December 1, 2016

IRS Targets Pizza Pro President’s Pension Plunder

By the C|C Whistleblower Lawyer Team

The IRS often, and often unfairly, gets a bad rap, frequently for doing exactly what it exists to do: collect taxes and catch those who try to cheat their way out of paying their fair share. A recent U.S. Tax Court decision, in a case brought by the IRS against Arkansas restaurant equipment licensing company Pizza Pro, demonstrates the essential role the Service plays in cracking down on fraudsters’ creative schemes to bilk the U.S. government.

A bit of background: under U.S. tax laws, companies may deduct as work-related costs, certain contributions to employee benefit plans; however, “overfunded” plans—i.e. those in excess of statutory limitations—are subject to excise taxes. At first blush, this rule fits the stereotype of the greedy tax collector, skimming money even from pension plans. But a look at the facts turns that image on its head.

Pizza Pro was hauled into Tax Court for unpaid excise taxes related to a cushy pension plan set up to benefit a sole participant—Pizza Pro’s president Scott Stevens. Stevens’ exclusive, custom-made plan had a youthful normal retirement age of 45. And, not surprisingly, his company’s generous contributions to the plan exceeded statutory limitations.

Although Stevens and Pizza Pro sought to escape tax liability by neglecting to file appropriate forms related to excise tax liability, the IRS did its own math on the shady pension plan, and brought suit to recover the money it was owed. Stevens didn’t assert financial hardship or an inability to file the forms as defense, but rather attempted to throw his company’s former attorney under the bus with a poorly assembled and ultimately unsuccessful advice-of- counsel defense.

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