ATTORNEY FOR PETITIONER:
ARTHUR M. WEINGARTNER
CORNELIUS & WEINGARTNER
Fort Wayne, IN
ATTORNEYS FOR RESPONDENT:
ATTORNEY GENERAL OF INDIANA
TED J. HOLADAY
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
JANIE G. HUNT, )
COMPANY, Successor in Merger with
v. ) Cause No. 02T10-9910-TA-205
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE INDIANA DEPARTMENT OF STATE REVENUE
June 30, 2003
Janie G. Hunt appeals a final determination of the Indiana Department of State
Revenue (Department) finding that she, as president of Hunts Health Care Center, Inc.
(HHC), was personally liable for HHCs unpaid withholding taxes, plus penalties and interest,
for the 1988 tax year. For the reasons stated below, the Court
AFFIRMS the Departments final determination.
FACTS AND PROCEDURAL HISTORY
In 1985, Hunt was the sole shareholder and president of the newly constructed
HHC, a nursing home in Fort Wayne, Indiana. In 1986, Hunt hired
Richard A. Smith to provide . . . the overall management and operational
supervision necessary to operate [HHC.]
See footnote (Petr Ex. 19 at 2.) Hunt
thereafter relinquished day-to-day control and authority over the operation of HHC to Smith.
Moreover, Hunt agreed to vacate the nursing home and not enter it
without permission of Smith.
In 1988, Hunt became concerned that Smith was not paying the withholding taxes
owed by HHC. She met with Smith to discuss her concerns, after
which, Smith quit as manager of HHC. Subsequently, Hunt entered HHC and
wrote at least two checks to the Department for withholding taxes.See footnote She
also placed her own money in HHCs bank account to prevent the checks
from bouncing. (Trial Tr. at 2025, 44.)
On November 8, 1988 and May 30, 1989, the Department issued notice to
HHC of additional withholding taxes due for 1988. The taxes were never
paid. Approximately ten years later, on March 26, 1998, the Department issued
notice to Hunt of the withholding taxes due for 1988. Hunt protested
the proposed assessment, which the Department denied.
On October 19, 1999, Hunt initiated an original tax appeal. On September
8, 2000, the Court held trial. Additional facts will be supplied as
ANALYSIS AND OPINION
Standard of Review
This Court hears an appeal from a final determination of the Department de
novo. Ind. Code § 6-8.1-5-1(h); Snyder v. Indiana Dept of State Revenue,
723 N.E.2d 487, 488 (Ind. Tax Ct. 2000), review denied. The Court
therefore is not bound by the evidence or the issues raised at the
administrative level. Snyder, 723 N.E.2d at 488.
The issue is whether Hunt is personally liable for HHCs unpaid withholding taxes.
Withholding taxes are imposed pursuant to Indiana Code Section 6-3-4-8(a), which provides
in relevant part,
[e]very employer making payments of wages subject to tax under IC 6-3 .
. . who is required . . . to withhold, collect, and pay
over income tax on wages paid by such employer to such employee, shall,
at the time of payment of such wages, deduct and retain therefrom the
amount prescribed in withholding instructions issued by the department. . . .
Such employer making payments of any wages:  (1) Shall be liable to
the state of Indiana for the payment of the tax required to be
deducted and withheld under this section[.]
Ind. Code § 6-3-4-8(a) (1988). Any money that an employer deducts
and withholds shall immediately upon such deduction be the money of the state
[and shall be held] in trust for the state of Indiana[.] Ind.
Code § 6-3-4-8(e) (1988). The law also provides that [i]n the case
of a corporate or partnership employer, every officer, employee, or member of such
employer, who, as such officer, employee, or member is under a duty to
deduct and remit such taxes shall be personally liable for such taxes, penalties,
and interest. Ind. Code § 6-3-4-8(f) (1988).
The inquiry into whether an individual is personally liable for unpaid withholding taxes
is twofold. The Court must first determine if the person is an
officer, employee, or member of the employer[.] Indiana Dept of State Revenue
v. Safayan, 654 N.E.2d 270, 273 (Ind. 1995). If so, then the
Court must determine whether the person has the duty to remit the withholding
taxes to the Department. Id. It is undisputed that Hunt was
an officer of HHC in 1988. Thus, the question remains whether she
had the duty to remit the withholding taxes to the Department.
The statutory duty to remit withholding taxes falls on any officer or employee
who has the authority to see that they are paid. Id.
