Opinion
16422-18L
09-30-2021
Transupport, Inc., Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER
L. Paige Marvel Judge
This case filed by petitioner Transupport, Inc. (Transupport) and five related transferee liability cases at Docket Nos. 16716-19, 16721-19, 16727-19, 16729-19 and 16751-19, filed by petitioner's officers (collectively, officers), have had a long and tortured history in the Tax Court. This order addresses the most recent chapter.
Following litigation in this Court and related appeals, see Transupport v. Commissioner, T.C. Memo. 2015-179, supplemented by T.C. Memo. 2016-216, aff'd, 882 F.3d 274 (1st Cir. 2018), respondent assessed the income tax deficiencies and related penalties and interest for tax years 2006, 2007, and 2008 determined by this Court and affirmed on appeal [collectively, the Liabilities]. When Transupport did not pay the Liabilities, respondent initiated various collection actions and ultimately issued the notice of determination at issue in this case. Transupport filed a timely petition to contest the notice of determination on August 21, 2018.
On June 10, 2019, Transupport filed a motion to remand this case to respondent's Appeals Office. By order dated June 19, 2019, the Court directed respondent to file a response to the motion and respondent filed the response on July 11, 2019. By order dated August 7, 2019, the Court directed Transupport to file a response to respondent's response and it did so on August 26, 2019. On February 26, 2020, this case was assigned to the undersigned solely to rule on Transupport's motion for remand. Thereafter, as a result of the pandemic, this Court cancelled its scheduled trial sessions, including the Boston, Massachusetts, trial session that was scheduled to begin on March 23, 2020, at which Transupport's motion for remand was scheduled for hearing, and issued another order dated March 11, 2020, assigning this case to the undersigned.
The related transferee liability cases were filed in response to notices of liability issued to petitioner's officers on June 13, 2019. Each of the officers filed a petition contesting the notices of liability on September 10, 2019. Each officer is represented by the same attorneys who represent Transupport. The transferee liability cases were calendared for trial at a Boston, Massachusetts, trial session scheduled to begin on November 2, 2020. Respondent filed a motion to consolidate the already consolidated transferee liability cases with this case but counsel for Transupport and the officers objected to the motion. The Court denied respondent's motion to consolidate on October 29, 2020.
In an email dated October 22, 2020, counsel for petitioner and the officers proposed terms for a possible global settlement and inquired in an email to respondent's counsel if such a settlement would result in a concession of the transferee liability cases. Specifically, counsel wrote as follows: "If the corporation agrees to a plan in which the liability is fully paid ($4 million down payment and the balance paid off over the five year span with five annual, equal year-end payments) and concedes the collection case, will you concede the individual cases?" Apparently, the answer was yes. On October 28, 2020, the parties filed a stipulation of settled issues in the consolidated transferee cases, reflecting that Transupport would pay its full corporate tax liability over a five-year period, starting with a $4 million down payment on or before December 1, 2020, with the balance paid in five equal annual installments on or before December 1, 2021, December 1, 2022, December 1, 2023, December 1, 2024, and December 1, 2025. The stipulation of settled issues further states that each officer agrees to an individual liability of $1.5 million plus interest, to be reflected in decisions filed in the transferee liability cases. Respondent agreed to forego collection of the transferee liabilities as long as Transupport makes the agreed upon payments. The parties in the transferee cases agreed to execute closing agreements (Forms 906, Closing Agreement On Final Determination Covering Specific Matters), reflecting the terms of the global settlement.
