In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐2798
MARK WITTMAN, Trustee in Bankruptcy,
Plaintiff‐Appellant,
v.
TIMOTHY A. KOENIG AND JILL M. KOENIG,
Defendants‐Appellees.
____________________
Appeal from the United States Bankruptcy Court for the
Western District of Wisconsin.
No. 14‐14446 — Robert D. Martin, Judge.
____________________
ARGUED FEBRUARY 16, 2016 — DECIDED JULY 26, 2016
____________________
Before POSNER, WILLIAMS, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. The sole issue in this appeal is
how to apply a Wisconsin statute that exempts from the assets
available to creditors to execute judgments a debtor’s annuity
contract that “complies with the provisions of the internal
revenue code.” See Wis. Stat. § 815.18(3)(j)2.a. The Wisconsin
statute does not specify which of the Internal Revenue Code’s
provisions (codified in Title 26 of the United States Code) an
annuity must comply with to qualify for an exemption. But
2 No. 15‐2798
the statute does require us to construe the exemption to “se‐
cure its full benefit to debtors.” Wis. Stat. § 815.18(1).
In this case, debtors Timothy and Jill Koenig claimed ex‐
emptions under § 815.18(3)(j) for several annuity contracts
they owned. The trustee challenged the exemptions. He ar‐
gued that an annuity, to qualify for the exemption, must com‐
ply with 26 U.S.C. §§ 401–09, which generally deal with tax‐
deferred “qualified” retirement plans. The debtors argue that
an annuity is exempt under § 815.18(3)(j) as long as the annu‐
ity qualifies for favorable tax treatment under 26 U.S.C. § 72,
which deals with annuities more generally. The federal bank‐
ruptcy courts in Wisconsin have consistently agreed with the
debtors’ interpretation of the statute. We do too, so we affirm
the judgment of the bankruptcy court. The key statutory text
is ambiguous on the decisive point, but the statute’s structure
and purpose, along with the legislature’s instruction to con‐
strue exemptions in favor of debtors, persuade us that the
bankruptcy court and debtors are correct here.
I. Factual and Procedural Background
Timothy and Jill Koenig filed for Chapter 7 bankruptcy
protection in 2014. They claimed exemptions under Wiscon‐
sin’s bankruptcy exemption statute for three annuities worth
a total of $292,185.97 as of the date of the bankruptcy. They
had bought those annuities in the approximately year and a
half before filing their bankruptcy petition. See 11 U.S.C.
§ 522(b)(3)(A) (allowing state‐law bankruptcy exemptions).
The trustee objected to the exemptions. Following prior deci‐
sions of bankruptcy courts in Wisconsin, the bankruptcy court
overruled the trustee’s objection and held that the annuities
are exempt from the bankruptcy estate. The trustee, the debt‐
No. 15‐2798 3
ors, and this court all agreed it was appropriate to use the pro‐
cedure under 28 U.S.C. § 158(d)(2)(A) to bypass the district
court and to try to resolve this issue of law on direct appeal to
our circuit. We review de novo this issue of statutory interpre‐
tation. In re Bronk, 775 F.3d 871, 875 (7th Cir. 2015).
Wisconsin’s exemption statute defines an annuity broadly
as “a series of payments payable during the life of the annui‐
tant or during a specific period.” Wis. Stat. § 815.18(2)(am).
An annuity can fall into one of two statutory bankruptcy ex‐
emptions under § 815.18(3). Paragraph (3)(j) fully exempts re‐
tirement assets, including annuities, that meet certain require‐
ments discussed below. Paragraph (3)(f) protects a broader
category of annuities that do not meet the requirements of
(3)(j). See Wis. Stat. § 815.18(3)(f)2. But paragraph (3)(f) im‐
poses dollar limits on the amount of the exemption. The ex‐
emption is limited to $150,000, except that the cap is just
$4,000 for annuities issued less than 24 months before the
debtor claims the exemption.1
1 Section 815.18(3) provides that listed property is exempt, with ex‐
ceptions not applicable here, and paragraph (3)(f) reads in full:
(f) Life insurance and annuities. 1. In this paragraph, ‘applicable
date’ means the earlier of the following:
a. The date on which the exemption is claimed.
b. The date, if any, that the cause of action was filed that
resulted in the judgment with respect to which the execu‐
tion order was issued.
