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United States v. Chelsea Brewing Company, LLC

United States District Court, S.D. New York

September 26, 2014

UNITED STATES OF AMERICA, Plaintiff,
v.
CHELSEA BREWING COMPANY, LLC, Defendant.

OPINION AND ORDER

EDGARDO RAMOS, District Judge.

The United States of America ("Plaintiff" or the "Government") brought the instant action to "reduce to judgment, " i.e., collect, the unpaid taxes, penalties, interest and fees assessed by the Internal Revenue Service ("IRS") against Chelsea Brewing Company, LLC ("Chelsea Brewing" or the "Defendant") for its failure to comply with its tax obligations under the Federal Insurance Contributions Act ("FICA"), 26 U.S.C. § 3111(a), and the Federal Unemployment Tax Act ("FUTA"), 26 U.S.C. § 3301, for multiple tax periods dating back to 2001. Compl., Doc. 1.

By Opinion and Order dated July 18, 2013, the Court granted partial summary judgment in the Government's favor with respect to all periods at issue except for the FICA tax period ending September 30, 2001. Slip Op., Doc. 34. The Court held, inter alia, that the authority cited by the Government-chiefly, the Internal Revenue Manual ("I.R.M."), which is non-binding-failed to establish that the ten-year statute of limitations should be tolled to permit collection of Defendant's unpaid liabilities for the September 30, 2001 FICA tax period.

Currently before the Court is the Government's motion for reconsideration of that decision. Doc. 35. The Government submits that its own "scrivener's error" caused the Court to overlook controlling authority. The Government points out that, in its reply brief, it supplemented its reliance on the I.R.M. with a citation to the Internal Revenue Code ("I.R.C."), which-unlike the I.R.M.-is binding. "Unfortunately, " however, the Government's reply brief "cit[ed] to a non-existent 26 U.S.C. § 6311(k)(2) instead of the controlling statute, 26 U.S.C. § 6331(k)(2)." Gov't Mem. 3, Doc. 36. This error caused the Court to conclude that the Government failed to offer any controlling authority in support of its tolling argument.

The Government now asserts that, because the provision that it intended to cite in its reply brief, 26 U.S.C. § 6331(k)(2), prohibits the Government from collecting taxes for thirty days following the termination of an installment agreement, and because the undisputed evidence shows that Chelsea Brewing entered into, and terminated, three installment agreements during the relevant timeframe, the limitations period for collecting Chelsea Brewing's unpaid tax liabilities for the period ending September 30, 2001 should have been tolled ninety days.[1] The Government further argues that the Court should reconsider its ruling in the interests of justice.

For the reasons set forth below, the motion is GRANTED.

I. Background[2]

As of September 23, 2013, Defendant's outstanding balance of tax liabilities for the September 30, 2001 FICA tax period, including interest and penalties, totaled $115, 564.19. Pl.'s 56.1 Stmt. ¶ 15, Doc. 22. Neither party contests the Court's previous determination that, absent tolling, in accordance with 26 U.S.C. § 6502(a)(1), the deadline for the Government to bring a collection action for this debt was ten years from the date of the IRS's assessment: December 10, 2011. Gov't Mem. 2; Def.'s Opp. 2, Doc. 37. The Government commenced the instant action 82 days after the statutory deadline, on March 1, 2012. See Compl.

The Government asserts that its claim to collect Chelsea Brewing's unpaid debt for the September 30, 2001 tax period is timely because Chelsea Brewing entered into three installment agreements with the IRS, all three of which were ultimately terminated. Gov't Mem. 3-6; Gov't Reply Br. 4-5, Doc. 38. Because the limitations period for a tax collection action is tolled for thirty days following the termination of an installment agreement, the Government argues, the ten-year limitations period should have been tolled for ninety days-thirty days per agreement- extending the Government's deadline to file the instant collection action to March 9, 2012. Chelsea Brewing does not deny that it owes unpaid FICA taxes for the period ending September 30, 2001; rather, it maintains that collection of this debt is time-barred. Pl.'s 56.1 Stmt. ¶ 15. Defendant argues that, factually, the Government's proof fails to demonstrate (1) that the IRS entered three distinct installment agreements with Chelsea Brewing; and (2) that such installment agreements were "terminated." Def.'s Opp. 3-4. Defendant also claims, incorrectly, that the Court already found that the Government failed to prove that "installment agreements were entered into." Id. at 5.

A. The Court's Summary Judgment Opinion

Based on the record, the parties' respective summary judgment briefs and the authorities cited therein, the Court determined, inter alia, that, because the I.R.M. is non-binding, and because the Government failed to provide additional authority in support of its position, that it had to reject the Government's argument that its deadline to bring a collection action should be tolled ninety days. Slip Op. 13. The Court also noted that the Government's records did not "sufficiently indicate when the installment agreements were entered into and terminated, nor do they describe any of the terms of the installment agreements, " id. (emphasis added), but did not make factual findings regarding the duration or number of the installment agreements.

B. Evidence Presented Regarding Installment Agreements

Patrick Greene, the managing partner of Chelsea Brewing, testified at his Rule 30(b)(6) deposition that he was generally aware that Chelsea Brewing had entered into multiple installment agreements with the IRS, but could not recall how many such agreements, their dates, or whether Chelsea Brewing defaulted on some or all of them. Boeving Decl. Ex. A (Dep. Tr. 17:13-19:25, Jul. 1, 2013), Doc. 19. However, he also admitted that he was not aware of any installment agreement on which Chelsea Brewing did not default. Id. at 18:15-18:18.

To establish that Defendant entered, and terminated, three separate installment agreements with the IRS, in its summary judgment briefing, the Government submitted Chelsea Brewing's IRS Account Transcript for the FICA tax period ending September 30, 2001, which states, in ...


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