy opportunity to “side hustle” their way into the middle class, the number of for-hire vehicles in New York swelled from 39,708 to 102,536.

Uber’s rapid expansion was good for passengers, who could suddenly summon a ride from anywhere in the city. But it was disastrous for almost everyone else. With more cars on the streets, traffic in the city got even slower and more congested. Investors poured more than $21 billion into the company, which has yet to turn a profit. (Uber posted $4.5 billion in losses last year alone, subsidizing rides in an all-out effort to establish a monopoly.) And according to one estimate, the company’s drivers — after paying for gas, maintenance, and Uber’s commission of 25 percent on every fare — took home barely $10 an hour on average. Last year, Uber agreed to shell out more than $80 million for underpaying drivers in New York — a systematic practice it blamed on an accounting error — and in January it agreed to pay $3 million to settle a class-action suit by New York drivers who accused it of levying excessive fees on their fares.

Veteran drivers like Schifter were hit especially hard. In the course of only a few years, Uber gutted the black-car and livery businesses, both of which had been reliable sources of income for working-class New Yorkers for generations. Cabbies also suffered: From June 2014 to June 2015, according to one analysis of city data, the number of Uber pickups in Manhattan soared by 1.4 million, while the number of taxi pickups plunged by 1.1 million. At the same time, the price of taxi medallions — which peaked at a record $1.3 million in 2014, when Uber was still ramping up — took a steep dive. In January, one sold for $120,000.

In his column in Black Car News, Schifter railed against what he recognized as unfair competition. For decades, drivers had spent their own money to build what the city had effectively promised would be a municipally regulated monopoly on for-hire vehicles, investing hundreds of millions of their hard-earned dollars to buy city-issued medallions and pay for vehicles. Then, almost overnight, the long-standing rules of supply and demand were upended. “The customers just don’t care,” Schifter lamented in one column, essentially summing up Uber’s entire business model. “They want the lowest price, no matter what.”
Everywhere he looked, Schifter saw the signs of an impending taxi apocalypse. One cabdriver told Schifter that he used to work five days a week and take home $1,000. Now he was driving seven days a week and taking home $800. One day, at the Flushing subway terminus, a friend of Schifter’s saw 30 cabs waiting on fares. In the pre-Uber days, there used to be only four. At JFK, Schifter watched as the taxi lot began to overflow with more waiting vehicles than he’d ever seen. “There apparently was not enough work in the city and they drove empty to JFK in desperation to get a job,” he wrote. “The Taxi & Limousine Commission and city government, as well as the state, are clueless as to the ticking time bomb they created.”

Black cars, by their very nature, are even more vulnerable to competition from Uber, which offers customers less hassle and a lower price for a similar service. In 2015, Schifter spent an entire Wednesday evening on call, and for the first time in his four decades of driving, not a single job came through. There were times when he averaged less than $4 an hour — and that was before expenses. In April 2017, on the third anniversary of his column, Schifter told readers that he had been spending up to 120 hours each week on call in the city. But despite working every single day, for more than 17 hours a day, he got only 20 jobs. “My income is down 50 percent in the past two years!” he lamented. And unlike other drivers, he wasn’t willing to go to work for the enemy by moonlighting for Uber or Lyft to supplement his dwindling income.

For Schifter, his column was more than a place to express his frustration and anger. It was a spiritual quest — the closest he came to a higher calling. One day, on a long drive to Connecticut, one of his clients suggested a book he had never heard of: Many Lives, Many Masters, a best seller with more than a million copies in print. He ordered it overnight express and devoured it the next day.

Although Schifter had always referred to himself as a “natural skeptic,” that hadn’t kept him from puttering around the existential void, seeking a semblance of order and purpose in what had become a very hard life. The book’s author, a psychiatrist named Dr. Brian Weiss, claimed that he, too, had once been a hard-nosed skeptic. But after he treated a patient who described having 86 past lives, Weiss wrote, she connected him with spiritual beings called “the masters,” whose wisdom transformed his life.