2. Except as provided in subd. 3. and par. (j), any unmatured life
insurance or annuity contract owned by the debtor and insuring
the debtor, the debtor’s dependent, or an individual of whom the
debtor is a dependent, other than a credit life insurance contract,
and the debtor’s aggregate interest, not to exceed $150,000 in
4 No. 15‐2798
The debtors argue that their annuities meet the require‐
ments for the full exemption under § 815.18(3)(j). Paragraph
(3)(j) applies to “Assets held or amounts payable under any
retirement, pension, disability, death benefit, stock bonus,
profit sharing plan, annuity, individual retirement account,
individual retirement annuity, Keogh, 401‐K or similar plan
or contract .” Wis. Stat. § 815.18(3)(j)1 (emphasis added).
But paragraph (3)(j) imposes additional requirements on the
assets it protects. First, those assets must provide “benefits by
reason of age, illness, disability, death or length of service and
payments made to the debtor therefrom.” Id.; In re Bronk, 775
F.3d at 877. Second, the assets must be either employer‐spon‐
sored or debtor‐owned assets that “compl[y] with the provi‐
sions of the internal revenue code.” Wis. Stat. § 815.18(3)(j)2.2
value, in any accrued dividends, interest, or loan value of all un‐
matured life insurance or annuity contracts owned by the debtor
and insuring the debtor, the debtor’s dependent, or an individual
of whom the debtor is a dependent.
3. a. If the life insurance or annuity contract was issued less than
24 months before the applicable date, the exemption under this
paragraph may not exceed $4,000.
b. If the life insurance or annuity contract was issued at
least 24 months but funded less than 24 months before the
applicable date, the exemption under this paragraph is
limited to the value of the contract the day before the first
funding that occurred less than 24 months before the ap‐
plicable date and the lesser of either the difference be‐
tween the value of the contract the day before the first
funding that occurred less than 24 months before the ap‐
plicable date and the value of the contract on the applica‐
ble date or $4,000.
2 The exemption in § 815.18(3)(j) provides in full:
No. 15‐2798 5
(j) Retirement benefits. 1. Assets held or amounts payable under any
retirement, pension, disability, death benefit, stock bonus, profit
sharing plan, annuity, individual retirement account, individual
retirement annuity, Keogh, 401‐K or similar plan or contract
providing benefits by reason of age, illness, disability, death or
length of service and payments made to the debtor therefrom.
2. The plan or contract must meet one of the following require‐
ments:
a. The plan or contract complies with the provisions of the
internal revenue code.
b. The employer created the plan or contract for the exclusive ben‐
efit of the employer, if self‐employed, or of some or all of the em‐
ployees, or their dependents or beneficiaries and that plan or con‐
tract requires the employer or employees or both to make contri‐
butions for the purpose of distributing to the employer, if self‐em‐
ployed, the employees, or their dependents or beneficiaries, the
earnings or the principal or both of a trust, annuity, insurance or
other benefit created under the plan or contract and makes it im‐
possible, at any time prior to the satisfaction of all liabilities with
respect to beneficiaries under a trust created by the plan or con‐
tract, for any part of the principal or income of the trust to be used
for or diverted to purposes other than for the exclusive benefit of
those beneficiaries.
3. The plan or contract may permit the income created from per‐
sonal property held in a trust created under the plan or contract
to accumulate in accordance with the terms of the trust. The trust
may continue until it accomplishes its purposes. The trust is not
invalid as violating the rule against perpetuities or any law
against perpetuities or the suspension of the power of alienation
of title to property.
4. The benefits of this exemption with respect to the assets held or
amounts payable under or traceable to an owner‐dominated plan
for or on behalf of a debtor who is an owner‐employee shall be
limited to the extent reasonably necessary for the support of the
debtor and the debtor’s dependents.
6 No. 15‐2798
The trustee and the debtors agree that the Koenigs’ annu‐
ities pay benefits by reason of age and death and are not em‐
ployer‐sponsored. The parties further agree that the annuities
comply with 26 U.S.C. § 72 but do not comply with §§ 401–09.
