United States v. Tax and Bankruptcy Attorney, PLC

U.S. District Court, District of Minnesota November 27, 2024

Trial Court Opinion

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
UNITED STATES OF AMERICA,
Civil No. 22-2928 (JRT/DLM)
Plaintiff,

v.
MEMORANDUM OPINION AND ORDER
TAX AND BANKRUPTCY ATTORNEY, PLC GRANTING SUMMARY JUDGMENT
and KENNETH KEATE,

Defendant.

LaQuita Taylor-Phillips, UNITED STATES DEPARTMENT OF JUSTICE, TAX
DIVISION, PO Box 7238, Ben Franklin Station, Washington, DC 20044, for
Plaintiff.

Kenneth E. Keate, TAX AND BANKRUPTCY ATTORNEY, PLC, PO Box 4065,
Saint Paul, MN 55104, for Defendant.

The United States filed this action to reduce to judgment various assessments
against Defendants Tax and Bankruptcy Attorney, PLC (“TAB”) and Kenneth Keate from
2011 to 2021 for unpaid taxes and civil penalty liabilities. The United States then moved
for summary judgment. Defendants failed to timely respond to the motion and still have
not done so. Because tax assessments are entitled to a legal presumption of correctness
and Defendants have not presented any evidence to create a genuine issue of material
fact, the Court will grant the United States’s motion.
BACKGROUND
I. FACTS
The United States initiated this action against Tax and Bankruptcy Attorney, PLC

(“TAB”) and Kenneth Keate. (Compl. ¶ 1, Nov. 17, 2022, Docket No. 1.) TAB is a limited
liability company established in Minnesota and Keate its sole owner and president. (Id.
¶¶ 6–7.) The United States claims that TAB incurred federal tax liability for failure to pay

employment and unemployment taxes, as well as a civil assessment for failure to timely
file Wage and Tax Statements (“W-2”). (Id. ¶¶ 9, 16, 23–24.) Keate faces claims for failure
to report some income and failure to pay income taxes and liability for TAB’s failure to
pay its trust fund taxes. (Id. ¶¶ 29–30, 37–40.)

A. TAB’s Federal Tax Liabilities
The IRS determined that TAB was liable for employment taxes and unemployment
taxes. TAB filed quarterly employment tax returns reporting that it owed taxes in sixteen
of the quarters ending between December 31, 2014, and December 31, 2020, but it did

not pay the taxes due. (Decl. of Michael Stepka (“Stepka Decl.”) ¶ 4, May 31, 2024, Docket
No. 32.) TAB also filed an unemployment tax return for the tax period ending December
31, 2018, but did not pay the taxes due. (Id. ¶ 11.) As of May 20, 2024, TAB’s overdue
balance of federal employment tax liabilities totals $73,456.06, and TAB’s outstanding

balance of federal unemployment tax liability totals $178.40 plus statutory interest and
additions that continue to accrue. (Id. ¶¶ 9–10, 15, Exs. 17, 19.)
TAB also incurred a civil penalty assessment under

26 U.S.C. § 6721

for failing to
timely file W-2 Statements with the IRS for the tax period ending December 31, 2015. (Id.

¶¶ 16–17.) As of May 20, 2024, TAB’s outstanding balance of civil penalty liability totals
$3,509.47 plus statutory interest and additions that continue to accrue. (Id. ¶ 19, Ex. 21.)
IRS timely noticed TAB of all assessments. (Id. ¶¶ 8, 14, 18.) The United States
supports each of TAB’s outstanding balances with IRS Certificates of Assessments,

Payments, and Other Specified Matters (“Forms 4340”). (Id. ¶¶ 7, 13, 18, Exs. 1–16, 18,
20.)
B. Keate’s Federal Tax Liabilities
Keate filed individual income tax returns for tax years 2010, 2011, 2013, 2016,

2017, and 2018 but did not pay the income taxes reflected on those returns. (Id. ¶ 20.)
Additionally, the IRS examined Keate’s tax forms in 2010 and 2011 and determined that
he had failed to report Schedule E, interest, and dividend income in both years. (Id.

¶¶ 21–22.) Keate was made aware via timely notices of these tax assessments. (Id. ¶ 25.)
As of May 20, 2024, Keate’s overdue balance of federal income tax liability totals
$51,354.32 plus statutory interest and additions that continue to accrue. (Id. ¶¶ 26–27,
Ex. 28.) The United States supported Keate’s tax liabilities with Forms 4340. (Id. ¶ 24, Ex.

