United States v. Colasuonno

Background

The United States sued Philip Colasuonno under 26 U.S.C. § 7401 to obtain a judgment for unpaid tax assessments. Colasuonno owned one-third of American Armored Car Ltd. The court stated that, as a part-owner, he was required to collect, account for, and pay over employee-related federal income, Social Security, Medicare, and unemployment taxes, referred to as “trust fund taxes.”

The relevant quarterly tax periods ran from June 30, 2001, through December 31, 2005. Colasuonno conceded that he failed to collect the trust fund taxes and knew that false tax returns were filed. He also admitted that employees were paid in cash through another company, FJC Security Services Inc., to avoid taxes on their wages. He previously pleaded guilty to conspiracy to commit tax fraud and aiding or assisting in the preparation of a false tax return. He was ordered to pay $781,467 in criminal restitution and was later resentenced to four months in prison after violating probation by failing to make a good-faith effort to pay restitution.

The Internal Revenue Service first proposed a penalty of $1,768,196.20 in 2010, then relieved Colasuonno of that proposed assessment. It later determined that the statute of limitations had not expired and reassessed him on April 21, 2011, for $1,742,410.30, with interest and penalties continuing to accrue. The United States stated that, as of May 29, 2023, Colasuonno owed $2,688,333.60 for the relevant period.

Parties’ Positions

The United States moved for summary judgment under Rule 56. To establish liability under 26 U.S.C. § 6672(a), it had to show that Colasuonno was a responsible person for collecting the trust fund taxes and willfully failed to comply with the law. The United States argued that Colasuonno had conceded that he was a responsible person and had not produced evidence disputing the assessment or the amount owed.

Colasuonno argued that there were factual disputes about whether the assessment was correctly calculated, whether his brother had already paid part of the amount through criminal restitution, and whether reducing the assessment to judgment would extend the time for collecting his criminal restitution obligation. He also argued that the Internal Revenue Service improperly pursued him instead of his brother and that he should have been able to rely on the agency’s earlier decision relieving him of the proposed assessment.

Court’s Analysis

The court explained that a government tax assessment is generally presumed correct. After the government establishes an outstanding assessment, the taxpayer must provide specific evidence showing both that the assessment is incorrect and what the correct tax liability should be. General objections and unsupported statements are not enough to defeat summary judgment.

The United States submitted sworn testimony from an Internal Revenue Service Revenue Office Advisor, account transcripts for the relevant periods, and the agency’s letter concerning the proposed assessment. Colasuonno submitted no evidence supporting his claim that the amount was wrong and did not identify the correct amount of his liability. The court therefore held that his challenge to the calculation did not create a triable factual issue.

The court also rejected Colasuonno’s argument about payments by his brother. Although the government may not recover twice for the same penalty, Colasuonno provided no evidence that his brother had actually paid any restitution. The United States also had not stated that it would refuse to credit any qualifying payment by his brother against the overall outstanding assessment. The court likewise found no evidence that the Internal Revenue Service used improper criteria in choosing to pursue Colasuonno.

Finally, the court held that the existence of the criminal restitution obligation did not prevent the civil tax action. The court stated that the government may pursue both criminal and civil proceedings in tax-fraud cases and that Colasuonno had not argued that his plea agreement barred the Internal Revenue Service from making the assessment. The court also rejected his reliance on the agency’s earlier decision, explaining that the agency could make a new assessment while the limitations period had not expired.

Disposition

Judge Judith C. McCarthy granted the United States’ motion for summary judgment. The Clerk was directed to terminate the pending motion, enter judgment for the United States, and close the case.