Parent Company Liable for Subsidiary’s Penalties

The Internal Revenue Service can collect penalties from a parent company on a subsidiary’s unpaid taxes reported on Forms 941, Employer’s Quarterly Federal Tax Return, because the penalty liability is separate and distinct from the underlying tax liability, the U.S. Tax Court ruled May 2 (Solucorp Ltd. v. Commissioner).

EPS Environmental Inc. (EPS) failed to pay its tax liabilities reported on Forms 941 from Dec. 31, 2004, through June 30, 2009. After several IRS notices and a collection due process hearing, EPS applied for an offer-in-compromise, which IRS rejected and EPS appealed to the Tax Court. The Tax ...