22–27.)
C. Keate’s Trust-Fund Recovery Penalties Liabilities
TAB was required to withhold federal income and Federal Insurance Contributions
Act (“FICA”) taxes from the wages of its employees and pay those withholdings to the IRS
for eleven quarters between 2010 and 2017 but failed to do so. (Id. ¶ 28.) Keate admitted
he was responsible for collecting, accounting for, or paying federal income taxes and FICA

taxes withheld from wages of TAB’s employees. (Second Decl. of LaQuita Taylor-Phillips
(“Taylor-Phillips Decl.”) ¶¶ 2–3, Ex. 41 at Resp. 1, Ex. 42 at Resp. 28, May 31, 2024, Docket
Nos. 33-1, 33-2.) During the tax quarters at issue, Keate admitted knowledge of TAB’s
unpaid trust fund taxes but “directed, authorized, or otherwise caused to be paid” other

creditors of TAB ahead of the United States. (Id. ¶ 3, Ex. 42 at Resps. 35–36.) IRS timely
provided Keate with notices of all assessments. (Stepka Decl. ¶33.)
As of May 20, 2024, Keate’s overdue balance of TFRP assessments totals

$34,577.27 plus statutory interest and additions. (Id. ¶ 34–35, Ex. 40.) Both Forms 4340
and IRS Account Transcripts are used to support the United States’s TFRP assessments
against Keate. (Id. ¶¶ 30–32, Exs. 29–32, 33–39.)
II. PROCEDURAL HISTORY

The United States filed this action to reduce the numerous tax and civil liability
assessments to judgment. (Compl. ¶¶ 8–54.) Defendants filed a joint Answer on March
22, 2023. (Answer, Docket No. 12.) On May 31, 2024, the United States moved for
summary judgment on all counts. (Mot. Summ. J., Docket No. 30.) The Court granted a

Motion for Continuance to give Defendants until July 24, 2024, to respond to the United
States’s motion. (Order, July 2, 2024, Docket No. 37.) However, Defendants have still
failed to respond to the United States’s Motion for Summary Judgment, file an additional
motion for continuance, or otherwise participate in this matter, and the time to do so has
long since passed. The court will thus decide the matter without oral argument.1

DISCUSSION
I. STANDARD OF REVIEW
Summary judgment is appropriate when there are no genuine issues of material
fact, and the moving party can demonstrate that it is entitled to judgment as a matter of

law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and
a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a
verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248

 (1986).  
A court considering a motion for summary judgment must view the facts in the light most 

favorable to the nonmoving party and give that party the benefit of all reasonable 
inferences to be drawn from those facts.  Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 587

 (1986).  The nonmoving party may not rest on mere allegations or 
denials but must show, through the presentation of admissible evidence, that specific 

facts exist creating a genuine issue for trial.  Anderson,

477 U.S. at 256

 (discussing Fed. R. 
Civ. P. 56(e)).  “The mere existence of a scintilla of evidence in support of the plaintiff's 
position will be insufficient; there must be evidence on which the jury could reasonably 
find for the plaintiff.”

Id. at 252

.                                     




    1 See D. Minn. L.R. 7.1(g) (“If a party fails to timely file and serve a memorandum of law, 
the court may . . . consider the matter submitted without oral argument.”). 
II.  ANALYSIS                                                             
    The United States moved for summary judgment to reduce its assessments against 

TAB and Keate to judgment.  Federal tax assessments are entitled to a presumption of 
correctness.  United States v. Fior D’Italia, Inc.,

536 U.S. 238, 242

 (2002).  Forms 4340, IRS 
Account Transcripts, and IRS employee declarations are all sufficient avenues to establish 
the validity of tax assessments.  United States v. Gerads,

999 F.2d 1255, 1256

 (8th Cir. 

1993); McLaine v. Comm’r,

138 T.C. 228, 241

 (2012); United States v. Macpherson, No. 
18-0050,

2018 WL 3628905

, at *2 (D. Minn. July 9, 2018).  Once the presumption of 
correctness is established, the taxpayer has the burden of proving by a preponderance of 
evidence that the assessments are incorrect.  North Dakota State Univ. v. United States,

255 F.3d 599, 603

 (8th Cir. 2001) (citation omitted).  “If the taxpayer fails to present 
evidence of an arbitrary or erroneous determination of his or her tax burden, the United 
States is entitled to summary judgment.”  United States v. Neal,

255 F.R.D. 638, 643

 (W.D. 

Ark.  2008);  see  also  Long  v.  Comm'r,

757 F.2d 957, 959

  (8th  Cir.  1985)  (“[T]he 
Commissioner is entitled to the benefit of that presumption in moving for summary 
judgment, and the presumption will permit judgment in the Commissioner's favor unless 
the opposing party produces substantial evidence overcoming it.”) (internal citations 

omitted).  Because Defendants did not respond to the summary judgment with any 
evidence to refute the assessments’ presumption of correctness, summary judgment is 
appropriate.                                                              
    A.   Counts 1–4: TAB’s tax liabilities and Keate’s federal income tax 
    Counts  1–42  at  base  seek  to  reduce  tax  assessments  and  civil  penalties  to 

judgment.  In support of each assessment and penalty, the United States submitted to 
the Court the declaration of IRS Advisor Stepka along with copies of the IRS’s Forms 4340.  
Such  declarations  and  certificates  establish  a  presumption  of  correctness  of  the 
assessment and are sufficient to shift the evidentiary burden to the taxpayer.  See United 

