John Stockdale, Jr. Resolves Withholding Tax Matter

Schafer and Weiner, PLLC represented a chapter 11 debtor.  The State of Michigan timely filed a proof of claim asserting certain tax claims against the debtor. After the deadline to amend its proof of claim expired, the State of Michigan advised the debtor that it owed additional unpaid withholding taxes for prepetition date periods.  The additional taxes were discharged in the bankruptcy when the State of Michigan failed to amend its proof of claim, but could still be assessed against the debtor’s sole member as the responsible person under applicable tax law. John Stockdale, Jr. negotiated a settlement with the State of Michigan which resolved all claims against the debtor and its sole owner related to the additional taxes for a nuisance amount.  The settlement amount was far less than the cost of reopening the bankruptcy case for a ruling that the taxes were discharged and released a substantially larger tax claim against the responsible person.