I.    Introduction.

        A confirmation hearing was held upon the debtor's chapter 13 plan on February 15, 1991. The confirmation hearing was extensively briefed and evidence was ably submitted by both the debtor and the United States. This case represents the third attempt of the debtor, a convicted tax protestor, to obtain a discharge of his taxes in bankruptcy. For the reasons set forth herein, his latest attempt will fail.

II.    Factual Backqround.

        The debtor, a longshoreman, became a leader of the tax protest movement in Alaska in the early 1980's. He stopped filing tax returns and paying taxes. He joined "Patriots in Action" and publicly encouraged others to join him in defying the Internal Revenue Service and the American court system.

        In 1985, the debtor was charged with three counts of failure to file income taxes, high misdemeanors. After a six day         1 ABR 390  trial, he was convicted on all three counts. He was sentenced to three years of imprisonment. Two years were suspended. Five years of probation were ordered. The debtor was released after serving nine months in prison. As a condition of probation, the debtor was ordered to file tax returns and work out and pursue a "payment plan for liquidation of the income tax liability."

        The debtor hired an accountant, Dan Cocklin, to prepare delinquent returns for 1979 to 1985. Cocklin delayed filing some of the returns for the years 1983 through 1985. The debtor finally received copies of the returns, which were erroneous. Cocklin had simply transposed numbers from earlier returns and had not accurately reflected the debtor's income and expenses. When the debtor realized the tax returns were fraudulent, he contacted the IRS. Because of those discrepancies, the debtor's 1979 through 1985 returns were audited. Taxes in excess of $70,000.00 were assessed on April 17, 1989. The assessment followed the debtor's unsuccessful attempt to discharge his tax liability through a chapter 13 initiated in 1988. This chapter 13 was converted to a chapter 7 and a discharge entered.

        Newhall made two payments to the IRS following the assessment. On April 23, 1989, he sent $2,420.97 and on April 24, 1989, he sent $1,272.27. He started overwithholding to pay the tax obligations. He has filed income tax returns and paid his taxes as they accrued following his incarceration in 1986.

        1 ABR 391 
        Newhall again filed a chapter 13 bankruptcy in July of 1989. It was later dismissed voluntarily. It was unfeasible due to the large amount of priority tax debt from his recent assessment.

        Newhall waited over a year and filed this current chapter 13 proceeding on August 23, 1990. The plan provides for payments of $198.00 per month for a period of 36 months. It will provide about a 7 percent dividend to the IRS on its claim of $91,316.89.

        The debtor has, through his numerous bankruptcies, as well as through inquiries and complaints to the IRS, prevented the IRS from filing liens or levying against his wages. He has never entered into an effective payment agreement with the IRS nor has he made any monthly payments to them on the assessed liability independent of his current employment taxes.

        The debtor retains an old Toyota for his personal use. He keeps this vehicle titled in the name of a church which does not exist. He effectively avoids any license fees to the state by keeping the car titled in the name of the church.

        The United States called the debtor as an adverse witness on its case in chief. The debtor unequivocally stated that he was no longer active in the tax protest movement, and did not aid or associate with those who did. Erica Elsbury was called by the United States as a rebuttal witness. She stated that the debtor actively aided her husband Keith Elsbury, a tax protest leader in         1 ABR 392  1989 and thereafter. Keith Elsbury was active in the presentation of tax protest information to various audiences. The debtor organized programs and provided a forum for Elsbury's views. In rebuttal, the debtor later admitted his association with Elsbury. He denied advocating nonpayment of taxes, however.

III.    Good Faith Analysis.

        This court adopts the rationale of the Ninth Circuit Bankruptcy Appellate Panel in reviewing the good faith requirement of 11 U.S.C. § 1325(a)(3). Good faith requires a review of the totality of the circumstances of the case. In In re Warren, 89 B.R. 87 (Bankr. 9th Cir. 1988), the Bankruptcy Appellate Panel recommended reviewing the following eleven factors in considering good faith:

1)    The amount of the proposed payments and the amounts of the debtor's surplus;

2)    The debtor's employment history, ability to earn, and likelihood of future increases in income;

3)    The probable or expected duration of the plan;

4)    The accuracy of the plan's statements of the debts, expenses and percentage of repayment of unsecured debt, and whether any inaccuracies are an attempt to mislead the court;

5)    The extent of preferential treatment between classes of creditors;

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6)    The extent to which secured claims are modified;

7)    The type of debt sought to be discharged, and whether any such debt is nondischargeable in Chapter 7;

8)    The existence of special circumstances such as inordinate medical expenses;

9)    The frequency with which the debtor has sought relief under the Bankruptcy Reform Act;

10)    The motivation and sincerity of the debtor in seeking Chapter 13 relief; and

11)    The burden which the plan's administration would place upon the trustee.

        In his plan, the debtor has proposed making payments of $198.00 per month for 36 months. The debtor's surplus, or "cushion", consists solely of his permanent fund dividend for the three year period. It averages about $83.00 per month and is not excessive for a family of four. There is a question as to the reasonableness of the educational expense proposed by the debtor for private schooling of his children. I concur with In re Navarro, 83 B.R. 348 (Bankr. E.D. Pa. 1988) and find that such an expense is not a luxury in this case.

        The debtor's earning capacity is accurately stated and is unlikely to increase substantially in the near future. The debtor has filed a three-year plan but, through counsel, has indicated a willingness to extend the plan to five years. The petition and         1 ABR 394  schedules are accurate, except that the IRS claim is understated by $15,000.00. There is only one creditor and therefore one class of unsecured creditors. The IRS claim is totally unsecured and would be dischargeable in a chapter 7. Due to the debtor's prior bankruptcies, however, the debtor cannot file another chapter 7 until 1994. The debtor has sought frequent relief from the bankruptcy court. This is the third time the debtor has filed a chapter 13 petition in the last three years. The plan's administration will place no burden on the trustee.

        The motivation and sincerity of the debtor in seeking chapter 13 relief are highly suspect. On the one hand, the debtor has paid his taxes and filed returns since his incarceration. He advised the IRS of the false returns prepared by Cocklin which triggered an audit. He worked with the auditor to determine the correct amounts due.

        On the other hand, he successfully avoided IRS levies by frequent written inquiries to the IRS and serial bankruptcy filings. He failed to properly license and register his Toyota with the state. He intentionally left the vehicle in the name of a fraudulent tax-exempt church. The debtor, a highly intelligent and capable person, deliberately mislead the court at the confirmation hearing. After stating that he did not associate with tax protestors, he admitted meeting with and assisting Keith Elsbury, a tax protest leader, in presenting his views to large         1 ABR 395  audiences. Despite his repeated denials of Elsbury's doctrinal views, the undisputed fact remains that the debtor has played a large role in disseminating those views to the public. It is fundamentally inconsistent for the debtor to engage is such conduct while maintaining he has the good faith required to discharge a $92,000.00 obligation to the IRS through a 7 percent plan.

IV.    Conclusion.

        Based on all the facts and circumstances of this case, I conclude that the debtor has failed to meet his burden of proof upon the issue of good faith. While the debtor may no longer be a leader in the tax protest movement due to the threat of probation revocation, by aiding those who are active in the movement, he accomplishes the same goal. Even absent his aid to Elsbury, the debtor has demonstrated he has no credibility. He is not the "honest but unfortunate" debtor entitled to bankruptcy relief.

        Therefore, it is ordered that the confirmation of the debtor's plan is denied and, on the court's own motion, the case is dismissed. Let judgment be entered accordingly.

DATED:    February 22, 1991.

DONALD MacDONALD IV
United States Bankruptcy Judge