It’s tax season again, so it’s time to pay the piper. Despite your efforts to responsibly report and file your taxes with all the allowable deductions and/or adjustments, the Government will find a way to feed itself. The State of Connecticut found a way to do just that to a Contractor despite the State owing the Contractor on a judgment.
Following a successful arbitration, the State of Connecticut Department of Transportation owed to the Contractor a judgment of several million dollars. But, when the Contractor received payment of that judgment from the State, it was “short” by over one million dollars. Upon investigation, the Contractor learned that the State Comptroller had unilaterally reduced the judgment to cover the Contractor’s unpaid taxes. Such taxes were unrelated to the issues successfully arbitrated in the Contractor’s favor.
The Contractor valiantly argued the State could not reduce the judgment amount because the DOT failed to prove the taxes as a setoff or counterclaim during the arbitration. Indeed, the DOT alleged but did not put forth any evidence to prove the amount or that the taxes were overdue. Nevertheless, payment of the judgment triggered review by the Comptroller and State tax statutes authorized the withholding to pay the Contractor’s tax debt.
Paraphrasing an excerpt from Common Sense (1776) by Thomas Paine, government is like an octopus with too many arms and, when one arm fails, another rises to feed the beast.
Connecticut Department of Transportation v. White Oak Corporation, 332 Conn. 776 (Aug. 20, 2019).
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Jonathan J. Straw
Partner | KraftsonCaudle.com
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