Retirement Care Associates v. U.S./I.R.S.
| Decision Date | 27 January 1998 |
| Docket Number | No. 1:96-CV-2499-CAM.,1:96-CV-2499-CAM. |
| Citation | 3 F.Supp.2d 1434 |
| Parties | RETIREMENT CARE ASSOCIATES, INC., et al., Plaintiffs, v. UNITED STATES, et al., Defendants. |
| Court | U.S. District Court — Northern District of Georgia |
James Randolph Schulz, Office of United States Attorney, Northern District of Georgia, Atlanta, GA, Sean M. O'Connor, U.S. Department of Justice, Washington, DC, for United States of America, By and through The Internal Revenue Service, Atlanta, Georgia and Washington, D.C., defendants.
Plaintiffs filed this suit alleging various violations relating directly or indirectly to Defendants' efforts to collect Plaintiffs' employment taxes. The case is before the Court on Defendants' motion for summary judgment. For the reasons stated below, the Court GRANTS Defendants' motion for summary judgment in part and DENIES it in part.
Plaintiffs are a group of related entities that own, operate, or manage nursing and retirement homes. Retirement Management Corporation (Retirement Management) is wholly owned by Capitol Care Management Company, Inc. (Capitol Care); Capitol Care is wholly owned by Retirement Care Associates, Inc. (Retirement Care); Retirement Care is a publicly traded corporation. Most, if not all, of the physical facilities used by Plaintiffs are owned by Retirement Care, and management and marketing services for all Plaintiffs are provided by either Capitol Care or Retirement Management. The principal place of business of Retirement Management is Suite 200, 6000 Lake Forest Drive, Atlanta, Georgia 30328. The principal place of business of Capitol Care is Suite 225, 6000 Lake Forest Drive, Atlanta, Georgia 30328. The principal place of business of Retirement Care is Suite 550, 6000 Lake Forest Drive, Atlanta, Georgia 30328. All other Plaintiffs maintain their principal offices at Suite 200, 6000 Lake Forest Drive, Atlanta, Georgia 30328. Suites 200 and 225 are adjoining and interconnected suites, and the two addresses are used interchangeably as the mailing and business addresses of all plaintiffs. Funds for all Plaintiffs are comingled in accounts maintained by Capitol Care, which handles all financial matters, including the payment of payroll and other taxes. Although funds for all Plaintiffs are maintained in the same bank accounts, all funds are allocated to specific entities.
Defendants include the United States and several employees of the Internal Revenue Service (IRS).
Plaintiffs and Defendants agree that Plaintiffs' tax forms have generally been filed in a timely manner. They disagree, however, as to whether deposits and taxes have been paid on time. Plaintiffs contend their taxes have been paid in a timely manner but that the payments have been misapplied to unlawfully assessed penalties. Plaintiffs further contend that any late deposits are isolated occurrences. Defendants contend Plaintiffs have a lengthy history of not making timely deposits and not paying federal tax liabilities. Defendants further contend that, as a result of this delinquency, Plaintiffs have been assessed both interest and penalties, and that, between 1992 and 1996, at least one Plaintiff had an outstanding tax liability at all times. Plaintiffs are contesting the penalties in an IRS administrative appeal.
Defendants have made efforts to collect the outstanding taxes, interest, and penalties. Whereas Defendants contend they have provided transcripts of Plaintiffs' accounts, Plaintiffs contend they have requested, but have not received, statements for each accounting period showing the original tax liability, the assessed interest and penalties, and the computations for those additional liabilities. Defendants contend levies upon Plaintiffs' property have been released upon Plaintiffs' representations that the tax liabilities would be paid in full, but that payments were not made and new liabilities were incurred. Plaintiffs contend the levies were released only upon actual payment of the liabilities claimed to be due. Defendants contend that, as a result of meetings with Plaintiffs, and at Plaintiffs' request, numerous payments have been reapplied to satisfy different liabilities and errors made by Plaintiffs have been corrected, resulting in reduced interest and penalties for some Plaintiffs and increased interest and penalties for other Plaintiffs.
