830 CMR, § 62C.31A.1

Current through Register 1533, October 25, 2024

Section 62C.31A.1 - Responsible Persons

(1)Statement of Purpose, Effective Date.

(a) The purpose of 830 CMR 62C.31A.1 is to describe the procedures prescribed by the Commissioner, pursuant to M.G.L. c. 62C, §§ 3 and 31A; M.G.L. c. 62B, § 5; M.G.L. c. 64G, § 7B; M.G.L. c. 64H, § 16; and M.G.L. c. 64I, § 17, for the assessment of taxes upon and the collection of taxes from responsible persons, persons under a duty to pay over certain trustee taxes and certain use taxes owed by a corporation, partnership or limited liability company.

(b) With regard to limited liability companies 830 CMR 62C.31A.1 applies to taxes remaining unpaid on or after December 8, 2005.

(2)Definitions. For the purposes of 830 CMR 62C.31A.1 the following terms shall have the following meanings:

Commissioner, the Commissioner of Revenue or his representative duly authorized to perform the duties of the Commissioner relating to the assessment upon and collection of taxes from responsible persons.

Demand, notification to a taxpayer or a responsible person that the amount of an original assessment or a responsible person assessment is currently due and payable to the Commonwealth.

Determination of Responsible Person's Personal Liability, the result of the process by which the Commissioner ascertains a taxpayer's responsible person and records the identity of the responsible person and the amount due from the responsible person.

Duty to Pay Over Taxes, an obligation to remit taxes that arises from a person's position, function, or responsibility undertaken on behalf of a corporation, partnership or limited liability company. Such obligation need not be a legally enforceable agreement between the corporation, partnership or limited liability company and the person.

Original Assessment, the assessment that results from the process by which the Department of Revenue verifies and/or determines the amount of tax imposed on and due from a taxpayer under M.G.L. chs. 62B, 64G, 64H, and 64I, determines the amount of applicable interest and penalties imposed and due from the taxpayer under M.G.L. c. 62C on an on-going basis, and records the amounts.

Person, an individual, partnership, trust, or association, with or without transferable shares, joint-stock company, corporation, limited liability company, society, club, organization, institution, estate, receiver, trustee, assignee, or referee, and any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals acting as a unit.

Responsible Person, any person who is or was under a duty to pay over taxes imposed on a corporation, partnership or limited liability company by M.G.L. chs. 62B, 64G, 64H, and 64I.

Responsible Person Assessment, the assessment, together with any additional accrued interest, that results from the process by which the Department of Revenue determines a responsible person's personal liability.

Responsible Person's or Person's Last Known Address, the responsible person's or the person's address as it appears in the records of the Commissioner or as it is found through investigation.

Required Tax or Required Taxes, any tax or taxes imposed, assessed, and owing under M.G.L. chs. 62B, 62C, 64G, 64H, or 64I.

Tax or Taxes , any withholding tax imposed under M.G.L. c. 62B, any room occupancy excise imposed under M.G.L. c. 64G, any sales tax imposed under M.G.L. c. 64H, any use tax imposed under M.G.L. c. 64I, and including any interest or penalties imposed under M.G.L. c. 62B, § 7 and c. 62C, §§ 28, 30, 30A, 32, 33, 34, 35, and 35A for withholding tax, room occupancy excise, sales tax, or use tax.

Taxpayer, any corporation, partnership or limited liability company required to file returns or pay over taxes imposed under M.G.L. chs. 62B, 62C, 64G, 64H, or 64I.

(3)General Rules.

(a)Substantive Rule.

1.General. If a corporation, partnership or limited liability company fails to pay to the Commissioner any required tax or required taxes of such taxpayer, the person or persons who have or had the duty to pay over the tax or taxes on behalf of the corporation, partnership or limited liability company shall be personally and individually liable for the amount of the required tax or required taxes.

2. Clarification of general rule for certain sales and use taxes beginning May 30, 2002 (December 8, 2005 for sales and use taxes of a limited liability company). In the case of (i) sales taxes due under M.G.L. c. 64H, § 8(d) or § 8(h) only, (ii) use taxes due under M.G.L. c. 64I, § 8(e) or § 8(j), (iii) use taxes due on purchases of a corporation, partnership or limited liability company on which no sales or use taxes were paid, and (iv) use taxes due from a taxpayer's customers but not collected by the taxpayer, the general rule in 830 CMR 62C.31A.1(3)(a)1. will apply to responsible person determinations made on or after May 30, 2002 (December 8, 2005 for determinations involving taxes of limited liability companies) and only for underlying liabilities for such taxes incurred by the corporation, partnership, or limited liability company after that date.

