OPINION AND ORDER
WILLIAM V. ALTENBERGER, Bankruptcy Judge.
The facts of this matter are straightforward and not disputed. The debtor, Michael Etheridge, (Debtor) operated a lumber yard in Aledo, Illinois, and incurred retailer occupation taxes to the State of Illinois (State). On October 2, 1985, the Debtor filed a timely return for the period of September, 1985, showing $1,143.00 in taxes due the State. On October 9, 1985, the Debtor filed a late return for the period August, 1984, through July of 1985, showing $30,542.00 in taxes due the State. On October 27, 1987, the Debtor filed a voluntary Chapter 7 proceeding, and subsequently filed an adversary complaint to have the taxes declared discharged.
The dispute between the Debtor and the State involves the interpretation and application of Sections 523 and 507 of the Bankruptcy Code, 11 U.S.C. Sections 523 and 507. Section 523 sets forth exceptions to discharge, and as applicable to this case, provides as follows:
The pertinent portions of Section 507 provide as follows:
The Debtor contends the taxes are discharged pursuant to Section 523(a)(1)(B)(ii) as his tax return was filed more than two years before the date he filed bankruptcy, notwithstanding Section 523(a)(1)(A). The State contends that as the late return was filed within three years before the date of the filing of the bankruptcy petition the taxes are not discharged pursuant to Section 523(a)(1)(A) and Sections 507(a)(7)(A)(i) and 507(a)(7)(E) notwithstanding the provisions of Section 523 (a)(1)(B)(ii). Neither party disputes that factually the case falls within the scope of the statute as argued by the other. Narrowly stated, the issue is whether taxes for which the required return was late filed which are not excepted from discharge under Section 523(a)(1)(B)(ii), are dischargeable even though they are specifically nondischargeable pursuant to Section 523(a)(1)(A) and Section 507(a)(7)(A)(i) and (E).
Section 523(a)(1) uses the word "or" between subsections (B) and (C). Similarly, Section 507(a)(7)(A) uses the word "or" between subsections (ii) and (iii). Section 102 of the Bankruptcy Code, 11 U.S.C. Section 102, sets forth rules of construction and provides in part:
The legislative history of Section 102(5) states as follows:
The case of In re Easton, 59 B.R. 714 (Bkrtcy.C.D.Ill.1986) presented a similar interpretation issue involving Section 507. In that case the debtors contended that under Section 523(a)(1)(A) and 507(a)(7), taxes that were due more than three years prior to their Chapter 7 filing were dischargeable (Section 507(a)(7)(A)(i)) even though some of the taxes at issue were assessed within 240 days of their filing (Section 507(a)(7)(A)(ii)), and some of the taxes at issue were assessable after the debtors filed their Chapter 7 proceeding (Section 507(a)(7)(A)(iii)). The Internal Revenue Service (IRS) took the position that the taxes were not discharged, because part of the taxes were assessed within 240 days prior to the debtors' petition (Section 507(a)(7)(A)(ii)) and part of the debtors' taxes were assessable after the debtors' Chapter 7 filing and therefore not discharged (Section 507(a)(7)(A) (iii)). In that case, this Court held that the provisions of Section 507 are not exclusive and that the taxes should not be discharged unless they came within the scope of all three subdivisions of Section 507(a)(7)(A).
and the case of In re Coleman American Moving Services, Inc., 20 B.R. 267, 6 C.B.C.2d 1065 (Bkrtcy.S.D.Kan.1981), where the court rejected the debtor's argument that to receive tax priority the tax claim must fall within the scope of both subsections 507(a)(7)(A)(i) and (ii) and held that the tax claim would be given priority if it came due within three years before the petition date (Section 507(a)(7)(A)(i)) or was assessed within the 240 day period prior to the petition date (Section 507(a)(7)(A)(ii)).
This Court believes that the rule of construction as applied in the Easton case is likewise applicable in this case. The subparagraphs of Section 523(a)(1) are in the alternative. Even though the tax may not be excepted from discharge pursuant to Section 523(a)(1)(B)(ii) the taxes are not discharged because the State can take advantage of Section 523(a)(1)(A) and Section 507(a)(7)(A)(i) and (E). Behind each exception to discharge are separate policy considerations. Congress has determined that taxes which are accorded a priority in the distribution of the debtor's estate are also nondischargeable. Those taxes — due less than three years before the bankruptcy — have not yet become so "stale" to be forgiven entirely or to unjustifiably burden general unsecured creditors by receiving a priority. See In re Crist, 85 B.R. 807 (Bkrtcy.N.D.Iowa 1988). With respect to these relatively current taxes, it matters not whether a return was timely filed, filed late, or not filed at all. In addition, Congress has determined that a debtor cannot escape liability for delinquent taxes by filing a late return, for whatever tax year, shortly before filing bankruptcy, even though those taxes may not be entitled to any priority in the scheme of distribution. That there is, as the present case demonstrates, some overlap between the two provisions does not make the Bankruptcy Code inconsistent or unfair. Moreover, merely because a particular liability is not encompassed by a particular exception to discharge does not provide it a safe harbor from another exception which squarely applies.
The debtor also relies quite heavily on the case of In re Doss, 42 B.R. 749 (Bkrtcy. E.D.Ark.W.D.1984). That case involves the court's construction of Section 523(a)(1)(B)(ii) and Section 507(a)(7)(A)(iii).
The COURT, THEREFORE, FINDS that the Retailer's Occupation Tax liabilities in the amount of $14,658.00 due the State of Illinois for which returns were last due less than three years before the petition in bankruptcy was filed are not dischargeable.
IT IS, THEREFORE, ORDERED that the Retailer's Occupation Tax in the amount of $14,658.00 due the State of Illinois by the Debtor, MICHAEL ETHERIDGE, D/B/A ETHERIDGE LUMBER, which returns were last due less than three years before the petition in bankruptcy was filed, be and the same are declared to be
This Opinion and Order is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.