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June 22, 2017


Court declines nursing home’s request for undue hardship

Are businesses treated as individuals under tax law? Based on previous cases, it would appear the answer to this question is yes. Corporations are responsible for taxes and appear to receive many of the same protections as are present for individuals.

Although this would seem to be an established precedent, a recent case heard by the Tax Court sends a different message.

Lindsay Manor Nursing Home v. IRS: The basics

The case in question involves a nursing home that was behind in its tax obligations. According to a recent publication in Accounting Today, the business failed to pay a $108,911 tax bill and was issued a Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing notification from the Internal Revenue Service (IRS). The nursing home countered that it had not received over $300,000 in payments from Medicaid, insurance and other forms of payment and was thus unable to make the requested tax payment. A levy, the business contended, would result in economic hardship.

Economic hardship is a ground that can provide protection against a levy in some instances. A levy is essentially a process that involves the removal of payment due directly from the party’s bank account. The nursing home argued that the definitions used to qualify for undue hardship included the use of the term “person” which includes corporations.

Tax Court reviews intent of law: The holding

The Tax Court reviewed the legislative history and found that the interpretation applied by the IRS was permissible. As such, the nursing home was not granted economic hardship protections.

Tax issues in Tax Court: Importance of preparation

This case provides an example of the difficulties of navigating a case in Tax Court. Finding a definition within the Internal Revenue Code that supports your case may not be enough to build a strong case. As such, it is wise for those facing these types of issues to seek legal counsel. An experienced Tax Court attorney can tailor a case to your defense, better ensuring a more favorable outcome.