The decisive issue is whether an annuity that complies with
§ 72 but not with §§ 401–09 “complies with the provisions of
5. This exemption does not apply to an order of a court concerning
child support, family support or maintenance payments, or to any
judgment of annulment, divorce or legal separation.
6. In this paragraph:
a. ‘Employer’ includes a group of employers creating a
combined plan or contract for the benefit of their employ‐
ees or the beneficiaries of those employees.
b. ‘Owner‐dominated plan’ means any plan or contract
that meets the requirements of subd. 2. and under which
90% or more of the present value of the accrued benefits
or 90% or more of the aggregate of the account is for the
benefit of one or more individuals who are owner‐em‐
ployees. For purposes of this definition, the accrued ben‐
efits or account of an owner‐employee under a plan or
contract shall include the accrued benefits or account of
the spouse, any ancestor or lineal descendant, whether by
blood or by adoption, or the spouse of such a lineal de‐
scendant, of the owner‐employee under the same plan or
contract.
c. ‘Owner‐employee’ means any individual who owns,
directly or indirectly, the entire interest in an unincorpo‐
rated trade or business, or 50% or more of the combined
voting of all classes of stock entitled to vote or the total
value of shares of all classes of stock of a corporation, or
50% or more of the capital interest or profits interest of a
partnership or limited liability company.
No. 15‐2798 7
the internal revenue code” within the meaning of the (3)(j) ex‐
emption.
Federal bankruptcy courts in Wisconsin have held consist‐
ently that annuities that qualify for tax deferred status under
26 U.S.C. § 72 satisfy the requirements of § 815.18(3)(j). See In
re Woller, 483 B.R. 886, 900–01 (Bankr. W.D. Wis. 2012); In re
Vangen, 334 B.R. 241, 244 (Bankr. W.D. Wis. 2005); In re Bogue,
240 B.R. 742, 745–46 (Bankr. E.D. Wis. 1999); In re Bruski, 226
B.R. 422, 424–26 (Bankr. W.D. Wis. 1998). A trustee raised this
question of statutory construction before this court in In re
Bronk. We noted a reservation about the earlier decisions of
the bankruptcy courts, but we held that the trustee had
waived the issue in that case by failing to raise it in the bank‐
ruptcy court. 775 F.3d at 878. No other reported cases have
construed which Internal Revenue Code provisions satisfy
the “complies with” requirement under § 815.18(3)(j)2.a. We
have not directly faced the question until this case, where the
question is presented squarely, with able briefing and argu‐
ment on both sides.
We now affirm the bankruptcy courts’ longstanding con‐
struction of § 815.18(3)(j). As instructed by the Wisconsin Su‐
preme Court, we first consider the statute’s language and also
look to the statute’s structure and purpose to inform our anal‐
ysis of the statutory language. See State ex rel. Kalal v. Circuit
Court for Dane County, 681 N.W.2d 110, 123–26 (Wis. 2004). If
the language is ambiguous, we may also consider external
sources such as legislative history, albeit with suitable cau‐
tion. See id. at 125–26.
8 No. 15‐2798
II. Statutory Language
We begin with the text of the Wisconsin statute. Id. at 124.
The phrase “complies with the provisions of the internal rev‐
enue code” is not further defined or explained in the statutory
language. Several provisions of the Internal Revenue Code
could apply to an annuity, and the statute does not signal a
preference among them. See, e.g., 26 U.S.C. §§ 72 (annuities
generally), 403 (employer‐sponsored annuities), 408(b) (indi‐
vidual retirement annuities). Some other states specify in sim‐
ilar exemption statutes which provisions of the Internal Rev‐
enue Code apply. See, e.g., Cal. Civ. Proc. Code
§ 703.140(b)(10)(E)(iii); Kan. Stat. § 60‐2308(b); S.C. Code § 15‐
41‐30(A)(11)(e)(iii). The Wisconsin legislature has not been so
specific.
What does it mean for an annuity to “comply with” the
Internal Revenue Code? We agree with the Wisconsin bank‐
ruptcy courts, which have held that “complies with” means
eligibility to receive the tax deferral applicable to annuities
under the Internal Revenue Code. Since the Internal Revenue
Code taxes most income in one way or another, the critical is‐
sue in taxing an annuity is whether the taxpayer can benefit
from deferred taxation of the implicit appreciation of the prin‐
cipal paid up front for the stream of later income. Accord‐
ingly, the most sensible reading of the statute is that the ex‐
emption should not depend on “whether the annuity is taxa‐
ble in accordance with the code” but rather “whether the tax
is deferred in accordance with the code.” In re Bruski, 226 B.R.
at 424; see also In re Kirchen, 344 B.R. 908, 913 (Bankr. E.D. Wis.
