United States v. Colasuonno

Background

The United States brought an action under 26 U.S.C. § 7401 to collect penalties assessed against Philip Colasuonno under 26 U.S.C. § 6682. The complaint alleged that Colasuonno was a one-third owner of American Armored Car Ltd. from 2001 through 2005, controlled financial matters involving the company’s employment taxes, and caused employee wages to be paid in cash without proper withholding or payment of taxes. The complaint also alleged that payments were disguised in the company’s records as payments for outside services.

The Internal Revenue Service assessed penalties for 19 quarterly tax periods on April 21, 2011, totaling $1,747,190.30. Colasuonno had filed for Chapter 7 bankruptcy on July 24, 2009, and the bankruptcy court entered a discharge on July 20, 2011. The United States filed this collection action on December 20, 2021. The complaint stated that, as of November 30, 2021, the amount owed exceeded $2,490,889.32, including interest.

Motions and Arguments

Colasuonno moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) and sought judgment on the pleadings under Rule 12(c). He did not deny that he was legally responsible for collecting, accounting for, and paying the company’s employment taxes, or that he willfully failed to pay them. Instead, he argued that the action was untimely.

His timeliness argument relied on a Notice of Federal Tax Lien filed with the Westchester County Clerk on June 8, 2011, while the bankruptcy case was pending. He argued that the filing violated the bankruptcy automatic stay and prevented the United States from relying on the statutory extension of the collection deadline. The United States argued that the filing of the notice did not affect the limitations period and that any claim based on a willful violation of the automatic stay had to be brought in the bankruptcy court.

Court’s Analysis

Under 26 U.S.C. § 6502(a)(1), the United States generally has 10 years after a tax assessment to collect it by levy or begin a court proceeding. Under 26 U.S.C. § 6503(h)(2), that period is suspended while a bankruptcy proceeding prevents collection and for six months afterward.

Because the assessments were made while Colasuonno’s bankruptcy case was pending, the court calculated the deadline as 10 years and six months after the July 20, 2011 bankruptcy discharge. That produced a deadline of January 20, 2022. The United States filed its complaint on December 20, 2021, so the court held that the collection action was timely.

The court also held that it could consider the tax-lien notice because it was a public record. It explained that a federal tax lien arises automatically when a tax delinquency occurs and that filing a notice generally serves to establish the government’s priority against third-party creditors.

The court did not decide whether filing the notice violated the automatic stay. It held that, even assuming a violation, Colasuonno identified no authority stating that such a violation would eliminate the tax-law tolling provision or make the collection action untimely. The court further explained that 26 U.S.C. § 7433(e)(1) makes a bankruptcy-court damages proceeding the exclusive remedy for a taxpayer’s claim that the Internal Revenue Service willfully violated the automatic stay in connection with collecting federal taxes. The court noted that the Bankruptcy Code provides for money damages, including attorney’s fees and costs where appropriate, for a willful stay violation.

Disposition

The court denied Colasuonno’s motion to dismiss and motion for judgment on the pleadings. It directed the Clerk to terminate the pending motion. The court’s ruling addressed the timeliness issue and did not determine whether the Notice of Federal Tax Lien actually violated the automatic stay.