Latest News 2012 September Tech Firm Files Bankruptcy, Plans to Avoid IRS and State Dept of Revenue

Tech Firm Files Bankruptcy, Plans to Avoid IRS and State Dept of Revenue

Amidst pressure from creditors, namely the IRS and the Minnesota Department of Revenue, Duluth-based technology firm, 50 Below Sales & Marketing, has filed for Chapter 11 bankruptcy protection, as reported by the Duluth News Tribune.

50 Below is one of Duluth's largest tech employers.

The filing listed approximately $12 million in debt to 20 creditors. The largest creditor, the IRS, is allegedly owed $8.8 million in unpaid payroll taxes. The Minnesota Department of Revenue is owed approximately $1 million in taxes as well. And one other government agency listed in the bankruptcy, the Minnesota Unemployment Insurance Program, is owed almost $500,000 for unemployment insurance.

Hosting over 100,000 websites and e-commerce stores, according to the company's website, 50 Below designs and develops large website applications and marketing for its corporate clientele.

Mike McGrath, the bankruptcy attorney for 50 Below, said, "The taxing authorities haven't agreed to let us pay the tax debt over a five-year period. The bankruptcy code specifically gives a Chapter 11 debtor the right to pay taxes over five years from the date of filing. We don't need government consent to a five-year plan. We've never had the government agree to a five-year plan, and now we have the statutory right to pay our taxes over five years."

McGrath has claimed that the company will not lay off any of their 250 staffers. He also said that the company made $800,000 in the first part of 2012 – making it profitable.

McGrath added, "If anything, we'll continue to grow. This will remain a good employer in Duluth. The company is way better off operating under Chapter 11 bankruptcy protection than we were the day before we filed. We're in a position to pay the taxes. We'll be paying substantial tax debt out of profits…"

50 Below's CEO, David Hogge, said, "The leadership and staff have performed an incredible job. With this behind us we can focus on our customers, partners and employees."

The company has had trouble meeting its tax bill with the IRS and the state for over a decade.

In 2006 the state Department of Revenue filed a lawsuit in regards to a $3.7 million tab for unemployment taxes. That case was settled by a court order in 2007.

The Justice Department filed a suit in 2010 for unpaid employment taxes and late filings. 50 Below fought the claims made against them, stating that they had complied with the order and the taxes had been paid.

On August 15 of this year 50 Below told the courts that the IRS "has told Fifty Below that it intends to put it out of business by seizing its assets. The IRS has begun levying on the Company's accounts, which means that Fifty Below does not have the funds to pay its taxes."

On August 23 the court heard from the Department of Justice that 50 Below had not complied. Before the judge could make a ruling, the company had filed for bankruptcy protection.

Contact a bankruptcy lawyer for all issues related to filing a business or personal bankruptcy. Only a bankruptcy lawyer will know how to protect you and your assets during the process of bankruptcy.