2006) (noting that to determine whether an IRA “complies
with” the Internal Revenue Code “one must consult the Inter‐
nal Revenue Code, specifically 26 U.S.C. § 408. Section 408(a)
No. 15‐2798 9
defines IRA, and provides several requirements for IRAs to
qualify for special tax treatment.”). But several provisions of
the Internal Revenue Code can apply to annuities.
The trustee argues that the statutory phrase “the provi‐
sions” of the Internal Revenue Code in paragraph (3)(j) indi‐
cates that the statute requires compliance with “the plural pro‐
visions applicable to the annuities (§§ 401–409)” rather than “a
singular provision (§ 72).” (Emphasis in original.) The argu‐
ment is not persuasive. An annuity plainly does not have to
comply with multiple provisions of the Internal Revenue
Code to qualify for an exemption under paragraph (3)(j). For
example, an individual retirement annuity under § 408(b) is
within the range of Internal Revenue Code provisions the
trustee identifies, and § 408(b) is a single provision of the In‐
ternal Revenue Code.
The trustee’s argument also lacks force because few if any
annuities can “comply” with all the provisions possibly ap‐
plicable to annuities, even within 26 U.S.C. §§ 401–09. It
would not make sense, for example, to require an individual
retirement annuity to comply with the Internal Revenue Code
provisions applicable to employer‐sponsored annuities, or
vice versa. Compare 26 U.S.C. § 403 (employer‐purchased an‐
nuities), with § 408(b) (individual retirement annuities). And
the trustee’s argument does not offer guidance for how courts
should pick and choose among those provisions. The lan‐
guage of § 815.18(3)(j) thus does not tell us which provisions
of the Internal Revenue Code will satisfy it.
III. Statutory Structure and Purpose
We next look to the structure and purpose of the statute.
“[S]tatutory language is interpreted in the context in which it
10 No. 15‐2798
is used; not in isolation but as part of a whole; in relation to
the language of surrounding or closely‐related statutes; and
reasonably, to avoid absurd or unreasonable results.” Kalal,
681 N.W.2d at 124. “[S]cope, context, and purpose are per‐
fectly relevant to a plain‐meaning interpretation of an unam‐
biguous statute .” Id. at 125. The trustee argues that the
statute sets up a structure in which (1) investment annuities
that are not employer‐provided or intended for retirement fall
under a broad paragraph (3)(f) category and are subject to
dollar caps, and (2) only annuities that are either employer‐
provided or comply with the retirement provisions found in
26 U.S.C. §§ 401–09 fall into a narrower category under para‐
graph (3)(j).
We disagree. Paragraph (3)(j) is written broadly. By its
terms, it also applies to any plan or contract “similar” to those
it specifically lists, as long as that plan or contract meets other
requirements, such as complying with unspecified Internal
Revenue Code provisions. See Wis. Stat. § 815.18(3)(j)1 and
(3)(j)2.a. It is not clear from this language that we should limit
paragraph (3)(j)’s reach to “retirement” assets.
And “retirement” annuities are not necessarily limited to
those qualifying under §§ 401–09. The statute does not draw
a clear, objective line separating retirement from non‐retire‐
ment assets. Qualified plans under §§ 401–09 have annual
contribution limits. See, e.g., 26 U.S.C. § 402(g). Many people
can use alternative retirement investment vehicles in addition
to the methods codified in §§ 401–09, and annuities taxable
under § 72 can be retirement investments.3
3 According to one investment firm, “Deferred annuities can be a good
way to boost your retirement savings once you’ve made the maximum
No. 15‐2798 11
Nothing in the structure or text of the exemption statute,
which we must construe to the debtors’ advantage, indicates
that we should exclude from paragraph (3)(j) annuities that
an individual debtor bought in addition to or in lieu of more
traditional retirement options.