Exception for certain responsible person determinations made on or after December 8, 2005. No person shall be personally or individually liable for a use tax liability due from a corporation, partnership or limited liability company resulting from purchases by the corporation, partnership or limited liability company of tangible personal property or services purchased for use by the entity unless the person's failure to pay the tax was willful or unless the person made personal use of the property or services subject to tax. This exception applies to responsible person determinations made on or after December 8, 2005.

(b)Procedure. The Commissioner will notify each person in writing of the proposed determination of personal liability. The person may confer with the Commissioner as to the original assessment or the proposed determination of personal liability. Upon the Commissioner's determination that the person was or is under a duty to pay over taxes, an assessment upon the responsible person occurs and the responsible person is personally and individually liable for the assessed and unpaid taxes of the corporation, partnership or limited liability company.

(4)Information Used in the Determination of Who May Have the Duty to Pay Over Taxes. The determination of who is under a duty to pay over taxes is made case by case, based on the facts and circumstances of the individual case. The Commissioner may use any information to determine who may be or may have been under a duty to pay over taxes, including but not limited to the following.

(a)Examination of Records. The Commissioner may examine any records, including but not limited to the following:

1.Tax Returns. To determine who may be or may have been under a duty to pay over taxes imposed under M.G.L. chs. 62B, 62C, 64G, 64H, or 64I, the Commissioner may examine the taxpayer's Massachusetts returns and the taxpayer's Application for Registration, Form TA-1. The Commissioner may also examine federal tax returns for the same purpose.

2.Other Records. To determine who may be or may have been under a duty to pay over taxes imposed under M.G.L. chs. 62B, 62C, 64G, 64H, or 64I, the Commissioner may examine all or any of the following records, as well as any other relevant records.

a. Articles of incorporation.

b. Minute books and bylaws.

c. Bank records.

i. Signature cards.

ii. Cancelled checks and bank statements.

d. Partnership agreements.

e. Operating agreements of limited liability companies.

(b)Investigation. To determine who may be or may have been under a duty to pay over taxes, the Commissioner may conduct an investigation or audit and may use any documents, testimony, or any other information derived from the investigation or audit.

(5)Factors in the Determination of Who May Have the Duty to Pay Over Taxes. The factors that the Commissioner may consider to determine who may be or may have been under a duty to pay over taxes include, but are not limited to, the following:

(a)Duty to Pay Over Taxes Shared by More Than One Person.

1.Multiple Determinations. The Commissioner may make multiple proposed determinations of personal liability if the Commissioner believes more than one person has or had the duty of collecting and paying over taxes on behalf of the same taxpayer. If the Commissioner determines that more than one person has or had the duty of collecting and paying over taxes on behalf of the same taxpayer for the same tax periods, such persons shall be jointly and severally liable for the amount of the assessment.

2.Partners in a Partnership.

a. Ordinarily, all general partners of a partnership are under a duty to pay over taxes. The Commissioner may thus make proposed determinations of personal liability against any or all general partners.

b. The Commissioner may make a proposed determination of personal liability against a limited partner if the limited partner is shown to be or to have been under a duty to pay over taxes.

3.Members of an LLC.

a. Ordinarily, all managing members of an LLC are under a duty to pay over taxes. The Commissioner may thus make proposed determinations of personal liability against any or all managing members.

b. The Commissioner may make a proposed determination of personal liability against a non-managing member if the non-managing member is shown to be or to have been under a duty to pay over taxes.

(b)Duty to Pay Over Taxes Acquired After Original Assessment. The Commissioner will not generally make a proposed determination of personal liability if the Commissioner believes the person did not have the duty to pay over taxes during the period of time in which the taxpayer's liability for the original assessment arose. But if funds sufficient to pay the unpaid original assessment are available to the taxpayer at the time a person acquires the duty to pay over taxes and the person fails to pay the original assessment upon receipt of a demand, the Commissioner may make a proposed determination of personal liability against that person.

