This matter comes before the Court pursuant to Defendant GE HFS HOLDINGS, INC., f/k/a Heller Healthcare Finance, Inc.'s Motion for Partial Summary Judgment (Doc. # 16), which was filed on June 9, 2011. The Government filed a Response in Opposition to Heller's Motion on June 23, 2011. (Doc. # 17). For the reasons that follow, the Court grants the Motion for Partial Summary Judgment.
The Government seeks to impose liability on Heller, pursuant to 26 U.S.C. § 3505(b), for unpaid employment taxes of two employers to whom Heller lent funds: (1) Whole Person Home Health Care of Ohio, Inc. and (2) Silver Moves, Inc.*fn1
The unpaid employment taxes amount to $146,729.69, plus interest. The following table illustrates the amounts in question:
Taxpayer/Period Amount Assessment Date
Whole Person Q2 1999 $45,750.33 October 18, 1999 Whole Person Q3 1999 $45,906.19 February 14, 2000 Whole Person Q1 2000 $26,184.27 September 11, 2000 Whole Person Q3 2000 $15,239.64 December 18, 2000 Silver Moves Q1 2000 $9,262.42 July 3, 2000 Silver Moves Q3 2000 $4,386.84 January 1, 2001 With respect to $127,103.21 of the $146,729.69 sought in the complaint (shown in bold and italics), Heller submits that the Government's suit is barred by Treasury Regulation § 31.3505-1(d)(1)'s ten-year statute of limitations: "In the event the lender . . . does not satisfy the liability imposed by section 3505, the United States may collect the liability by appropriate civil proceeding commenced within 10 years after assessment of the tax against the employer." The ten-year statute of limitations set forth in the Treasury Regulation may be tolled, pursuant to Treasury Regulation § 31.3505-1(d)(3), by the execution of a written agreement between the parties before the expiration of the ten-year period.
The Government agrees that its complaint (Doc. # 1) was not brought within the ten-year period fixed by Treasury Regulation § 31.3505-1(d)(1). In addition, the Government agrees that it did not enter into a written stipulation with Heller to extend the time for filing suit. Nevertheless, the Government contends that this action is timely pursuant to 26 U.S.C. § 6503(h)(2). That section of the Internal Revenue Code, pertaining to limitations on assessment and collection of taxes, contains a bankruptcy tolling provision.*fn2
The relevant facts are not in dispute. The Court is called upon to address the single issue of whether the bankruptcy of Whole Person and Silver Moves (the employers) tolled the statute of limitations for collecting unpaid employment taxes against Heller (the lender) under § 3505(b). As discussed below, the Court determines that the bankruptcy did not toll the statute of limitations for collecting against Heller.
In August 1997, Heller entered into a Loan and Security Agreement with NuMed Home Health Care, Inc. and six of its subsidiaries (including Whole Person and Silver Moves, Inc.). (Doc. # 15 at ¶ 3). Under that agreement, Heller lent funds to Whole Person and Silver Moves, Inc. Id. On November 1, 2000, NuMed, Whole Person, and Silver Moves filed voluntary Chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the Middle District of Florida. Id. at ¶4. In February 2001, as part of the bankruptcy, the Government filed an adversary proceeding against Heller to determine the priority, validity, or extent of liens that Heller and the Government asserted in NuMed's accounts receivable. Id. at ¶ 5.
In June 2001, the Government amended its adversary proceeding complaint to make claims (in count two) against Heller under § 3505(b) of the Internal Revenue Code. That amended complaint encompassed the unpaid taxes that are at issue in the present action. Id. at ¶ 6. The parties conducted discovery regarding the Government's § 3505(b) claim during the pendency of the bankruptcy case. Id. at ¶ 7. On August 16, 2001, the bankruptcy court confirmed NuMed's joint plan of reorganization (which also covered Whole Person and Silver Moves). Id. at ¶ 8.
The confirmation of the joint plan of reorganization did not end the litigation. In December 2001, the Government moved to dismiss its § 3505(b) count, arguing that the bankruptcy court lacked subject matter jurisdiction over its § 3505(b) claims. Id. at ¶ 9. In March 2002, the bankruptcy court issued a published decision granting the Government's motion to dismiss its § 3505(b) claims because the Court lacked jurisdiction to determine the tax liabilities of entities that are not bankruptcy debtors. United States v. Heller Health Care Finance, 48 Collier Bankr. Cas. 2d (MB) 335; 2002 Bankr. LEXIS 532 (M.D. Fla. Bankr. March 13, 2002).*fn3
On October 18, 2010, the Government filed the present action (Doc. # 1) seeking payment of $146,729.69, plus interest, in accordance with § 3505(b) of the Internal Revenue Code. on January 27, 2011, Heller filed its answer and asserted the following affirmative defense:
Plaintiff's action is not timely under Treas. Reg. § 31.3505-1(d)(1) with respect to some of the trust fund taxes described in paragraph 6 of the Complaint. Specifically, Plaintiff's action is not timely with respect to the June 1999, September 1999, and March 2000 trust fund taxes for Whole Person Home Health Care of Ohio, Inc. and ...