Contrary to the trustee’s argument, the bankruptcy courts’
broad interpretation of paragraph (3)(j) would not leave par‐
agraph (3)(f) as an empty set for annuities. “Statutory lan‐
guage is read where possible to give reasonable effect to every
word, in order to avoid surplusage.” Kalal, 681 N.W.2d at 124.
As a general rule, then, we should avoid an interpretation of
paragraph (3)(j) that would leave paragraph (3)(f) inopera‐
tive. But the bankruptcy courts’ broad interpretation of para‐
graph (3)(j) would not create this problem. Paragraph
815.18(2)(am) defines an annuity as simply “a series of pay‐
ments payable during the life of the annuitant or during a spe‐
cific period.” Not every series of payments that would qualify
as an annuity under § 815.18(2)(am) meets paragraph (3)(j)’s
requirements or complies with 26 U.S.C. § 72.
allowable contributions to your 401(k) or IRA.” What Are Annuities?, Fi‐
delity Investments, https://www.fidelity.com/annuities/what‐are‐annui‐
ties. Another firm states, “A deferred annuity can be a great way to con‐
tinue your retirement saving if you’ve already contributed the maximum
to other retirement accounts.” Add to Your Retirement Savings with a De‐
ferred Annuity, The Vanguard Group, https://investor.vanguard.com/an‐
nuity/deferred. A Forbes columnist and former editor gave similar advice,
for certain investors who “have exhausted other forms of tax‐favored re‐
tirement savings, like 401(k)s and IRAs” if they can keep fees and costs
low. William Baldwin, How the Smart Money Uses Tax‐Deferred Annuities,
Forbes, May 17, 2011, http://www.forbes.com/sites/bald‐
win/2011/05/17/how‐the‐smart‐money‐uses‐tax‐deferred‐annuities. All
websites cited in this opinion were last visited July 25, 2016.
12 No. 15‐2798
Paragraph (3)(j) would still cover only a subset of annui‐
ties, even if we include within its scope annuities that comply
with 26 U.S.C. § 72. Regardless of any other requirements,
paragraph (3)(j) requires annuities to pay “benefits by reason
of age, illness, disability, death or length of service.” Wis. Stat.
§ 815.18(3)(j)1; In re Bronk, 775 F.3d at 877. And 26 U.S.C. § 72
comes with its own requirements. See, e.g., § 72(s)(1) (require‐
ments for payments in the event of the holder’s death); § 72(q)
(penalty for premature distributions). Allowing paragraph
(3)(j) exemptions for annuities that comply with § 72 would
not allow just any annuity, however structured, to qualify for
the exemption. There would still be significant restrictions.
Income from an installment sale, for example, might still
be covered by paragraph (3)(f) rather than (3)(j). Installment
sale income is taxed under 26 U.S.C. § 453 rather than any of
the Internal Revenue Code provisions applicable to annuities.
And some installment sales might well qualify as an “annu‐
ity” under Wisconsin Statutes § 815.18(2)(am)’s broad defini‐
tion. Some private annuity contracts might also fail to comply
with 26 U.S.C. § 72. See Whether the Private Annuity or Install‐
ment Sale Rules Apply, Federal Tax Coordinator ¶ J‐5262, 1997
WL 502239 (2d ed. 2016); see also Prop. Treas. Reg. §§ 1.1001‐
1(j), 1.72‐6(e), 71 Fed. Reg. 61441‐01 (Oct. 18, 2006). Private an‐
nuities are contracts between private individuals, often family
members, where one party sells a valuable asset in exchange
for an annuity, usually for estate planning purposes. See gen‐
erally Alexander A. Bove Jr., Is the Private Annuity Really
Dead?, Probate & Property, March/April 2015. Installment sale
income or a private annuity could fall under Wisconsin Stat‐
utes § 815.18(2)(am)’s broad definition of annuity—“a series
of payments payable during the life of the annuitant or during
a specific period”—but not comply with 26 U.S.C. § 72 and
No. 15‐2798 13
thus not qualify for the paragraph (3)(j) exemption and be
subject to (3)(f) instead.4
The debtors’ full use of the paragraph (3)(j) exemption
would not frustrate the purpose of the Wisconsin and federal
bankruptcy statutes. There is nothing unlawful about struc‐
turing one’s assets to take advantage of the bankruptcy laws
as Congress and the Wisconsin Legislature have seen fit to
write them. Judge Learned Hand famously wrote about tax
planning that “there is nothing sinister in so arranging one’s
affairs as to keep taxes as low as possible. Everybody does so,
rich or poor; and all do right, for nobody owes any public
duty to pay more than the law demands: taxes are enforced
exactions, not voluntary contributions.” Commissioner v. New‐
man, 159 F.2d 848, 850–51 (2d Cir. 1947) (Hand, J., dissenting).