The Commissioner will not make a proposed determination of personal liability against a person for an original assessment against a limited liability company that arose prior to December 8, 2005 unless funds sufficient to pay the unpaid original assessment became available to the limited liability company on or after December 8, 2005 and the person fails to pay the original assessment upon receipt of a demand.

(c)Duty to Pay Over in Absence of Other Factors. In the absence of any other relevant factors, the Commissioner may consider that all or any one or more of the following persons are or were under a duty to pay over the taxes:

1. The president, secretary, and treasurer of a corporation;

2. Any other principal officer or officers, whatever their titles, of a corporation;

3. All or any one of the active partners of a partnership;

4. All or any one of the managers of a limited liability company; and

5. All or any one of the members of a limited liability company involved in managing the company.

(6)Notification of Proposed Determination of Personal Liability.

(a)Requirement of Notification. If the Commissioner determines from a consideration of information under 830 CMR 62C.31A.1(4) or factors under 830 CMR 62C.31A.1(5), or otherwise, that a person or persons under a duty to pay taxes of the corporation, partnership or limited liability company failed to do so the Commissioner will notify each such person of the proposed determination of personal liability for taxes assessed against the taxpayer under M.G.L. chs. 62B, 62C, 64G, 64H, or 64I. This notice shall serve as a the notice of intention to make a responsible person assessment.

(b)Time for Notification. The Commissioner may send the notification referred to in 830 CMR 62C.31A.1(6)(a) at any time during the limitation period for collection of taxes from an original assessment.

(c)Contents of Notification. The notification of proposed determination of personal liability will include the following:

1. The date of its issuance,

2. The name of the person to whom it is issued,

3. The name of the taxpayer,

4. The type of tax or taxes assessed upon the taxpayer,

5. The date of the original assessment,

6. The tax period or periods,

7. The amount of the original assessment,

8. A description of the person's right to confer with the Commissioner or his duly authorized representative as to the original assessment and the proposed determination of personal liability,

9. An explanation that a lien will arise in favor of the Commonwealth upon all property belonging to the person if a determination of responsible person's personal liability is made,

10. The deadline that the person must meet to confer with the Commissioner, and

11. Any additional information the Commissioner considers appropriate.

(d)Presumption of Receipt of Notice. The transmittal of a notification of proposed determination of personal liability through the United States mail to the person at the person's last known address creates a presumption that the notification was received by the person.

(e)Failure to Receive Notice. A person's failure to receive a notification of proposed determination of personal liability does not delay a determination of responsible person's personal liability and does not affect the validity of the determination, the original assessment or the responsible person assessment.

(7)Conference with the Commissioner.

(a)Request for a Conference.

1. Any person notified of the proposed determination of personal liability may confer with the Commissioner within thirty days after the date of the issuance of the notification of the proposed determination of personal liability.

2. A person or representative must send a written request for a conference to the Chief of the Collections Bureau or other authorized Massachusetts Department of Revenue personnel specified in the notification of proposed determination of personal liability, at the address shown on the notification.

3. To expedite processing, a request for a conference should include telephone numbers for the person and/or the person's representative. All requests must include a current address for the person and/or the person's representative; requests without a full return address will be considered incomplete and without effect.

(b)Conduct of the Conference. The conference with the Commissioner is an informal proceeding.

(c)Referral to Office of Appeals. The person may request referral to the Office of Appeals. The Chief of the Collections Bureau or other authorized Massachusetts Department of Revenue personnel specified in the notification of proposed determination of personal liability and the Director of the Office of Appeals, as a matter of joint discretion, may agree to refer the conduct of the conference to the Office of Appeals but such requests will generally only be granted if they present novel issues of law or fact. Unless the person is notified of a referral to the Office of Appeals, the conference will be held in the Collections Bureau or other Bureau specified in the notification of proposed determination of personal liability. Conferences held in the Office of Appeals are conducted as described in 830 CMR 62C.31A.1(7)(b).

(d)Timely Request for a Conference. A timely request for a conference must be received by the Collections Bureau or other Bureau specified in the notification of proposed determination of personal liability by the 30^th day following the issuance of the proposed determination of personal liability. A request for a conference received after the 30^th day following the issuance of the notification will be considered solely at the discretion of the Chief of the Collections Bureau or other authorized Massachusetts Department of Revenue personnel specified in the notification of proposed determination of personal liability.

