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Some Copley Retirees May -- Repeat, MAY -- Get Refunds

In 2006, Copley Newspapers offered an early retirement package to a group of veteran employees. The company warned that if enough people didn't take the offer, there would be layoffs. A sufficient number took the deal. They got 25% of their severance pay in December of 2006 and 75% in January of 2007. Now these former employees have received notice from Copley that they may be able to claim a refund for an overpayment of Social Security and Medicare taxes. This is based on a legal decision in Quality Stores vs. United States earlier this year. The gist was that severance payments made by employers to employees in an involuntary layoff are not subject to Social Security and Medicare taxation. In a letter to the retirees, Copley warns that a final resolution of the Quality Stores case may take several years. The law firm that won the case also warns that the Internal Revenue Service may appeal, and even if the IRS lost, the case would be a precedent in only a few states (not including California). However, under certain circumstances, the Quality Stores case could become a national precedent.

It's probably a longshot, but Copley is at least giving it a try. Copley sold the Union-Tribune in 2009, but the corporate structure still exists to dispose of real estate and take care of legal matters, such as the Quality Stores case.

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In 2006, Copley Newspapers offered an early retirement package to a group of veteran employees. The company warned that if enough people didn't take the offer, there would be layoffs. A sufficient number took the deal. They got 25% of their severance pay in December of 2006 and 75% in January of 2007. Now these former employees have received notice from Copley that they may be able to claim a refund for an overpayment of Social Security and Medicare taxes. This is based on a legal decision in Quality Stores vs. United States earlier this year. The gist was that severance payments made by employers to employees in an involuntary layoff are not subject to Social Security and Medicare taxation. In a letter to the retirees, Copley warns that a final resolution of the Quality Stores case may take several years. The law firm that won the case also warns that the Internal Revenue Service may appeal, and even if the IRS lost, the case would be a precedent in only a few states (not including California). However, under certain circumstances, the Quality Stores case could become a national precedent.

It's probably a longshot, but Copley is at least giving it a try. Copley sold the Union-Tribune in 2009, but the corporate structure still exists to dispose of real estate and take care of legal matters, such as the Quality Stores case.

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Comments
29

If Copley pursues this on behalf of its former employees, won't that be a nice fat fee spread over a number of years for a law firm? And even if they do not prevail, the firm will still get paid plenty. So, at least some lawyers will get something out of Copley, regardless of what happens to the former employees.

April 18, 2011

Possibly a law firm will clean up, but I doubt it. The way I read the information, the IRS will probably bring an appeal, and if it loses, the case becomes a precedent in only a few states (not including California). A number of things would have to happen for the precedent to spread across the country. I don't know how much Copley-paid lawyers would have to be involved. Best, Don Bauder

April 18, 2011

Social Security and Medicare taxes are both prorgams, schemes covered by federal laws, if the IRS issue is decided it would apply in all states. Correct me if you think there is a reason it would be limited in application.

Pay the taxes, if the case settles in favor of the tax relief you file an amended return. You pay upfront, that way if the decision goes against you the penalties are not added on.

April 18, 2011

If you google "quality stores vs. united states" + "pepper hamilton" you will come up with the discussion by Pepper Hamilton, the law firm that won the Quality Stores case. It explains how even if the IRS lost an appeal, the case would only be a precedent in a small group of states. Then it explains the number of things that would have to happen to make the case a precedent throughout the U.S. Best, Don Bauder

April 19, 2011

http://www.pepperlaw.com/publications_update.aspx?ArticleKey=1740

"The IRS may appeal Quality Stores to the Sixth Circuit Court of Appeals. If the decision were to be affirmed by the Sixth Circuit, it would then be precedential only in Kentucky, Ohio, Michigan, and Tennessee – the geographical boundaries of the Sixth Circuit" "Taxpayers whose refund claims were rejected would need to file lawsuits, and only when a case reached a circuit court and a circuit court made a favorable decision would the case become precedent in that circuit."

April 19, 2011

That's from the Pepper Hamilton site. That was the law firm that won the suit. Best, Don Bauder

April 19, 2011

So for the other 12 Circuits there would need to be an action filed in a local district court and then if they lost appealed to the court of appeals, and then cite the 6th Ruling (if it goes there and wins) before the 6th ruling can be applied in that specific circuit-if I read that right.

If the IRS appeals to the 6th Circuit the case might end up in front of one of my old Professors, 6th Circuit Judge McKeague.

April 19, 2011

Yeah, but you only have have 3 years from the date of your return or 2 years from the date you paid the tax, whichever is later, to file an amended tax return.Otherwise, you have to protective claim while a court case regarding the same issue is pending and I think it has to be a case in your district, but I'm not sure about that. So any UT emplyees who received payments that this case MAY apply to, are already out of luck. In order to preserve their claim, they would have had to file their protctive claims no later than April of 15th of 2010 and yesterday, respectively, unless they filed their return but haven't made a payment if taxes were due.