The same applies to bankruptcy planning; no debtor owes her
creditors more than the law demands. See In re Smiley, 864
F.2d 562, 566 (7th Cir. 1989) (noting that the law allows a
debtor “to make full use of the exemptions to which he is en‐
titled under the law”), quoting H.R. Rep. No. 95‐595 (1977), as
reprinted in 1978 U.S.C.C.A.N. 5963, 6317, and S. Rep. No. 95‐
989 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5862. Both
the federal bankruptcy code and the Wisconsin exemption
4 This is more than just a legal hypothetical. The IRS reports that im‐
proper use of private annuities is on the rise. See Abusive Tax Shelters Again
on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season, Internal
Revenue Service (February 3, 2015), available at
https://www.irs.gov/uac/Newsroom/Abusive‐Tax‐Shelters‐Again‐on‐
the‐IRS‐Dirty‐Dozen‐List‐of‐Tax‐Scams‐for‐the‐2015‐Filing‐Season (“IRS
personnel continue to see an increase in the improper use of private annu‐
ity trusts .”). And litigation over the tax treatment of private annuities
is not unheard of. See, e.g., Katz v. Commissioner, 96 T.C.M. (CCH) 396, at
*2–3 (T.C. 2008); Rye v. United States, 25 Cl. Ct. 592, 593–94 (Cl. Ct. 1992).
14 No. 15‐2798
statute contain fraudulent transfer provisions that protect
creditors. See 11 U.S.C. § 548; Wis. Stat. § 815.18(10). The trus‐
tee has not invoked those provisions here.
To cap off our analysis, in § 815.18 itself the Wisconsin leg‐
islature chose to require a liberal construction of the exemp‐
tion statute in a debtor’s favor: “This section shall be con‐
strued to secure its full benefit to debtors and to advance the
humane purpose of preserving to debtors and their depend‐
ents the means of obtaining a livelihood, the enjoyment of
property necessary to sustain life and the opportunity to
avoid becoming public charges.” Wis. Stat. § 815.18(1). We
may not “write exemptions into statutes,” but based on this
legislative instruction, we must broadly interpret the exemp‐
tions the legislature has created. In re Geise, 992 F.2d 651, 656
(7th Cir. 1993). Because the debtors’ reading of paragraph
(3)(j) is consistent with the language and structure of the stat‐
ute, we construe the arguable ambiguity in the key statutory
phrase, “complies with the provisions of the internal revenue
code,” to give the debtors its “full benefit.” An annuity that
qualifies for tax deferral under 26 U.S.C. § 72, as the debtors’
annuities do in this case, “complies with the provisions of the
internal revenue code.” See generally Kalal, 681 N.W.2d at 124
(“Statutory interpretation involves the ascertainment of
meaning, not a search for ambiguity.”) (citation and internal
quotation marks omitted).
IV. Legislative History
The legislative history is not inconsistent with our conclu‐
sion based on the statute’s language, structure, and purpose.
Although it is not determinative for our analysis, we examine
the legislative history to respond to the parties’ arguments.
Wisconsin’s statutory interpretation method “prevents the
No. 15‐2798 15
use of extrinsic sources of interpretation to vary or contradict
the plain meaning of a statute.” Id. at 126. This rule, however,
has not stopped Wisconsin courts on occasion from consult‐
ing “legislative history to show how that history supports our
interpretation of a statute otherwise clear on its face.” Seider v.
OʹConnell, 612 N.W.2d 659, 671 (Wis. 2000); see also Kalal, 681
N.W.2d at 126 (noting, “as a general matter, legislative history
need not be and is not consulted except to resolve an ambigu‐
ity in the statutory language, although legislative history is
sometimes consulted to confirm or verify a plain‐meaning in‐
terpretation”).