The whole thing sounded implausible, but Weiss held degrees from Columbia University and Yale Medical School. He had been featured in the New York Times and interviewed by Oprah Winfrey on national television. Schifter urged George and Faiz to read the book, hoping they would be moved by its message. The book’s teachings were essentially a Whitman’s sampler of the world’s religions, advising readers that acts of charity, hope, and love could advance the immortal spirit. The highest purpose of humanity, Weiss added, was learning: gaining knowledge and passing it along to others.
Schifter found that purpose in his column. Sitting in his car, waiting for jobs that came less and less often, he poured out his wisdom on his iPad. He addressed his readers as “Brothers and Sisters,” proposing a concrete plan of action. “We will all be slaves to Uber,” he warned, offering to play the role of Spartacus. “I am seeking to organize drivers into a fighting army of thousands … Be part of an established tradition of fighting tyranny.” And he promised a bright future on the far side of victory: “If we work together, then everyone will have a better life and the true ‘American Dream.’ ”

In July 2016, to galvanize his fellow drivers and launch the revolution, Schifter created a Facebook group called NY Black Car Drivers Association. “If there are too many vehicles on the street, the system (and its drivers) will be devastated,” he had warned not long after launching his column. “If you look back at the dawn of the industry, it was evident what can happen when too many vehicles overran the streets — robberies, killings, battles between the drivers themselves, etc.”

Schifter was referring to the Great Depression, when unemployed men flooded the taxi industry, creating more supply than the market could bear. Thousands of cabbies chased a shrinking pool of riders. Fares plunged. Desperate drivers tried working 20-hour days and still couldn’t make enough to get by. In 1934, a peaceful strike devolved into a riot when a mob of angry drivers began beating scabs and setting vehicles on fire all over the city. After a few false starts at regulation, the city eventually capped the number of cabs, creating the modern-day taxi-medallion system.

Now, in the midst of another industrywide depression — with Uber drivers flooding the streets — Schifter urged his brothers and sisters to band together and join his newly created association. “He knew that his fellow drivers were going through what he was going through,” Neil Weiss says. “And that bothered him, probably more than anything.”

A few friends liked the page to show their support. But the cavalry Schifter had summoned didn’t answer the call. Desperate, in search of guidance from the man who had inspired him, he tried to contact Dr. Weiss on Facebook. “I believe I am here for a purpose other than just for me,” Schifter wrote. “I am trying to find the answers. Do you have any suggestions?”

The post was public. It received no response.

Despite working around the clock, Schifter saw no chance of turning his life around. His body was a wreck, and hours behind the wheel had only exacerbated the chronic pain in his neck and hip. He was deep in debt, and his income had slowed to a trickle. “He was suffering from all this pain and difficulties with his finances. He couldn’t keep up anymore,” George recalls. “It was too much of a drain on him.”

In conversations with Faiz, Schifter blamed politicians for flooding the streets with cabs. But last summer, he also hit on a new idea to rouse the public to action: He wanted to end his life. And he would turn his death into an unavoidable call to arms.

The same book that had given Schifter a sense of purpose now gave him comfort. Death, he believed, is an illusion. “Reincarnation is reality,” he wrote on Facebook. “Many Lives, Many Masters by Dr. Brian Weiss was my breakthrough discovery that established it.” When he told Faiz about his plan, his friend was devastated. “Don’t even think about it,” Faiz told him. Appealing to Schifter’s spiritual side, he pointed out that most religions forbid suicide.

But by last fall, Schifter had made up his mind. That Halloween, the engine on the black SUV he used for work — a GMC Yukon Denali XL — died for a second time. There was no money for the repair, and the car seemed determined to fall apart, so Schifter decided to let it go. “That was the final straw,” George says. That same month, Black Car News ran the last installment of his column, with the author credit in the past tense: “Douglas Schifter was an executive chauffeur and a professional driver.”

After Schifter missed a mortgage payment, his family invited him to come live with them. Friends offered to help him find work. But Schifter was unconvinced that anything would be enough to pay off his $75,000 in debt. He knew he was going to lose his home, and, at his request, George helped him start moving his possessions into storage. “We would sit down and we’d talk about life, our lives together, family,” George recalls. “Not a day went by when I didn’t ask him to change his mind.”