(e)Issues That May be Raised at the Conference.

1. At the conference the person may raise any issue concerning the validity of the original assessment that the taxpayer may have or could have raised. If the taxpayer or the person or anyone else has paid the amount of the original assessment, proof of the payment should be presented at the conference.

2. The person may raise issues concerning the person's duty to pay over the taxes.

(8)Determination of Responsible Person's Personal Liability and the Responsible Person Assessment.

(a)The Commissioner's Determination of Responsible Person's Personal Liability. If the Commissioner determines that a person did have the duty to pay over taxes, the person will be personally and individually liable for the unpaid amount of the original assessment.

(b)Timing of the Determination of Responsible Person's Personal Liability.

1. If the person does not request a conference within 30 days of the date of the issuance of the notification of proposed determination of personal liability, the determination of responsible person's personal liability shall take effect 30 days after the issuance of the notification of the proposed determination of personal liability. In any case, the Commissioner may, in his or her sole discretion, make the determination of responsible person's personal liability at a date later than 30 days after the notification of proposed determination of personal liability.

2. If the person makes a timely request for a conference, the Commissioner will make the determination of responsible person's personal liability after the conference. In any case, the Commissioner may, in his or her sole discretion, make a determination of responsible person's personal liability at a date later than 30 days after the issuance of the notification of the proposed determination of personal liability.

(c)The Responsible Person Assessment. The responsible person assessment shall take effect on the date the determination of responsible person's personal liability is made.

(d)Written Notice of Responsible Person Assessment. The Commissioner will send a written notice of the responsible person assessment to the responsible person, at the responsible person's last known address or at the address given on the request for a conference, on or as soon as practicable possible after the date of the Commissioner's determination of responsible person's personal liability. The written notice shall serve as a the notice of assessment and constitutes a demand upon the responsible person.

(e)Contents of Written Notice of Responsible Person Assessment. The written notice of the responsible person assessment will include the following:

1. The date of the Commissioner's determination of responsible person's personal liability,

2. The date of the responsible person assessment,

3. The amount of the responsible person assessment,

4. The name of the responsible person,

5. The name of the corporation, partnership or limited liability company,

6. The type of tax,

7. The amount of the original assessment,

8. The date of the original assessment,

9. The tax period or periods,

10. A description of the responsible person's right to apply for abatement,

11. The deadlines that the responsible person must meet to apply for abatement, and 12. Any additional information the Commissioner considers appropriate.

(f)Presumption of Receipt of Written Notice of Responsible Person Assessment. The transmittal of a written notice of determination of the responsible person assessment through the United States mail to the responsible person at the responsible person's last known address or at the address given on the request for a responsible person's conference creates a presumption that the written notice of the responsible person assessment was received by the responsible person.

(g)Failure to Receive Notice. A responsible person's failure to receive a written notice of the responsible person assessment does not affect the validity of the responsible person assessment.

(9)Responsible Person's Application for Abatement.

(a)Application for Abatement to the Commissioner. Any responsible person aggrieved by the original assessment or the responsible person assessment may apply in writing to the Commissioner for an abatement of the original assessment or of the responsible person assessment.

(b)Deadlines for Application for Abatement. Any responsible person's application for abatement must be received by the Commissioner by the following dates, whichever is later:

1. Within three years from the last day for filing the return for the tax upon which the original assessment was based, determined without regard to any extension of time, 2. Within two years from the date of the responsible person assessment, or

3. Within one year from the date that the amount of responsible person assessment was paid.

(c)Requirements of Application for Abatement.

1.Abatement of the Responsible Person Assessment. If a responsible person is aggrieved by the responsible person assessment, the responsible person may apply in writing for an abatement on Form CA-6, Application for Abatement. If the responsible person wishes to apply for an abatement of the responsible person assessment only, the responsible person is not required to file any tax returns under M.G.L. c. 62C, § 38 and 830 CMR 62C.37.1(4)(a)1.