There is some indication that the legislature intended par‐
agraph (3)(j) to apply to annuities falling outside 26 U.S.C.
§§ 401–09. The Wisconsin legislature adopted paragraph (3)(j)
in its present form in 1990. As quoted in In re Bogue, a Wiscon‐
sin State Bar committee commented that the revisions were
“intended to broaden the areas and items that are now ex‐
empt,” while at the same time retaining language “not exclud‐
ing ‘non‐qualified’ plans.” 240 B.R. 742, 746 (Bankr. E.D. Wis.
1999). The committee felt this was “fair and reasonable” in
light of the retirement savings options available to the “aver‐
age wage earner.” Id. This State Bar commentary provides
some reason to think the drafters of paragraph (3)(j) intended
the exemption to apply to a broader swath of retirement plans
than those qualifying under 26 U.S.C. §§ 401–09.
The trustee argues that later developments indicate that
the legislature intended a narrower scope for paragraph (3)(j).
In 2004, the legislature amended § 815.18 to add to paragraph
(3)(f) debtor‐owned annuities not already covered in (3)(j).
The trustee argues that the Wisconsin Legislative Bureau’s bill
analysis indicates legislative intent that the (3)(j) exemption
16 No. 15‐2798
should be read narrowly to apply only to annuities that com‐
ply with 26 U.S.C. §§ 401–09.
The trustee’s argument based on the bill analysis does not
persuade us to abandon the textual instruction to interpret
ambiguities in favor of debtors. The bill analysis said that
“Current law,” meaning paragraph (3)(j), “does not address
exemptions from creditor claims for an unmatured annuity
that is owned by the debtor.” Wisconsin Bill Analysis, 2003 Reg‐
ular Session, Senate Bill 504, Wisconsin Legislative Reference
Bureau, 2003. However, even at that time, paragraph (3)(j) al‐
ready covered some annuities that were not sponsored by an
employer: those that complied with the provisions of the In‐
ternal Revenue Code. Wis. Stat. § 815.18(3)(j)2.a (2003). If the
broad language in the bill analysis was intended as the trustee
reads it, it was just wrong. If it were given the force of law,
then individual retirement annuities under 26 U.S.C. § 408(b)
would not qualify for the (3)(j) exemption. See § 408(b) (refer‐
ring multiple times to the “owner” of the individual retire‐
ment annuity). But neither the trustee nor anyone else be‐
lieves that would be correct, for it would subject individual
retirement annuities under § 408(b) to the dollar limits in par‐
agraph (3)(f). The legislative history does not help the trustee.
The Wisconsin Legislature has shown no sign of repudiat‐
ing the unbroken chain of federal bankruptcy court decisions
broadly interpreting the “complies with” language in para‐
graph (3)(j). Legislative silence is ordinarily a weak indication
of legislative intent. Wenke v. Gehl Co., 682 N.W.2d 405, 416
(Wis. 2004) (“Numerous variables, unrelated to conscious en‐
dorsement of a statutory interpretation, may explain or cause
legislative inaction.”). But the dominance of federal bank‐
ruptcy courts in applying a state’s exemption statutes means
No. 15‐2798 17
that any legislature’s study of a state’s exemption statutes will
need to look closely at federal bankruptcy decisions applying
the state statutes.
It is difficult to imagine careful drafting of legislation in
this field that would not consider decisions by the federal
bankruptcy courts in the state. In this situation, then, it is rea‐
sonable to treat legislative silence as at least weak evidence
that the bankruptcy courts’ interpretation of Wisconsin Stat‐
utes § 815.18(3)(j) has not been objectionable to the legislature.
Cf. Schill v. Wisconsin Rapids School District, 786 N.W.2d 177,
204–05 (Wis. 2010) (taking legislative inaction as evidence of
legislative intent when there was a “long‐standing” opinion
of the Attorney General on the construction of a statute and
the legislature had since made “numerous” other amend‐
ments to the law). If the Wisconsin legislature were to disa‐
gree with the earlier bankruptcy decisions or this decision, it
would not be difficult to revise § 815.18(3)(j) to undo them for
future cases.
The decision of the bankruptcy court treating the debtors’
annuities as exempt from creditors is AFFIRMED.