The defunct Concorde Garment Manufacturing Corp. and its affiliated companies’ numerous former foreign workers are appealing to the U.S. Court of Appeals for the Ninth Circuit a federal court order requiring them to return $1.2 million in Federal Insurance Contributions Act taxes to the Internal Revenue Service.
Attorney Steven P. Pixley, counsel for Concorde, and attorney Colin M. Thompson, counsel for the foreign workers, filed their notice of appeal on Friday in the U.S. District Court for the NMI.
The appeal seeks to reverse Chief Judge Ramona V. Manglona’s final order dated Oct. 15, 2013, and her Aug. 20, 2013, order that granted the U.S. government’s motion for judgment on the pleadings.
Pixley and Thompson said this appeal is filed within 60 days of the court’s Oct. 15 entry of the final judgment.
The lawyers said they previously appealed the Aug. 20 order but it was determined that this was not a final order and their premature appeal was voluntarily dismissed on Oct. 3.
The court issued the final order after U.S. Department of Justice Tax Division trial attorney Landon Yost asked for an entry of judgment in favor of the U.S. government and against Concorde in the sum of $1,181,265.71 plus interest from Dec. 28, 2009.
With the court having ruled against Concorde’s arguments why FICA taxes did not apply to its employees, Yost said it is now clear that Concorde’s claim for refund lacked a legal basis and that the refund given to Concorde was a mistake and should be returned to the IRS.
Court records showed that Concorde filed Forms 941 “Employer’s Quarterly Tax Returns,” for the quarters ending March 31, 2006, June 30, 2006, Sept. 30, 2006, and Dec. 31, 2006. Concorde paid the amount due for the FICA taxes for those quarters.
Concorde then filed a Form 843 “Claim for Refund,” requesting a refund for those quarters, asserting that its temporary contract workers in the CNMI were not subject to FICA taxes and that it therefore erroneously paid payroll taxes for those employees.
On Dec. 28, 2009, IRS issued a refund to Concorde and its employees in the amount of $1,181,265.71.
In July 2011, Concorde and over 4,000 Chinese nationals formerly employed by Concorde and its affiliated companies sued the U. S. government to recover FICA taxes that were erroneously paid to the U.S. for tax years 2004 to 2007.
They asserted that the imposition of FICA tax liability on employees and collected from plaintiffs should be refunded.
In 2010, 12 other former garment factories and Tinian Dynasty Hotel & Casino also sued the U.S. government to recover FICA taxes that were allegedly erroneously paid.
On Dec. 17, 2011, the U.S. government filed a counterclaim for the recovery of this refund, arguing that Concorde’s claim was without legal basis and should not have been allowed.
In its answer to the counterclaim, Concorde asserted that the counterclaim was barred by the applicable statute of limitations.
In the U.S. government’s motion for entry of judgment, Yost stated that the court has now ruled that FICA taxes did apply to Concorde’s employees for the tax periods at issue, effectively holding that Concorde’s claim for refund lacks legal merit.
Yost said the counterclaim was timely since a suit for recovery of an erroneous refund must be filed within two years after the making of such a refund (or within five years if the refund was induced by fraud or misrepresentation of a material fact).
Concorde has insisted that the U.S. government’s counterclaim for the recovery of $1.2 million in FICA taxes that the IRS refunded in 2009 was barred by the applicable statute of limitations. (Ferdie de la Torre)