2.Abatement of Original Assessment.

a. If a responsible person is aggrieved by the original assessment, the responsible person may apply in writing on Form CA-6, Application for Abatement, attaching a copy of the tax return for the tax on which the original assessment was issued.

b. If a responsible person is aggrieved by the original assessment and the return for the tax on which the original assessment was based has not been filed by the taxpayer or the responsible person cannot locate it, the responsible person may complete and file a tax return on behalf of the taxpayer, according to the responsible person's best information and belief, in order to satisfy the jurisdictional requirement of M.G.L. c. 62C, § 38 and 830 CMR 62C.37.1(4)(a)1. The completion and filing of a tax return for jurisdictional purposes is not evidence of a responsible person's duty to pay over taxes.

(d)Right to a Hearing on an Application for Abatement. A responsible person seeking abatement may request a hearing pursuant to M.G.L. c. 62C, § 37 and 830 CMR 62C.37.1(6).

(e)Extension of Limitation Period for Collection of Taxes Upon Application for Abatement. A timely application for abatement is a pending question that will extend the limitation period for collection of taxes under 830 CMR 62C.31A.1(14).

(f)Other Provisions. Except as noted in 830 CMR 62C.31A.1(9)(a) through (d), the responsible person's application for abatement must be made in accordance with M.G.L. c. 62C, §§ 37 through 39 and 830 CMR 62C.37.1.

(10)Lien on a Responsible Person's Property.

(a)Creation of Lien Upon Responsible Person's Property. Upon the Commissioner's determination of responsible person's personal liability, the responsible person assessment becomes a lien in favor of the Commonwealth upon all real and personal property and rights to property belonging to the responsible person.

(b)Duration of Lien Upon Responsible Person's Property.

1. The lien arises at the time of the responsible person assessment.

2. The lien against a responsible person continues until that responsible person's liability for the responsible person assessment is satisfied by payment, as provided under 830 CMR 62C.31A.1(12), or until that responsible person's liability for the responsible person assessment is satisfied by settlement, as provided under 830 CMR 62C.31A.1(13) or until the Commissioner otherwise exercises the authority to release a lien pursuant to M.G.L. c. 62C, § 50(f).

3. The lien against the responsible person's property will terminate ten years after the date of the responsible person assessment unless the Commissioner exercises the authority to extend or refile the lien pursuant to M.G.L. c. 62C, § 50(a).

(c)Limitations Upon a Lien Upon Responsible Person's Property. Any lien upon a responsible person's property is subject to all limitations prescribed in M.G.L. c. 62C, § 50(b) and (c) and 830 CMR 62C.50.1(3).

(d)Enforcement of a Lien Upon Responsible Person's Property Through the Courts. If a responsible person refuses or neglects upon demand to pay the amount of the responsible person assessment, whether or not any levy has been made upon the responsible person's property, the Commissioner may direct a civil action to be filed in a district court or superior court of the Commonwealth under M.G.L. c. 62C, § 50(e) to enforce the lien upon the responsible person's property or to subject any property of the responsible person of whatever nature or property in which the responsible person has any right, title, or interest to the payment of such liability.

(e)Release of a Lien Upon Responsible Person's Property. The Commissioner may issue a release of lien upon a responsible person's property pursuant to M.G.L. c. 62C, § 50(f) and 830 CMR 62C.50.1(4) and (6).

(11)Other Collection Remedies. The Commissioner may use any other remedies available by law to collect the amount of a responsible person assessment.

(12)Satisfaction of Responsible Person's Personal Liability by Payment. Payment in full of the amount of the original assessment or the responsible person assessment will satisfy the liability of the taxpayer and responsible person or persons as described below unless such payment is later determined to be a preference item in bankruptcy proceedings.

(a)Payment by Taxpayer. Payment in full of the original assessment, together with any additional accrued interest and penalties, by the taxpayer will satisfy the liability of the taxpayer for the original assessment and the liability of any responsible person for the responsible person assessment.

(b)Payment by Other Person. Payment in full of the original assessment or the responsible person assessment by a person (hereinafter "payor") other than the taxpayer will satisfy the payor's liability for the original assessment or the responsible person assessment. Such payment will not satisfy the liability of the taxpayer or the liability of any responsible person (other than the payor) until one of the following conditions is satisfied:

1. the payor waives his or her rights to appeal the original and/or the responsible person assessment or otherwise to claim relief from either assessment; or

2. the period available for the payor to appeal the original assessment and/or the responsible person assessment or otherwise to claim relief from the original assessment and/or responsible person assessment, through abatement or otherwise, has expired without the payor filing such an appeal or seeking such relief; or

3. the payor's appeal or other claim for relief from the original assessment results in part or all of the original assessment being abated and the Commissioner does not take an appeal from that decision. In the case of partial abatement of the original assessment, the responsible person assessment shall be partially abated to the same extent. The liability of the taxpayer or the liability of any responsible person is satisfied only to the extent of such partial abatement and only if the Commissioner does not appeal the decision.