States v. Novell, No. 6:14-3009,

2014 WL 5474592

, at *2 (W.D. Mo. Oct. 28, 2014), aff’d,

607 F. App’x 600

(8th Cir. 2015). Here, Defendants did not present any evidence that the
tax assessments or penalties were erroneous or arbitrarily determined.3 The United
States is thus entitled to summary judgment on Counts 1–4 in the respective amounts of

$73,456.06, $178.40, $3,509.47, and $51,354.32, plus statutory interest and additions
accruing after May 20, 2024.
B. Count 5: Keate’s liability for TFRP assessments
The United States’ fifth count seeks to reduce to judgment a trust-fund recovery

penalty assessment (“TFRP”) made against Keate. This Count is unique because it is TAB’s

2 Counts 1–4 include assessments for TAB’s employment tax (Count 1), TAB’s
unemployment tax (Count 2), TAB’s civil penalty (Count 3), and Keate’s federal income tax (Count
4). (Compl. ¶¶ 8–35.)
3 Defendants allege in their Motion for Continuance that it provided the United States
with copies of the missing W-2 Form and claims that the IRS “would forgive [the penalty] since
this is the only return I failed to file.” (Defs.’ Mot. Continuance at 2–3, June 28, 2024, Docket No.
36.) This allegation does not, however, dispute the validity of the assessment made against TAB
for failing to timely submit the W-2 Form.
responsibility, but Keate can be held liable as the responsible agent. Employers are
required to deduct and withhold federal income taxes and FICA taxes from employees’

wages. Westerman v. United States,

718 F.3d 743, 747

 (8th Cir. 2013).  Such withholdings 
are  considered  “trust  fund”  taxes  because  they  are  held  in  “trust”  for  the  federal 
government until paid to the IRS.

Id.

  The person responsible for collecting, truthfully 
accounting for, or paying over the trust fund taxes may be held personally liable to the 

IRS for “willful” underpayment of trust fund taxes.

Id.

  The term “willful” means a 
“voluntary, conscious, and intentional act, such as the payment of other creditors in 
preference to the United States.”

Id.

 at 748 (quoting Elmore v. United States,

843 F.2d 1128, 1132

 (8th Cir. 1988)).                                              
    Here,  Keate  admits  to  being  the  person  responsible  for  collecting,  truthfully 
accounting for, or paying over the trust fund taxes.  Keate also admits to directing, 
authorizing, or otherwise causing to be paid TAB’s other creditors ahead of the United 

States.  These admissions support a determination that Keate’s failure to pay the required 
trust fund taxes was willful.  Ferguson v. United States,

484 F.3d 1068, 1073

 (8th Cir. 2007).  
Further, TFRP assessments are ordinarily presumed to be correct.

Id. at 1077

.  Keate has 
not provided any evidence to refute that presumption or otherwise create a genuine issue 

of fact.  The United States is thus entitled to summary judgment on Count 5 for the 
amount of $34,577.27 plus statutory interest and additions accruing after May 20, 2024.  
                          CONCLUSION                                     
    The United States has provided sufficient evidence to support a presumption of 

correctness on its assessments against TAB and Keate.  Defendants failed to provide 
evidence sufficient to refute that presumption.  The Court thus finds that the United 
States has shown that it is entitled to summary judgment against TAB on Counts 1–3 in 
the total amount of $77,143.93 plus statutory interest and additions accruing after May 

20, 2024.  The United States has further shown that it is entitled to summary judgment 
against Keate on Counts 4–5 in the total amount of $85,931.59 plus statutory interest and 
additions accruing after May 20, 2024.

ORDER

    Based on the foregoing, and all the files, records, and proceedings herein, IT IS 
HEREBY ORDERED that                                                       
 1.  Plaintiff’s Motion for Summary Judgment [Docket No. 30] is GRANTED.   
 2.  Defendant Tax and Bankruptcy Attorney, PLC will pay the United States in the 

    amount of $77,143.93 plus statutory interest and additions accruing after May 20, 
    2024.                                                                
 3.  Defendant Kenneth Keate will pay the United States in the amount of $85,931.59 
    plus statutory interest and additions accruing after May 20, 2024.   

 4.  The United States must submit to the Court a proposed judgment with updated 
    calculations of accrued interest and additions within 28 days after entry of this 
    Order.                                                               
 LET JUDGMENT BE ENTERED ACCORDINGLY.                                    



DATED:  November 27, 2024            _____s/John R. Tunheim_____          
at Minneapolis, Minnesota.              JOHN R. TUNHEIM                   
                                    United States District Judge