State Tax Assessment of $8 Million Withdrawn

• Client: Chapter 7 Bankruptcy Trustee
• Date: January 2009
• Location: New York

Summary:

In 2006, Schiff Hardin was hired by a telecommunications company to work on several state tax controversies, including a 2004 State of New York audit. In February 2007, the company filed for bankruptcy, and the Chapter 7 trustee retained Schiff Hardin as special tax counsel.

State and local taxes on telecommunication services are complicated and different in every state. They include sales and use tax, franchise tax, utility gross receipts tax, metropolitan area surcharges on franchise and gross receipts taxes, and numerous regulatory fees. In 2008, New York's total assessments against the company reached more than $8 million; the state claimed that most of its assessments were tax priority claims against the company's bankruptcy estate.

In October 2008, our attorneys filed, on behalf of the telecommunications company, various protests and appeals in New York state administrative forum. At the same time, we drafted a comprehensive brief for the bankruptcy judge, objecting to New York's claims and arguing that its assessments were meritless under its own tax law and unsupported by the facts.

In January 2009, before New York's response to the objection brief was due, the state informed our attorneys that it would withdraw all claims and assessments against the company.

New York's withdrawal of all its assessments and claims ended a five year battle between the company and the state, saving the bankruptcy estate millions of dollars. This favorable resolution reflects Schiff Hardin's expertise in state and local tax matters, especially in New York.