April 19, 2011

If the ex-employees are already out of luck, I wonder why Copley sent them the letter. My guess is that Copley lawyers researched the case and thought there was at least an outside chance. Best, Don Bauder

April 19, 2011

Again, it sounds like a longshot to me. Best, Don Bauder

April 19, 2011

I think no shot, actually, Apparently, too little, too late, as it were.

April 19, 2011

Same response: I would guess there is a chance, however slim, or Copley would not have sent the letter. Best, Don Bauder

April 19, 2011

I just reread the Pepper Hamilton publication and I was accurate in my interpretation. Their publication is dated March of LAST year and the United States v. Quality Stores, Inc. (In re Quality Stores, Inc.) decision was renderd last February. This is where I am confused. In your story you say "This is based on a legal decision in Quality Stores vs. United States earlier this year." So I guess the questions I have would be have you actually read this letter or did you get your information on it second hand, when did Copley actually send out this letter and if it was just sent recently, why did they wait so long to send it out, did someone misinform you of the Quality Stores case decision or was that just a typo, was there any mention by Copley of any other pending court case regarding the same issue is this or did they even bother to mention that those employees who recived these early retirement packages might want to consult an attorney. Because this decision was over a year ago, if Copley only recently, as in the past few days, informed the recipients of the retirement packages, I would have to say that unless they notified them of another ongoing lawsuit that is prtinent, then the chances are slim and none theat any of these people had the opportunity to get a lawyer,file a lawsuit and then file for a protective claim with the IRS.

April 19, 2011

"That's from the Pepper Hamilton site" Yeah, I think pepperlaw.com was a dead giveaway.lol

April 19, 2011

It was to me, since I had already read it. Best, Don Bauder

April 19, 2011

If Copley lawyers thought that controlling the respiratory rates of the 7 billion people on this planet would give them a more advantageous legal position, they would certainly give it a try.

April 20, 2011

Remember, there is very little left of Copley Newspapers. It owns some real estate it is trying to sell, as I have recounted in previous columns and blog posts. It has to take care of legal matters, such as this one. Otherwise, there isn't much going on. Best, Don Bauder

April 20, 2011

Have ANY of the LA Jolla properties sold?

April 24, 2011

hi Don, What's the latest on layoffs at the U-T? I heard there were several within the last week or so, in addition to some salary slashing (but no pay cuts for editors or management, of course!)

April 22, 2011

From what I hear, a couple of reporters/writers were laid off, and some part-timers who pinch-hit for editorial personnel won't be getting more work. The color lab and composing room employees are getting the axe, as I understand it. I don't know how many people this involves. Best, Don Bauder

April 24, 2011

Don, any names of those laid off?

April 24, 2011

I know them but I hesitate to post them without speaking to the people. Best, Don Bauder

April 24, 2011

Don, In Diane Bell's UT column on 4/23/11, she wrote that Bob Kittle is no longer working for KUSI-TV. He said he quit to write a book. What's the real reason?

April 24, 2011

I have not heard that Kittle left KUSI-TV. News to me. Best, Don Bauder

April 24, 2011

Don, have you been able to ascertain when it was that Copley sent this letter to retirees? Was it recently or was it some time ago? Have you been able to read what it says for yourself? What information did Copley provide to these retirees? Are they actually interested in helping them or are they just trying to cover their asses? We need more details. Inquiring minds want to know.

April 24, 2011

I have a copy of the document. It was sent by Copley. I read it. I also read online information about the court case. I dislike saying this, but it is not like Copley to voluntarily try to help ex-employees. I don't think the company (what's left of it) is overtly covering its hind end. I just think it feels there is a very outside chance that the ruling could become precedent, so it wants to alert those who might be eligible. But as I read up on the case, I realized it was a longshot -- very long. Best, Don Bauder

April 24, 2011

What is the date of this letter? Since the decision was rendered by the court over a year ago, I'm curious how long it took to inform the retirees.

April 25, 2011

The letter is dated April 14, 2011. I posted the item four days later. Best, Don Bauder

April 26, 2011

Ok,it's as I suspected. The court decision was handed down in Feb of last year and April 14th to send out the letter. That means the employees who received severance pay in Dec of 2006 are out of luck. The had until April 15, 2010 before the 2006 statute of limitations closed to file a protective claim. The employees who received their severance in 2007 had until the past April 18th, so unless they were to hire a lawyer, find an ongoing relevant case that the IRS would accept as a contingency affecting the claim and file a protective claim all by close of business in the 18th, then they are out of luck too. It might be possible, but unless Copley specifically laid out what they needed to to do, I doubt most of them would know. It seems to me, based on the information provided that they too, are out of luck.

April 26, 2011

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