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EXHIBITS
March
9, 2009
Via Facsimile: 563-328-4452
Mr. John H. Officer
Internal Revenue Service
101
Re: Nursing Home Supportive
FEIN: 36-0000000
Request for Abatement
of Penalties 941, 2nd, 3rd, 4th Quarter 2006
Request for Abatement
of Penalties 941, 1st, 2nd, 3rd, Quarter, 2007
Request for Abatement
of Penalties 941, 1st, 2nd, 3rd Quarter, 2008
Request for Abatement
of Penalties 940, 2006, 2007
Dear Mr. Mills:
We have received your correspondence of February 26, 2009
containing the balances of tax, interest and penalties due for Nursing Home
Living Center, LLC. (copy of letter attached). We believe that Nursing Home
Supportive Living Center, LLC, (hereinafter “Nursing Home”) had
reasonable cause for having failed to file and to pay its taxes on a timely
basis. We request that you abate the
federal tax deposit penalties, failure to file, failure to pay penalties, and
late filing penalties and the interest assessed on these penalties in
connection with its 941 and 940 tax liabilities for tax periods listed above on
the basis of reasonable cause.
Facts*
In January, 2008, when Bank of America bought
LaSalle Bank, the new bank refused to extend Nursing Home’s line of
credit, called its loan and offset the cash in Nursing Home’s bank
accounts against LaSalle’s balance due on its loan, causing cash flow difficulties
for the business during the first 3 quarters of 2008. It has taken Nursing Home
until March, 2009 to locate another lender who might be willing replace Bank of
America/LaSalle Bank. The
The State of
It was not foreseeable to
Nursing Home that the State of
Nursing Home could not
increase rates to its residents covered by State Medicaid to cover the
reduction in State of
Nursing Home could not ask
its Public Aid/Medicaid residents to move or to find other supportive living
housing because the reimbursements to Nursing Home had been cut by the Illinois
Department of Public Aid/Medicaid programs. One Hundred Fourteen Nursing Home
residents have no where else to live.
Under the Illinois Public Aid Code, such an action is also a business
offense with fines from $500 to $5,000.
See LeBlang, supra, 2003 (update) at 484.
Nursing Home could not
cover the shortfall created by the State of
food, electricity, heat,
and clothing to the Nursing Home facility would have refused to provide
continued services to Nursing Home if their salaries and accounts were not paid
or partially paid.
Nursing Home exercised
ordinary business care and prudence in determining its tax obligations but was
unable to comply with those obligations.
The State of
The State of
Nursing Home provided
medical and residential supportive services to its Public Aid Recipient Residents
as mandated by Illinois laws, including the Abused and Neglected Long-Term Care
Facility Resident Reporting Act, 210 ILCS 30/1 et seq., the Illinois Public Aid
Code, 406 ILCS 5/ A-11 et seq., and the Illinois Nursing Home Care Reform Act,
210 ILCS 45/1-101 et seq., during the period when the State of Illinois cut
nursing home funding and when the State of Illinois lagged up to six months in
its payments to nursing homes. Nursing
Home is only now beginning to catch up and recoup some of its losses incurred
during these prior periods.
In the exercise of
ordinary care and business prudence, Nursing Home now utilizes a payroll
company to prepare its payroll and to make EFTPS payroll tax deposits.
Statement of
Law
The taxpayer's failure to timely
file, deposit and pay the tax due with its returns is due to reasonable cause
and not willful neglect. In United
States v. Boyle, 469
To escape the penalty, the
taxpayer bears the...burden of proving both (1) that the failure did not result
from “willful neglect,” and (2) that the failure was “due to
reasonable cause.” 26 U.S.C. 6651
(a) (1).
Section 6724 of the
Internal Revenue Code provides that no penalty shall be asserted if such
failure to timely file (or pay) was due to reasonable cause and not willful
neglect. Although reasonable cause is
typically determined on a case by case basis, relief based upon reasonable
cause is usually granted when the taxpayer exercises ordinary business care and
prudence in determining his or her tax obligations.
The Internal Revenue
Service Penalty Handbook provides the following grounds for non-assertion or
abatement of penalties:
"20.1.1.3.1 Reasonable Cause
(1) Reasonable cause is based on all the facts and circumstances
in each situation and allows the Service to provide relief from a penalty that
would otherwise be assessed. Reasonable
cause relief is generally granted when the taxpayer exercises ordinary business
care and prudence in determining his/her tax obligations but is unable to
comply with those obligations.
(2) In the interest of equitable treatment of the taxpayer and
effective tax administration, the nonassertion or abatement of civil penalties
based on reasonable cause or other relief provisions provided in this IRM must
be made in a consistent manner and should conform with the considerations
specified in the Internal Revenue Code (IRC), Regulations (Treas Regs), Policy
Statements and Part 120.1."
A. Ordinary
Business Care and Prudence
The IRM in Section 20.1.1.3.1.2 defines ordinary
business care and prudence as:
"Ordinary business care and prudence includes
making provisions for business obligations to be met when reasonably
foreseeable events occur. A taxpayer may establish reasonable cause by
providing facts and circumstances showing the taxpayer exercised ordinary
business care and prudence (taking that degree of care that the reasonable
person would exercise) but nevertheless was unable to comply with the law."
B. Circumstances
Beyond Taxpayer’s Control
The IRM also provides relief for “circumstances
beyond the taxpayer’s control”:
"Consider whether or not the taxpayer could have
anticipated the event that caused the noncompliance. Reasonable cause is generally established
when the taxpayer exercises ordinary business care and prudence but, due to
circumstances beyond the taxpayer's control, the taxpayer was unable to timely
meet the tax obligation. The taxpayer's obligation to meet the tax law
requirements is ongoing. Ordinary
business care and prudence requires that the taxpayer continue to attempt to
meet the requirements, even though late."
