On December 5, 2005, Appellee, Mouzon Enterprises, Inc. (“Mouzon”), filed a Petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Georgia. Thereafter, the Georgia Department of Revenue (“Department”) filed a Proof of Claim establishing a priority tax claim in the amount of $472,591.89, and an unsecured claim, which represented accrued penalties and interest, in the amount of $69,098.79. A portion of the amounts claimed by the Department were estimated because Mouzon had failed to file sales and use tax returns between December of 2000 and December of 2005.
After filing several delinquent tax returns, Mouzon objected to the Proof of Claim filed by the Department. In its Objection, Mouzon argued that according to its recently filed tax returns, the priority tax claim should not have exceeded $83,031.94, and the unsecured claim was subject to recalculation based on its actual tax liability. In response, the Department argued that according to its review of the delinquent tax returns, its priority tax claim and unsecured claim should be reduced to the amounts of $204,497.81, and $29,055.61, respectively. As with the prior Proof of Claim, portions of the revised amounts claimed by the Department had been estimated because Mouzon had not yet filed all of its delinquent returns. On September 21, 2006, following discussions between the Department and Mouzon by which the latter’s objections were resolved, the bankruptcy judge entered a Consent Order allowing the Department a priority tax claim in the amount of $174,348.84, and an unsecured claim in the amount of $29,683.15. The bankruptcy case was voluntarily dismissed on June 20, 2007.
Following dismissal of the bankruptcy case, the Department issued Assessments against Mouzon and its Corporate Officers, Milton Mouzon and Glenda Robertson Mouzon. The Corporate Officers appealed the Assessments, and their appeals were referred to the Office of State Administrative Hearings. On administrative appeal, the Corporate Officers claimed they discovered errors in the delinquent tax returns prepared for Mouzon, specifically, that the returns had included labor costs as taxable income. Based on this discovery, the Corporate Officers challenged the Assessments arguing that the amounts claimed therein were erroneous because they were based, in part, on labor costs that are not subject to sales tax under state law. In response, the Department argued that the Corporate Officers did not have standing to challenge the tax liability of Mouzon, and that the tax liability of Mouzon had already been determined by the Consent Order entered by the bankruptcy court.
Judge(s): Edmondson, Marcus, Barbour
Jurisdiction: U.S. Court of Appeals, Eleventh Circuit
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