Defunct garment factory denies US govt claim that $1.2M refund check was erroneously issued

A defunct garment manufacturer has denied the U.S. government’s counterclaim that the $1.2 million in a tax refund check that the Internal Revenue Service issued to the factory in 2009 was erroneous.

Attorney Steven P. Pixley, counsel for Concorde Garment Manufacturing Corp., has admitted that Concorde received a refund or payments made to the Federal Insurance Contributions Act (FICA) as alleged in one of the U.S. government’s counterclaim.

In Concorde’s reply to U.S. government’s counterclaim, Pixley also asserted that the counterclaim is time barred by the applicable statute of limitations.

Pixley has asserted in its lawsuit that the imposition of FICA tax liability on employees and employers in the CNMI is without legal authority and that the FICA tax collected from plaintiffs should be refunded.

In July 2011, Concorde and numerous Chinese nationals formerly employed by Concorde and its affiliated companies, sued the U.S. government to recover allegedly wrongfully assessed FICA taxes that were erroneously paid to the U.S. for tax years 2004 to 2007.

The plaintiffs, through counsels Steven P. Pixley and Colin M. Thompson, said that, on Dec. 15, 2008, Concorde received $1,157,359.71 representing a partial refund of FICA taxes.

Pixley and Thompson said the U.S. commenced collection proceedings against Concorde to recover this refund after April 15, 2010, including the implementation of illegal levy proceedings.

“Notwithstanding the partial FICA refund payment, the Defendant (U.S.) has not issued a formal denial relating to the plaintiffs’ refund claims,” the lawyers said.

Last December, the U.S. government filed a counterclaim against Concorde.

The U.S. government, through the U.S. Department of Justice’s Tax Division, asserted that Concorde is indebted to the government in the amount of $1,181,265.71 plus interest as provided by law from the date of the erroneous refund on Dec. 28, 2009.

DOJ said the refund check was erroneous, because, among other things, the claim for refund was without legal basis and should not have been allowed.

The U.S., through IRS, collected FICA tax in the CNMI on employers and “wages” of employees for “employment.”

Last year, 12 other former garment factories and Tinian Dynasty Hotel & Casino also sued the U.S. government to recover allegedly wrongfully assessed Social Security and Medicare taxes (FICA) that were erroneously paid between 2002 to 2007.