But he didn’t. In January, George tried to confiscate the shotgun that Schifter kept hidden in his bathroom cupboard. George waited until his brother was asleep, then stashed the gun in his truck for safekeeping. Schifter woke up a few hours later, and somehow he knew.

“Give it back to me!” Schifter thundered.

George, who saw his brother as a gentle giant, was surprised.

“There’s no reason for you to yell at me,” he told Schifter. “I don’t deserve it.”

Schifter welled up in tears and apologized. But he insisted on taking back the gun.

When George returned to his home in Orlando, he told their older brother, Paul, what had happened. Paul called the police to report that Schifter was in imminent danger of taking his life. But when officers paid a house call, Schifter told them everything was fine.

In early February, George and Matt, the family’s youngest brother, drove back to the Poconos. On the way, they kept in frequent touch with Schifter from the road, checking in with him on his landline, since his cell phone had been disconnected. When they arrived that Sunday, shortly after noon, Schifter was already gone, but he’d left the lights and heater on for them.

The next morning, a shotgun blast erupted from a rental car at the east gate of City Hall. A frenzy ensued. Was it terrorism? Police responded, taping off the scene. Traffic was halted on the Manhattan-bound side of the Brooklyn Bridge. The bomb squad came to check for explosives. All they found in the car was Schifter, lifeless in a crisp white shirt and dress pants. Next to him, inside a Ziploc bag, was a photograph of a clean-shaven kid standing in front of the American flag. It was a photo of George, from his days in basic training in the Air Force; on his recent visit, he had urged Doug to keep it with him, so he wouldn’t feel alone.

In his suicide note, Schifter made clear what had driven him to take his own life. “Due to the huge numbers of cars available with desperate drivers trying to feed their families,” he wrote, “they squeeze rates to below operating costs and force professionals like me out of business. They count their money and we are driven down into the streets we drive becoming homeless and hungry. I will not be a slave working for chump change. I would rather be dead.”

But at the press conference about Schifter’s suicide, Mayor Bill de Blasio downplayed Schifter’s parting explanation. “Let’s face it,” he told reporters. “For someone to commit suicide, there’s an underlying mental-health challenge.” De Blasio was hardly in a position to diagnose Schifter. There was, in fact, no evidence that Schifter was mentally ill — just a long written record, published over the course of three years in Black Car News, that underscored how the upheaval in the taxi industry had left him physically impaired, financially desperate, and emotionally devastated. De Blasio himself had done little to rein in Uber, backing down on a cap he had proposed placing on app-driven services. “I heard you were going to end the cruelty to the Central Park horses,” Schifter had addressed de Blasio in one of his columns. “How about ending the government’s cruelty to us?”
Schifter wasn’t even the first driver to kill himself. Two months earlier, in separate incidents, two livery drivers — Alfredo Pérez and Danilo Corporán Castillo — had committed suicide. Castillo, 57, had jumped from the roof of his Harlem apartment building after learning that he might lose his license for picking up unauthorized street hails. In his pocket, a suicide note was scrawled on the back of a summons from the Taxi & Limousine Commission.

When Schifter’s death made the cover of Black Car News, letters poured in from supportive readers. One called on de Blasio to name the east gate of City Hall “Doug Schifter Way.” Another compared Schifter to Thích Quang Duc, the Buddhist monk who set himself ablaze on a Saigon street in 1963, and to Mohamed Bouazizi, the Tunisian street vendor whose self-immolation in 2010 helped spark the Arab Spring. A third likened him to Nelson Mandela and Martin Luther King Jr. Someone suggested the date of Schifter’s suicide — February 5 — may not have been a coincidence; it was the anniversary of New York’s 1934 taxi riots, which gave birth to the industry that served the city and its drivers for so many decades.