On March 7, 1996, Devorah Williams and Judith R. Adams, representing the IRS, met with C. Winston Freeman and Thomas J. Stalzer, representing Plaintiffs. Saltzer proposed: (1) the IRS refrain from collection activities; (2) Retirement Care, Capitol Care, and Retirement Management pay the tax portion of their outstanding liabilities and file appeals or offers in compromise for the remaining amounts outstanding; and (3) three or four other Plaintiffs pay the tax portion of their outstanding liabilities every two weeks and file appeals or offers in compromise for the remaining amounts outstanding. Plaintiffs contend the IRS agreed to the proposal. Defendants contend the proposal was rejected but that the IRS proposed, instead, that it would refrain from attempting to collect outstanding penalties if all related corporate entities met the following conditions by March 15, 1996:
1. Pay the tax and interest owed on all of their outstanding tax liabilities;
2. Present a written request for abatement of penalties;
3. File any delinquent Forms 941, 940, and 1120 for any period already ended and make all required tax deposits of their Form 941 liabilities for the first quarter of 1996; and
4. Provide proof of federal tax deposits due by March 15, 1996, for their Form 941 liabilities for the first quarter of 1996 and complete financial statements.
At the March 7 meeting, the IRS provided Plaintiffs with unpaid balances (including taxes, interest, and penalties) for Retirement Care, Capitol Care, and Retirement Management. Plaintiffs contend these balances were not current and did not include a breakdown of tax, penalties, and interest for each tax period.
On March 12, 1996, Williams spoke to Freeman; gave him the balances due for Retirement Care, Capitol Care, and Retirement Management; and told him that immediate enforcement action would result if the outstanding liabilities were not satisfied. Defendants contend that, when the conditions had not been met by March 15, 1996, Williams informed Stalzer that all entities must pay all taxes, interest, and penalties or the IRS would begin enforcement action.
On March 20, the IRS received checks for the amounts Williams had indicated were the outstanding taxes for Retirement Care, Capitol Care, and Retirement Management. With the checks, the IRS received a letter from Stalzer requesting the reapplication of certain payments. Williams contacted Stalzer on March 21, informed him that payments applied to interest and penalties would not be reapplied, and told him that Retirement Care still owed $240,999.97. Defendants contend Williams further informed Stalzer that the conditions established at the March 7, 1996 meeting had not been met, that the tax liabilities had not been satisfied, and that she intended to proceed with collection actions against Retirement Care, Capitol Care, and Retirement Management.
On March 22, Plaintiffs reiterated a previous offer to place publicly traded stock with a market value of $3 million in an escrow account to secure the IRS against any failure of Plaintiffs to pay their tax liabilities. The IRS refused this offer.
Also on March 22, Williams prepared an affidavit in support of an application for a writ of entry to the business premises of Retirement Care. The affidavit and a data sheet, also prepared by Williams, were submitted to the IRS District Counsel's office to prepare an application for a writ of entry. The unpaid balance of outstanding liabilities for Retirement Care stated in the affidavit was calculated as of April 5, 1996, two weeks in the future, and showed a total unpaid balance of $669,236.72. Defendants contend the balance did not include additional, more recent outstanding tax liabilities of $76,126.84 (Forms 941 and 940) and $2,830,369.35 (Form 1120). Late on the afternoon of March 22 (Friday), after she prepared and signed the affidavit, Williams received a letter from Stalzer containing a check from Capitol Care for $240,999.97, the amount requested by Williams on March 21. The check contained a notation that it was to be applied to Retirement Care's Form 941 liability for the first quarter of 1995. On Monday, March 25, Williams exchanged the check for a cashier's check, deposited the cashier's check, and applied the payment as requested.
On Thursday, March 28, Williams accompanied an Assistant United States Attorney to the district court to obtain the writ of entry for which she had prepared the affidavit on March 22. Because Retirement Care's Form 941 liability for the first quarter of 1995 was included in the total unpaid balance of $669,236.72 shown on Williams' affidavit and because Williams did not change her affidavit to reflect the $240,999.97 payment, the affidavit overstated the amount owed by Retirement Care. Williams...
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... ... 338, 355, 97 ... S.Ct. 619, 630 (1977); Retirement Care Associates, Inc ... v. United States , 3 F.Supp.2d 1434, 1443 ... ...