OAH 8-2700-20979-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF REVENUE

In the Matter of the Denial of Cancellation Collection Costs of the Gopher Company, Inc.

FINDINGS OF FACT,

CONCLUSIONS AND

RECOMMENDATION

This matter came on for an evidentiary hearing before Administrative Law Judge Eric L. Lipman on January 6, 2010, at the Office of Administrative Hearings. Joan M. Tujetsch, Staff Attorney, appeared on behalf of the Minnesota Department of Revenue (Department). Jason L. Brouwer, as owner, appeared on behalf of the Respondent, The Gopher Company, Incorporated (the Company). The hearing record closed at the conclusion of the evidentiary hearing.

STATEMENT OF THE ISSUE

Whether any of the circumstances referenced in Minn. Stat. § 16D.11, subdivision 3 require cancellation of the collection costs sought to be recovered by the Minnesota Department of Revenue?

Based upon all of the proceedings herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1. The Gopher Company, Incorporated is a Minnesota corporation whose stock. The company’s sole shareholder is Jason Brouwer.[1]

2. The Company did not remit unemployment insurance taxes for the period including the first quarter of calendar year 2005 through the last quarter of 2008.[2]

3. By way of a letter dated May 18, 2009, the Minnesota Department of Employment and Economic Development (“DEED”) sent a “Notice of Intent to Refer Debt to the Department of Revenue Collection Division.” In the Notice, DEED asserted that:

Our records indicate that GOPHER COMPANY INC, THE owes $321,084.54 to the Minnesota Department of Employment and Economic Development (DEED). This is debt owed on your unemployment insurance account and does not include debt previously referred to [Department of Revenue Collection Division].

Of this debt amount, $316,041.54 is past due and will be referred to DORCD. To avoid referral to DORCD, this amount must be paid in full and received by DEED on or before 06/15/2009.[3]

4. On or about June 10, 2009, Mr. Brouwer telephoned the Department of Revenue Collection Division to inquire about the possibility of arranging a payment plan to reduce the debt. Ms. Frederickson, an official with the Department of Revenue asked Ms. Brouwer to send a copy of the notice to her by facsimile, as the matter had not yet been referred to the Department of Revenue Collection Division from DEED.[4]

5. Neither Mr. Brouwer nor the Company made full payment of the debt amount to DEED by June 15, 2009.[5]

6. When the unpaid debt was referred by DEED to the Department of Revenue Collection Division, the Collection Division added to the debt amount the 17 percent collection cost surcharge as directed by Minn. Stat. § 16D.11.[6]

7. Mr. Brouwer, on behalf of the company, objected to the imposition of collection costs and requested that the Minnesota Department of Revenue waive those costs.[7]

8. By way of a letter dated July 28, 2009, the Minnesota Department of Revenue Collections Division denied the request to cancel the imposition of collection costs.[8]

9. Mr. Brouwer, on behalf of the company, filed a timely appeal of the July 28, 2009 determination.[9]

10. As of December 12, 2009, the amount of collection costs was $59,872.94.[10]

Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:

CONCLUSIONS

1. The Administrative Law Judge and the Commissioner of Revenue have jurisdiction in this matter pursuant to Minn. Stat. §§ 14.50 and 16D.11, subdivision 4.

2. The Department has given proper notice of the hearing in this matter and has fulfilled all relevant procedural requirements of law and rule.

3. The Department has the authority to impose collection costs, as set forth in Minn. Stat. § 16D.11, subdivisions 1 and 2.

4. The Respondent failed to timely remit $316,041.54 in unemployment insurance taxes.

5. The Respondent failed to remit the total amount of overdue unemployment insurance taxes, as demanded by the Department of Employment and Economic Development. Having failed to respond to this demand with full payment, the debt was properly referred to the Department of Revenue Collection Division and the imposition of collection costs imposed under Minn. Stat. § 16D.11 in accordance with the statutory requirements.