Three factors are relevant to whether a person has such authority: (1) the
persons position within the power structure of the corporation[,] (2) the authority of
the officer or employee as established by the articles of incorporation, bylaws, or
persons employment contract[,] and (3) whether the person actually exercised control over the
finances of the business. Id.
Because Hunt was the president and sole shareholder of HHC, she presumably had
the authority to see that the State received the withholding taxes. See
id. However, [t]his presumption may be rebutted by showing that the officer
did not in fact have that authority. Id. Hunt claims that
she had nothing to do with the day-to-day operation of HHC. (Trial
Tr. at 21.) Nevertheless, by her own admission, she assumed control of
HHC after Smith quit in 1988. (Trial Tr. at 22.) Moreover,
the record shows that Hunt exercised control over payment of the withholding taxes
by (1) entering HHC to sign checks drawn on its account for payment
of the withholding taxes, and (2) placing her own funds into HHCs account
to cover the checks she signed. Consequently, the Court finds that Hunt
was an officer of HHC who had the authority, and therefore the duty,
to see that the withholding taxes were paid.
In the alternative, Hunt argues that in spite of her duty to remit
the withholding taxes, collection at this point is barred by the doctrine of
laches. Laches is an equitable defense to stop another person from asserting
a claim he would normally be entitled to assert.
Storm, Inc. v.
Indiana Dept of State Revenue, 663 N.E.2d 552, 557 (Ind. Tax. Ct. 1996).
The rationale behind the doctrine of laches is that a person who,
for an unreasonable length of time, has neglected to assert a claim against
another waives the right to assert his claim when his delay prejudices the
person against whom he would assert it. Id. Before a court
will bar a claim due to laches, it must find the presence of
three elements: 1) inexcusable delay in asserting a right, 2) an implied
waiver arising from knowing acquiescence in existing conditions, and 3) circumstances resulting in
prejudice to the adverse party. Id. Hunt claims that the first
element of laches is satisfied because the Department did not attempt to collect
the withholding taxes from her until 1998, ten years after they were first
due. Hunt is mistaken.
The record shows that the Department timely notified HHC of the delinquent withholding
taxes in 1988 and 1989; Hunt, as a person responsible for remitting the
withholding taxes, is presumed to have been aware of and privy to correspondences
relating to her corporate duties, including notices of assessment sent to HHC.
See Ball v. Indiana Dept of State Revenue, 563 N.E.2d 522, 524 (Ind.
1990) (holding that where notice to a corporation is sufficient, notice to the
responsible officer is not required). Accordingly, the Court finds that the Department
did not inexcusably delay in seeking to collect the delinquent withholding taxes.
Because Hunt cannot show that the first element of laches is satisfied, her
invocation of that defense must fail.
For the aforementioned reasons, the Court AFFIRMS the Departments final determination.
Hunts agreement with Smith was a condition of the bank loan used
to finance the construction of HHC.
Footnote: On March 21, 1988, Hunt signed a $712.51 check drawn on HHCs
account. On May 29, 1988, Hunt signed a $505.66 check drawn on
HHCs account. (Petr Exs. 1314.)
Footnote: The record shows that HHC was placed in receivership and subsequently filed
for bankruptcy in March 1988. At the same time, the Indiana Department
of Health required Hunt to hire an independent nursing home manager to run
HHC. Hunt argues that these facts indicate that she neither had the
authority nor the duty to pay the withholding taxes. Nevertheless, during the
period relevant to this appeal, Hunt was the owner and an officer of
HHC, and she issued checks for withholding taxes. She also deposited her
own money into HHCs bank account to cover those checks. These facts
overcome any claim Hunt asserts to being a powerless third party.
Footnote: Hunt also argues that the 1998 proposed assessment is untimely under Indiana
Code Section 6-8.1-5-2, which states that the department may not issue a proposed
assessment . . . more than three (3) years after the latest of
the date the return is filed[.]
Ind. Code § 6-8.1-5-2(a) (1998).
However, the fact that the Department did not attempt to send a notice
of assessment directly to Hunt until 1998 is of no consequence because timely
notice to HHC in 1988 and 1989 tolled the statute of limitations with
respect to Hunt. See Ball v. Indiana Dept of State Revenue, 563
N.E.2d 522, 525 (Ind. 1990). Consequently, the collection of the withholding tax
delinquencies is not barred by the statute of limitations. See id.