18 B 28055
Debtor Fayyaz Karim (“Karim”) filed a motion for entry of an order of contempt against the Illinois Department of Revenue (“IDOR”), alleging that IDOR had violated the discharge injunction by attempting to collect a penalty debt that had been discharged in his chapter 7 bankruptcy case. The penalty debt at issue was imposed under the Illinois Cigarette Tax Act, 35 ILCS 130/1 et seq., which prohibits the possession of contraband cigarettes. According to Karim, the penalty was a tax penalty within the meaning of § 523(a)(7) and was discharged by operation of subsection (B) of that section, which provides for the discharge of tax penalties imposed with respect to a transaction or event that occurred more than three years before the petition date. IDOR responded by arguing that the penalty debt had not been discharged because it was either not a tax penalty within the meaning of § 523(a)(7) or, if the debt was a tax penalty within the meaning of the statute, because the penalty was imposed with respect to a transaction or event that occurred within three years of the petition date. The Court held that the penalty debt at issue was a tax penalty and that the relevant transaction or event for purposes of § 523(a)(7) occurred within three years of the petition date. As such, the Court found that the debt was nondischargeable and that IDOR thus did not violate the discharge injunction. Accordingly, the Court denied Karim’s motion for entry of an order of contempt.