The stipulation of settled issues states that "Respondent agrees to the terms set forth in paragraph 1 because Transupport has agreed to pay the Liabilities in full over time." Since the stipulation of settled issues was filed, Transupport has made the $4 million down payment, decisions in the transferee liability cases have been entered by this Court, and closing agreements have been executed. Each closing agreement contains the following recitals:
WHEREAS Transupport, Inc. ("Transupport") has outstanding federal income tax liabilities for taxable years 2006, 2007, and 2008 (the "Liabilities");
WHEREAS the Internal Revenue Service (the "Service") and Transupport have agreed to a payment plan with respect to the Liabilities (the "Payment Plan");
WHEREAS, under the Payment Plan, Transupport has made a payment of $4,000,000 on or before December 1, 2020, and has agreed to pay the balance of the Liabilities in five annual, equal payments on or before December 1, 2021, December 1, 2022, December 1, 2023, December 1, 2024, and December 1, 2025. * * *
The recitals are consistent with the stipulation of settled issues. Each of the closing agreements was executed by all parties to the agreement before the end of 2020.
Because the transferee liability cases were assigned to a different Judge and because the parties did not inform the undersigned of the global settlement that the parties finalized at the end of 2020, the undersigned considered Transupport's motion for remand. By order served on January 19, 2021, the undersigned granted Transupport's motion for remand, on the assumption that there was still an unresolved issue concerning the extent to which Transupport would be required to pay its already assessed Liabilities and directed that an administrative hearing on remand be held.
On February 19, 2021, respondent's counsel sent Transupport's attorneys a proposed decision resolving this case in accordance with the global settlement reflected in the stipulation of settled issues and the closing agreements. Transupport's attorneys refused to execute the decision citing the undersigned's order dated January 19, 2021.
On March 26, 2021, respondent's counsel filed a motion to modify order in which they stated that a remand was not necessary because Transupport and the officers had settled the pending cases, and Transupport had agreed to pay in full the assessed Liabilities. Respondent asked the undersigned to vacate the order served on January 19, 2021.
In accordance with an order dated April 21, 2021, Transupport filed a response to respondent's motion to modify order. In that response, Transupport alleged, in effect, that the remand was necessary to correct fundamental unfairness in the collection process and to protect Transupport's right to argue for collection alternatives. Moreover, Transupport argued that respondent had breached the global settlement by sending notices to each of the transferees with respect to the unpaid individual assessments.
This convoluted history has required the Court to review in detail the events leading up to the global settlement reflected in the stipulation of settled issues and the closing agreements. That review convinces the Court that the parties in this case and in the transferee liability cases negotiated a global settlement that rendered the then-upcoming trial in the transferee liability cases unnecessary, limited the individual liability that the officers could face, and provided Transupport with a beneficial installment agreement (i.e., a collection alternative) that would allow it to pay the Liabilities in full over a 5-year period without the necessity of a trial. Our order granting a remand, which we entered before we knew of the settlement reached by the parties, does not change the fact that the record overwhelmingly establishes that the parties entered into a global settlement. The parties negotiated that settlement with full knowledge of the rights to litigate that they were giving up and the settlement had been implemented in all respects except for the entry of decision in this case. As there is no ongoing dispute about the collectability of Transupport's Liabilities, a remand would serve no purpose.
As for Transupport's allegations that respondent somehow breached the terms of the global settlement by sending notices confirming the individual liabilities reflected in the decisions entered in the officers' transferee liability cases, we doubt that such notices constitute a breach of respondent's agreement not to collect directly from the officers as long as Transupport pays the Liabilities as agreed. But because the officers have filed a motion in their cases to assert that the terms of the closing agreements have been breached, we will refrain from deciding an issue that is not properly before us. It is therefore
ORDERED that respondent's motion to modify order, filed March 26, 2021, is granted in that this Court's order served on January 19, 2021, ordering a remand in this case is vacated and shall have no further force and effect. It is further
ORDERED that petitioner's Motion to Remand, filed June 10, 2019, is hereby denied. It is further
ORDERED that the parties shall submit a signed decision document consistent with the settlement reached and reflected in the stipulation of settled issues filed in the transferee liability cases no later than October 29, 2021. It is further
ORDERED that, if the parties cannot agree on a decision document, respondent must file a motion for entry of decision no later than October 29, 2021.