(13)Settlement of Responsible Person's Tax Liabilities.

(a) A responsible person may make an offer to the Commissioner which is less than the amount of the responsible person assessment. Settlement of the responsible person assessment pursuant to M.G.L. c. 62C, § 37A and 830 CMR 62C.37A.1 satisfies the liability of the taxpayer and the liability of any other responsible person or persons only up to the amount of the settlement.

(b) Settlement of the taxpayer's liability for the original assessment pursuant to M.G.L. c. 62C, § 37A and 830 CMR 62C.37A.1 satisfies the liability of the taxpayer and the liability of any responsible person or persons for the original assessment and for the responsible person assessment resulting there from.

(c) Notwithstanding the rules concerning satisfaction of liability as set out in 830 CMR 62C.31A.1, any satisfaction resulting from a settlement agreement is void if the settlement agreement is reopened based upon factors described in the Settlement of Tax Liabilities Regulation 830 CMR 62C.37A.1(5).

(14)Limitation Period for Collection of Taxes from a Responsible Person.

(a)Limitation Period for Collection of Taxes from an Original Assessment.

1.Effective January 1, 1988: taxes relating to an original assessment may be collected from a responsible person within ten years after an original assessment, before the expiration of any period of collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such ten-year period, or, if there is a release of levy under M.G.L. c. 62C, § 64 after such ten-year period, then before such release. If any question relative to the original assessment or the responsible person determination is pending before the Department of Revenue, the Appellate Tax Board, or any court at the end of the original ten-year period, the period will extend until one year after the final determination of the question. See M.G.L. c. 62C, § 65.

2.Effective January 1, 1999 and thereafter, for bankruptcy cases in which the taxpayer is the debtor under relevant chapters of Title 1 of the United States Code, the running of the period of limitations for the original assessment shall be suspended for the period during which the Commissioner is prohibited by reason of such case from collecting the tax, and for the period during which a plan for payment of the tax is in effect, and for six months thereafter.

3.Effective January 1, 2005 and thereafter, within an additional period if the original assessment remains unpaid, but only as to real or personal property of the taxpayer to which a tax lien has attached and for which notice of the lien has been filed or recorded under M.G.L. c. 62C, § 50.

(b)Limitation Period for Collection of Taxes from a Responsible Person Assessment. Effective December 8, 2005 and thereafter for responsible person assessments made on or after that date, in addition to the period for collection of taxes from the original assessment, supra, taxes from a responsible person assessment may be collected from a responsible person:

1. within ten years after a responsible person assessment modified as follows;

2. within any further period after such ten-year period during which the responsible person assessment remains unpaid but only against any real or personal property of the responsible person to which a tax lien has attached and for which notice of the lien has been filed or recorded under M.G.L. c. 62C, § 50 in favor of the commonwealth in accordance with applicable state and federal law within ten years after the responsible person assessment of the tax;

3. before the expiration of any period of collection agreed upon in writing by the Commissioner and the responsible person before the expiration of such ten-year period; 4. if there is a release of levy against the responsible person under M.G.L. c. 62C, § 64 after such ten-year period, then before such release; or

5. if any question relative to the responsible person assessment is pending before the Department of Revenue, the Appellate Tax Board, or any court at the end of the ten-year period, within one year after the final determination of the question. For bankruptcy cases in which the responsible person is a debtor under relevant chapters of Title 1 of the United States Code, the running of the period of limitations shall be suspended for the period during which the commissioner is prohibited by reason of such case from collecting the tax, and for the period during which a plan for payment of the tax is in effect, and for six months thereafter.

830 CMR, § 62C.31A.1

Amended by Mass Register Issue 1273, eff. 11/7/2014.

Amended by Mass Register Issue 1333, eff. 12/5/2016.