Recently a dissolved corporation found out the hard way that corporate formalities do indeed matter to the IRS.
Urgent Care Nurses Registry, Inc. (Urgent Care) was incorporated in California on July 21, 2005, and was assigned a taxpayer identification number by the California Franchise Tax Board (board). On Aug. 1, 2008, the board suspended Urgent Care’s corporate charter pursuant to section 23301 of the Suspension and Revivor article of the California Revenue and Taxation Code, and on July 26, 2016, the California secretary of state certified that Urgent Care’s “powers, rights and privileges remain suspended.”
Urgent Care filed some income and employment tax returns for 2009 through 2013 but enclosed no payments. It failed to file other returns, and IRS prepared substitutes for returns and assessed all of the taxes in question plus a penalty for failing to file Forms W-2, Wage and Tax Statement. In January of 2015, IRS sent Urgent Care a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
On Sept. 28, 2015, Urgent Care timely sought review in the Tax Court. On July 28, 2016, IRS filed a motion to dismiss for lack of jurisdiction, contending that the petition was not filed by a party with capacity to sue. The Court directed Urgent Care to respond to the motion to dismiss on or before Sept. 2, 2016, which it failed to do.
The Tax Court granted IRS’s motion to dismiss for lack of jurisdiction on the ground that Urgent Care lacked legal capacity to prosecute the case.
The Court said that since Urgent Care’s corporate powers were suspended in 2008, and there was no indication that it has since received a certificate or revivor or become current on its California tax obligations, it lacked the capacity to sue.
Is your corporation in good standing and are its books and records up to date? Shouldn’t they be?
If you have any questions or would like to discuss this article or any other legal concern you have, please contact:
Morris Saunders at:
email@example.com or at 312-368-0100.