(IRM Sec. 20.1.1.3.1.2(d))
In addition, the IRM also states:
(1) “The taxpayer may try to establish reasonable cause by
claiming that a mistake was made...." (IRM 20.1.1.3.1.2.2)
"(1) The
taxpayer may try to establish reasonable cause by claiming forgetfulness or an
oversight by the taxpayer or another party caused the
noncompliance.” (IRM
20.1.1.3.1.2.3)
Discussion
We therefore request that
the Internal Revenue Service abate the failure to deposit penalties, failure to
file, failure to pay penalties and paying late penalties and the interest
assessed on these penalties in connection with the 941 tax periods for the 2nd,
3rd,
4th Quarter 2006, the 1st, 2nd, 3rd,
Quarter, 2007 and the 1st , 2nd and 3rd Quarter, 2008 and the 940 tax periods for 2006
and 2007 assessed against Nursing Home Supportive Living Center, LLC,
based on a determination of reasonable cause.
Sincerely,
Robert
E. McKenzie
REM/pp
Enclosures
cc: Client
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Table
17. Civil Penalties Assessed and
Abated, by Type of Tax and Type of Penalty, Fiscal Year 2008 |
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[Money amounts are in thousands of
dollars.] |
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Civil
penalties assessed [1] |
Civil
penalties abated [1, 2] |
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Type
of tax and type of penalty |
Number |
Amount |
Number |
Amount |
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|
(1) |
(2) |
(3) |
(4) |
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Civil penalties, total |
40,353,465 |
28,115,371 |
3,075,159 |
11,858,696 |
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Individual income tax: |
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|
|
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Civil penalties, total |
30,223,315 |
13,365,745 |
1,119,922 |
4,088,235 |
|
Accuracy [3] |
391,621 |
904,206 |
48,326 |
216,870 |
|
Bad check |
175,695 |
21,668 |
9,324 |
7,980 |
|
Delinquency |
3,660,514 |
4,677,827 |
779,429 |
2,091,019 |
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Estimated tax |
8,551,575 |
2,385,319 |
265,805 |
286,766 |
|
Failure to pay |
17,419,367 |
5,053,053 |
9,324 |
1,440,757 |
|
Fraud |
2,265 |
165,750 |
216 |
16,173 |
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Partnership information [4] |
14,847 |
95,571 |
2,840 |
23,602 |
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Other [5] |
7,431 |
62,352 |
4,658 |
5,067 |
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Corporation income tax: |
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|
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Civil penalties, total [6] |
783,864 |
2,163,750 |
135,191 |
1,113,042 |
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Accuracy [3] |
3,355 |
572,514 |
138 |
183,068 |
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Bad check |
1,453 |
240 |
291 |
2,883 |
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Delinquency |
131,450 |
438,222 |
22,155 |
271,404 |
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Estimated tax |
301,345 |
582,773 |
21,957 |
307,787 |
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Failure to pay |
346,061 |
555,024 |
90,257 |
337,327 |
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Fraud |
149 |
12,401 |
5 |
414 |
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Other [5] |
51 |
2,575 |
388 |
10,159 |
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Employment taxes: |
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Civil penalties, total [7] |
8,513,558 |
4,172,608 |
1,602,564 |
3,407,913 |
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Accuracy [3] |
2,597 |
22,601 |
99 |
593 |
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Bad check |
41,774 |
3,180 |
3,079 |
1,499 |
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Delinquency |
1,775,198 |
1,185,627 |
285,579 |
475,293 |
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Estimated tax [8] |
4,909 |
33,082 |
1,255 |
19,935 |
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Failure to pay |
4,384,202 |
1,104,878 |
737,800 |
276,590 |
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Federal tax deposits |
2,304,351 |
1,814,400 |
574,721 |
2,633,260 |
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Fraud |
403 |
6,304 |
4 |
16 |
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Other [5] |
124 |
2,535 |
27 |
727 |
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Excise taxes: |
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|
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Civil penalties, total [9] |
417,926 |
1,259,718 |
136,566 |
426,691 |
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Accuracy [3] |
950 |
2,760 |
d |
d |
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Bad check |
4,796 |
154 |
262 |
23 |
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Daily delinquency |
92,114 |
307,142 |
67,362 |
241,330 |
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Delinquency |
105,510 |
211,820 |
12,058 |
9,364 |
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Estimated tax [10] |
13,478 |
6,049 |
957 |
1,691 |
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Failure to pay |
168,938 |
115,436 |
42,440 |
9,217 |
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Federal tax deposits |
3,806 |
44,759 |
1,479 |
37,757 |
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Fraud |
128 |
1,597 |
d |
d |
|
Other [5] |
28,206 |
570,002 |
11,963 |
127,238 |
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Estate and gift tax: |
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|
|
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Civil penalties, total [11] |
12,308 |
2,579,568 |
6,974 |
167,167 |
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Accuracy [3] |
d |
d |
6 |
84 |
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Bad check |
132 |
1,139 |
74 |
1,024 |
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Delinquency |
3,995 |
2,494,748 |
2,447 |
117,234 |
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Failure to pay |
7,931 |
76,662 |
4,359 |
46,485 |
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Fraud |
d |
d |
0
|
0
|
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Other [5] |
185 |
1,457 |
88 |
2,341 |
|
Nonreturn penalties [12] |
402,494 |
4,573,982 |
73,942 |
2,655,647 |