Opinion
CASE NO. 5:01-cv-1457
February 24, 2004
OPINION AND MEMORANDUM, [Resolving Docs. No. 10, 48]
Pending before this Court, on remand from the Sixth Circuit Court of Appeals, is Defendant Donovan's motion for summary judgment. Although Defendant Donovan admits that he is indebted to the United States for unpaid taxes, Defendant argues that the period of time to collect payment on these taxes has expired. In light of the October 31, 2003 opinion issued by the Sixth Circuit on the matter, this Court denies Defendant Donovan's motion for summary judgment and enters judgment for the United States.
The parties agree that, on March 16, 1989, the United States assessed a trust fund recovery penalty against Defendant Donovan as a responsible officer of J.A. Clark Mechanical, Inc. The United States made the assessment for taxes for the second quarter of 1986 in the amount of $165,857.95. With penalties and interest, the United States sought $466,936.21 as of May 18, 2001.
At the time of the assessment, Section 6502(a) of the Internal Revenue Code gave the United States ten years after the assessment of the tax to bring suit to collect the defendant's tax liability, unless an exception to the ten-year period applied. See Internal Revenue Code, 26 U.S.C. § 6502(a) (1989). On January 29, 1999, Donovan submitted an offer in compromise on the IRS's standard Form 656. The compromise offer, by its own terms, extended the ten-year limitations period, suspending the statutory period for collection while the offer was pending plus one additional year.
Later, Donovan withdrew the pending offer. While the parties do not dispute the factual circumstances of when the offer was withdrawn, they dispute when the withdrawal became effective. According to the government, under the IRS's standard form for offers in compromise, Form 656, the offer remains pending until "an authorized IRS official accepts, rejects or acknowledges withdrawal of the offer in writing." Dept. Treas, IRS Form 6565 (rev. 1-97).
Defendant Donovan says that he withdrew his offer by a letter dated April 18, 2000, that he faxed to the IRS on the same day. Donovan says the earlier offer was withdrawn when the IRS received the withdraw letter. The United States asserts the withdrawal was effective on April 28, 2000, when IRS Group Manager Roger Craig issued a letter to Donovan regarding the withdrawal of the compromise offer. The ten-day discrepancy in dates makes a significant difference here, because the United States did not file the instant suit until June 13, 2001. If Donovan withdrew his offer on April 18, 2000 when he sent the letter, then the statute of limitations bars the present suit. If, however, the withdrawal was not effective until April 28, 2000, the date upon which Group Manager Craig issued his letter, then the present suit is timely.
Thus, this case turns on whether Donovan's withdrawal of his offer became effective on April 18, 2000 or on April 28, 2000. The Sixth Circuit Court of Appeals has determined that the effective date of the withdrawal was April 28, 2000. Given this holding, this Court denies Defendant Donovan's motion for summary judgment and enters judgment for the United States. Summary judgment is appropriate when the evidence submitted shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The parties here do not dispute the facts of the case, but only disagree on the legal question of when the letter of withdrawal became effective. Because this involves the legal matter of contract interpretation, the Court decides this issue as a matter of law.
The Court hereby enters judgment for the United States in the amount of $466,936.21 together with interest from May 18, 2001. The Court directs the parties to confer regarding the calculation of interest from May 18, 2001. If the parties are unable to agree on the interest calculation from that date, the parties will file their respective positions by March 12, 2004. Each party may then respond to the other party's submitted calculation by March 17, 2004. The Court grants the government's request for costs. For the reasons stated above, the Court hereby denies Defendant Donovan's motion for summary judgment and enters judgment, in the amount of $466,936.21 plus interest, for the United States.
IT IS SO ORDERED.