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United States v. Sheltering Arms Personal Care Home, Inc.

United States District Court, S.D. West Virginia, Charleston

April 17, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
SHELTERING ARMS PERSONAL CARE HOME, INC., and COUNTRY COVE ASSISTED LIVING, LLC, and WILLOW BAY, LLC, and RANDY PRINCE, Defendants.

          MEMORANDUM OPINION AND ORDER

          JOHN T. COPENHAVER, JR. UNITED STATES DISTRICT JUDGE.

         Pending is a motion to dismiss the complaint filed by Country Cove Assisted Living, LLC (“Country Cove”) on October 13, 2016 and a motion to dismiss the complaint filed by Willow Bay, LLC (“Willow Bay”) that same day.

         I.

         The United States instituted this action by filing a complaint with the court on January 5, 2016. In the complaint, the United States alleges that defendant Sheltering Arms Personal Care Home, Inc. (“Sheltering Arms”) is a West Virginia corporation that operates two assisted living facilities in Fayette County, West Virginia, through its subsidiaries Country Cove and Willow Bay. Complaint, (“Compl.”) ¶ 3. The complaint alleges that Randy Prince is the president and sole shareholder of Sheltering Arms. Id. at ¶ 4. According to the United States, “Sheltering Arms is responsible for paying the wages of Country Cove's and Willow Bay's employees; for withholding, collecting, and paying over to the Internal Revenue Service the federal employment taxes associated with those wages; and for filing the federal employment and unemployment tax returns associated with those wages.” Id. at ¶ 3.

         Count One of the complaint alleges that Sheltering Arms filed “Employer's Quarterly Federal Tax returns” for taxable quarters ending between September 30, 2007 and June 30, 2014. Id. at ¶ 5. Based on the unpaid federal tax liabilities reported as due and owing on those returns, a representative of the Secretary of the Treasury made assessments against Sheltering Arms for the unpaid employment taxes, penalties, and interest for the quarterly tax periods that ended between September 30, 2007 and June 30, 2014. Id. The United States alleges that as of August 10, 2015, Sheltering Arms is indebted to the United States for federal employment taxes in the amount of $183, 021.60. Id. at p. 8.

         The United States additionally alleges that Sheltering Arms has unpaid Federal Unemployment Tax Act liabilities including taxes, penalties, and interest in the amount of $167, 67.74 as of August 10, 2015 and Corporate Income Tax liabilities including taxes, penalties, and interest in the amount of $17, 359.80 as of that same date. Id. at ¶ 6-7.

         In addition, Sheltering Arms was assessed a civil tax penalty of $1, 020 for its failure to timely file Wage and Tax Statements for the tax period ending on December 31, 2008. Id. at ¶ 8. The outstanding balance of the penalty as of August 10, 2015 is $1, 163.43. Id. Sheltering Arms has failed to pay the assessment due to the United States. Id. at ¶ 9.

         The United States alleges that Sheltering Arms owes it $218, 377.44 as of August 10, 2015, plus interest and penalties accruing after that date. Id. No explanation is given as to why the United States seeks Count One monetary relief only against Sheltering Arms.

         Count Two of the complaint seeks a permanent injunction against all defendants pursuant to 26 U.S.C. § 7402(a). The United States alleges that Sheltering Arms has become delinquent in recent years by failing to file: (1) Quarterly Federal Employment Tax Returns for the quarters ending on September 30, 2014 and December 31, 2014; (2) a Federal Unemployment Tax return for the year ending in December 31, 2014; and (3) Federal Corporate Income tax returns for the taxable years 2013 and 2014. Id. at ¶ 11. Despite efforts by the Internal Revenue Service (“IRS”) to bring Sheltering Arms into compliance with its employment tax deposit and payment obligations, including its recording of notices of federal tax lien against Sheltering Arms; levying upon its bank accounts; and agreeing to be paid on an installment plan, on which Sheltering Arms continuously missed payments, Sheltering Arms has failed to meet its legal obligations. Id. at ¶ 12. The United States contends an injunction is necessary and appropriate because without one, “Sheltering Arms and Randy Prince are likely to continue to obstruct and interfere with the enforcement of the internal revenue laws by pyramiding employment and income taxes to the detriment of the United States.” Id. at ¶¶ 16-21.

         As damages, the United States asks for judgment against Sheltering Arms in the amount of $218, 312.59 plus statutory interest and other additions accruing after August 10, 2015. Id. at p. 15. In addition, it asks for a permanent injunction ordering that all defendants:

i. Withhold Federal income, Social Security, and Medicare taxes from the wages of its employees when those wages are paid and pay them, along with the employer's portion of the Social Security and Medicare taxes, over to the IRS according to law;
ii. Establish a bank account in a bank (as defined pursuant to I.R.C. § 581) designated as “Sheltering Arms Personal Home Care [sic], Inc., Trustee, Special Fund in Trust for the United States” under I.R.C. § 7512; and
iii. In accordance with federal deposit regulations, make timely deposits of all taxes imposed by the Federal Unemployment Tax Act (FUTA taxes) as they become due into the account opened in accordance with paragraph B, above;
iv. Within two days of each payroll date, make payroll deposits of withheld federal income, Social Security, and Medicaid taxes into the account opened ...

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