6. Minnesota Statutes § 16D.11, subdivision 3, provides for cancellation of collection costs in the following circumstances:

(1) the debtor’s household income as defined in section 290A.03, subdivision 5 excluding the exemption subtractions in subdivision 3, paragraph (3) of that section, for the 12 months preceding the date of referral is less than twice the annual federal poverty guideline under United States Code, title 42, section 9902, subsection (2);

(2) within 60 days after the first contact with the debtor by the enterprise or collection agency, the debtor establishes reasonable cause for the failure to pay the debt prior to referral of the debt to the enterprise;

(3) a good faith dispute as to the legitimacy or the amount of the debt is made, and payment is remitted or a payment agreement is entered into within 30 days after resolution of the dispute;

(4) good faith litigation occurs and the debtor’s position is substantially justified, and if the debtor does not totally prevail, the debt is paid or a payment agreement is entered into within 30 days after the judgment becomes final and nonappealable; or

(5) collection costs have been added by the referring agency and are included in the amount of the referred debt.

7. Respondent The Gopher Company, Incorporated did not establish that any of the exceptions set forth in Minn. Stat. § 16D.11, subdivision 3 is applicable in this instance.

8. Department may proceed with collection of the fee through Revenue Recapture or any available means of civil debt collection.

Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMEDATION

The Administrative Law Judge recommends that the Commissioner AFFIRM the imposition of collection costs in this matter.

Dated: January 25, 2010

_ /s/ Eric L. Lipman_ _ _ _ _ _ _ _ _ _ _ _ _

ERIC L. LIPMAN

Administrative Law Judge

Reported: Digital Recording

No transcript prepared

NOTICE

This report is a recommendation, not a final decision. The Commissioner of the Minnesota Department of Commerce will make the final decision after a review of the record. The Commissioner may adopt, reject or modify the Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the final decision of the Commissioner shall not be made until this Report has been made available to the parties to the proceeding for at least ten days. An opportunity must be afforded to each party adversely affected by this Report to file exceptions and present argument to the Commissioner. Parties should contact Ward Einess, Commissioner, Minnesota Department of Revenue, 600 North Robert St., St. Paul, MN 55146 to learn about the procedure for filing exceptions or presenting argument.

If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.

Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.

MEMORANDUM

The Company asserts that the recovery of the collection costs authorized by Minn. Stat. § 16D.11 is inappropriate because an attempt was made to negotiate a settlement of the claim before June 15, 2009 and the “Notice of Intent to Refer Debt to the Department of Revenue Collection Division” was ambiguously worded.[11] Neither argument is availing.

Under the terms of the Notice a full payment was to be received by DEED on or before June 15, 2009, in order to avoid a referral of the debt to the Department of Revenue,[12] and, under the statute, the addition of collection costs. As noted above, full payment of the overdue amounts was not received by DEED before June 15, 2009. Under these circumstances, both the referral and the addition of collection costs were proper.

The phrasing and layout of the Notice does not change this result. First, the exceptions set forth Minn. Stat. § 16D.11 do not include a debtor’s right to avoid the imposition of collection costs on the grounds that the Notice of Intent to Refer was unclear or ambiguous. Second, the agency to which inquiries should be directed to before June 15, 2009 – namely, DEED – was apparent from the face of the Notice. Lastly, even if there were genuine doubt as to the meaning of the Notice, that doubt should have evaporated when, before the expiration of the June 15 deadline, Mr. Brouwer was advised by an official of the Department of Revenue Collections that the matter had not yet been referred to that agency.[13] A reasonably diligent person would not have let the June 15 deadline expire without continuing the inquiry and contacting the only other agency referenced in the Notice – the Department of Employment and Economic Development.

For these reasons, the Commissioner should affirm the imposition of the collection costs.

E. L. L.

[1] See, Testimony of Jason Brouwer; Exhibits C and 2.

[5] See, Testimony of William Schmidt; Exs. C and 2.

[13] Test. of J. Brouwer; Test. of W. Schmidt.