Court holds promoter of abusive VEBA penalized for making false or fraudulent statements Post image for Court holds promoter of abusive VEBA penalized for making false or fraudulent statements SEPTEMBER 14, 2015 or triggering the Code Sec. 6700(a)(2)(A) penalty was met.
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA PENN-MONT BENEFIT SERVICES, : Plaintiff, : CIVIL ACTION : v. : : UNITED STATES OF AMERICA, : No. 13-4130 Defendant. : M E M O R A N D U M Stengel, J. August 20, 2015 Penn-Mont Benefit Services is the administrator of the Regional Employers Assurance Leagues Voluntary Employees’ Benefit Association (REAL VEBA) trust, which the IRS determined was a tax shelter. In November 2012, the IRS assessed 26 U.S.C. § 6700 penalties against Penn-Mont and John Koresko, the REAL VEBA creator and primary officer of Penn-Mont, for their respective roles in promoting the REAL VEBA plan in 2003. After paying the portion of the assessment required by statute, Mr. Koresko and Penn-Mont sued the United States in two separate actions for a refund of the penalty assessment they paid—asserting that it was unwarranted, incorrect, or impermissible under several legal theories. The United States filed a counterclaim, requesting the penalties be paid in full. The Government asserts six counts or reasons why the REAL VEBA scheme was not a legally permissible tax exemption vehicle. Penn-Mont failed to answer the Government’s counterclaim. The Clerk of Court entered default at the Government’s request. The PENN-MONT BENEFIT SERVICES, INC. v. UNITED STATES OF AMERICA Doc. 32 Dockets.Justia.com 2 United States has moved for default judgment. For the reasons explained below, I will grant this motion in part and deny it in part. I. Procedural History of this Action On or about November 19, 2012, pursuant to 26 U.S.C. § 6700, the IRS issued a Notice of Penalty Charge to Penn-Mont assessing a penalty of $386,000 under 26 U.S.C. § 6700 for promoting an abusive tax shelter in taxable year 2003.1 On December 17, 2012, Penn-Mont paid $57,900 or 15% of the penalty and filed a Claim for Refund of Tax Return Preparer and Promoter Penalties.2 On July 16, 2013, Penn-Mont filed this action seeking a tax refund under 26 U.S.C. § 6703(c)(2).3 It claims the civil penalty is erroneous for several reasons: it cannot be considered a “promoter” within the meaning of the statute; it lacked the requisite intent of knowing that its statements were false; and the calculation of penalties is incorrect.4 Penn-Mont seeks declaratory judgment that it is not liable for these penalties, a refund with interest of the 15% already paid, attorney’s fees and costs.5
Court holds promoter of abusive VEBA penalized for making false or fraudulent statements
ReplyDeletePost image for Court holds promoter of abusive VEBA penalized for making false or fraudulent statements
SEPTEMBER 14, 2015
or triggering the Code Sec. 6700(a)(2)(A) penalty was met.
IN THE UNITED STATES DISTRICT COURT
ReplyDeleteFOR THE EASTERN DISTRICT OF PENNSYLVANIA
PENN-MONT BENEFIT SERVICES, :
Plaintiff, : CIVIL ACTION
:
v. :
:
UNITED STATES OF AMERICA, : No. 13-4130
Defendant. :
M E M O R A N D U M
Stengel, J. August 20, 2015
Penn-Mont Benefit Services is the administrator of the Regional Employers
Assurance Leagues Voluntary Employees’ Benefit Association (REAL VEBA) trust,
which the IRS determined was a tax shelter. In November 2012, the IRS assessed 26
U.S.C. § 6700 penalties against Penn-Mont and John Koresko, the REAL VEBA creator
and primary officer of Penn-Mont, for their respective roles in promoting the REAL
VEBA plan in 2003. After paying the portion of the assessment required by statute, Mr.
Koresko and Penn-Mont sued the United States in two separate actions for a refund of the
penalty assessment they paid—asserting that it was unwarranted, incorrect, or
impermissible under several legal theories.
The United States filed a counterclaim, requesting the penalties be paid in full.
The Government asserts six counts or reasons why the REAL VEBA scheme was not a
legally permissible tax exemption vehicle. Penn-Mont failed to answer the Government’s
counterclaim. The Clerk of Court entered default at the Government’s request. The
PENN-MONT BENEFIT SERVICES, INC. v. UNITED STATES OF AMERICA Doc. 32
Dockets.Justia.com
2
United States has moved for default judgment. For the reasons explained below, I will
grant this motion in part and deny it in part.
I. Procedural History of this Action
On or about November 19, 2012, pursuant to 26 U.S.C. § 6700, the IRS issued a
Notice of Penalty Charge to Penn-Mont assessing a penalty of $386,000 under 26 U.S.C.
§ 6700 for promoting an abusive tax shelter in taxable year 2003.1 On December 17,
2012, Penn-Mont paid $57,900 or 15% of the penalty and filed a Claim for Refund of
Tax Return Preparer and Promoter Penalties.2 On July 16, 2013, Penn-Mont filed this
action seeking a tax refund under 26 U.S.C. § 6703(c)(2).3
It claims the civil penalty is
erroneous for several reasons: it cannot be considered a “promoter” within the meaning
of the statute; it lacked the requisite intent of knowing that its statements were false; and
the calculation of penalties is incorrect.4
Penn-Mont seeks declaratory judgment that it is
not liable for these penalties, a refund with interest of the 15% already paid, attorney’s
fees and costs.5