And there were vigils and rallies. Protesters organized by the New York Taxi Workers Alliance, a grassroots group representing 19,000 drivers, descended on City Hall. They waved signs that read REST IN PEACE DOUGLAS SCHIFTER, OUR DRIVER BROTHER and YOUR LIFE AND DEATH WERE NOT IN VAIN. They held aloft his photograph and chanted, “Douglas! Our brother! There’ll never be another!”

Then, on March 16, there was another suicide. Gabriel Ochisor found his father, Nicanor, hanging from a metal cable in the garage of their home in Maspeth, Queens. The 64-year-old Romanian immigrant had been a yellow-cab driver for more than 25 years. He’d watched the value of his medallion drop by more than a million dollars, his retirement evaporating before his eyes.

One hundred drivers returned to City Hall with their signs. They lined up at the east gate, where Schifter had ended his life, and shuffled through a metal detector. They gathered around photographs of the dead, then scattered flowers on four prop coffins—the kind you might get at a Halloween store — before climbing the steps of City Hall. There, they took up a chant: “No more loss! No more death! We need action now!”

One cabbie, addressing the protesters, observed that the turnout would have been bigger if drivers could afford to show up. “They need to be out working!” he barked. “They don’t have the luxury to come out here and protest.” Then, after an hour of chanting and speeches, everyone put down their signs and headed back to work.

© 2018, New York Media LLC.  All rights reserved.

Monday, May 21, 2018

Dischargeability of taxes in bankruptcy

Here at Shenwick & Associates, many clients, lawyers and accountants have called us regarding the discharge of taxes in bankruptcy filings.  Many kinds of “old” state and federal income taxes are dischargeable in bankruptcy. In the case of income taxes, they are dischargeable in Chapter 7 if all the following criteria are met:

1. The tax is for a year for which a tax return is due more than 3 years prior to the filing of the bankruptcy petition;
2. A tax return was filed more than two years prior to the filing of the bankruptcy petition;
3. The tax was assessed more than 240 days prior to filing of the bankruptcy petition;
4. The tax was not due to a fraudulent tax return, nor did the taxpayer attempt to evade or defeat the tax;
5. The tax was not assessable at the time of the filing of the bankruptcy petition; and
6. The tax was unsecured.

Income taxes: (i) for tax years ending on or before the date of filing the bankruptcy petition, for which a return is due (including extensions) within 3 years of the filing of the bankruptcy petition; (ii) assessed within 240 days before the date of filing the petition; (iii) not assessed before the petition date, but were assessable as of the petition date, unless these taxes were still assessable solely because no return, a late return (within 2 years of the filing of the bankruptcy petition), or a fraudulent return was filed, withholding taxes for which a person is liable in any capacity, an employer's share of employment taxes on wages, salaries, or commissions (including vacation, severance, and sick leave pay) and excise taxes on transactions occurring before the date of filing the bankruptcy petition are all not dischargeable in bankruptcy.

As part of our bankruptcy intake process, we analyze a client’s state and federal tax transcripts to determine whether their tax debts (if any) are dischargeable or not.  It’s complicated by the fact that various actions by the IRS or the taxpayer can “toll” the periods of time listed above.  And a recent case from the Bankruptcy Court for the Southern District of Georgia, Elkins v. IRS (In re Elkins), demonstrates the pitfalls of not calculating these dates correctly.  Elkins requested an extension to file his 2001 federal income tax return. As a result, his 2001 federal tax return was due on October 15, 2002.   He filed for chapter 7 relief on October 14, 2005.  Both Elkins and the IRS filed motions for summary judgment regarding the dischargeability of his income taxes. 

Elkins argued that a year was limited to 365 days (2004 was a leap year).  He also included both the day his tax return was due and the day he filed his bankruptcy petition in his calculations.  The bankruptcy court disagreed, finding that a year meant a calendar year.  As a result, the bankruptcy court ruled that Elkins filed his petition one day prior to the three-year anniversary date of when his 2001 tax return was due. Therefore, the IRS's claim for Elkins’ 2001 tax liability was non-dischargeable under §§ 507(a)(8)(A)(i) and 523(a)(1)(A).

For your questions about taxes and bankruptcy, please contact Jim Shenwick.