Allen Grading Co., the contracting company owned by Mayor Chuck Allen, owes more than $800,000 in federal taxes, according to tax liens filed against the company.
Documentation Allen provided shows he has been making Internal Revenue Service payments, which he claims are against the debt his company owes.
A tax lien is the government’s legal claim to an individual or businesses property when that entity fails to pay taxes. It can result in the government seizing and selling property in order to make up for the unpaid taxes.
The liens, posted to the N.C. Secretary of State’s website, show 12 instances of unpaid taxes reaching back to early 2013, totaling $852,883.30, including fees and penalties imposed by the IRS. Ten of those missed payments fall under tax form 941 — federal payroll tax.
Payroll taxes, which constitute $845,540.44 of the total lien amount, are those that employees pay when an employer takes deductions from their gross pay. According to the Congressional Budget Office, while employers technically pay an equal share of payroll taxes to what is taken from employees’ paychecks, the tax burden is generally passed on to the employees in the form of lower wages.
One payment, for the tax period ending on Dec. 31, 2013, fell under tax form 940, which covers a company’s annual Federal Unemployment Tax Act obligation. That tax is combined with state unemployment taxes to provide compensation to workers who lose their jobs. Most employers pay both state and federal unemployment tax, though the lien against Allen Grading Co. only covers federal taxes. The lien holds the company accountable for $6,849.65 in FUTA taxes.
Finally, the company owes $448.21 in corporate income taxes, which fall under tax form 1120. That missed payment took place at the end of 2014, for the quarter ending on Dec. 31 of that year.
Allen said that the missed payments began in 2012 and 2013 when the Allen Grading Co. had a series of jobs go poorly.
“It stems from a couple of large jobs that we had where we lost a significant amount of money, and that was the start of our cash flow crunch,” he said. “Then we had Hurricane Matthew come along, and that didn’t help us any because we had significant rework, loss reduction, all of that stuff. So that didn’t play in our favor either.”
The two lien documents were filed several months apart. The first document, filed in January, constitutes the bulk of what the Allen Grading Co. owes, $773,879.76, for unpaid payroll, corporate income and unemployment taxes dating back to March 2013.
The largest of the missed payments came in the quarter ending March 31, 2017. According to the lien document, the Allen Grading Co. owes $277,547.57 for that quarter alone.
The second lien document was filed in August. It covers two missed payments, one in September 2017 and another in March. Together, the two add up to $78,958.64.
Allen provided the News-Argus with documentation, including a certified check to the IRS, two electronic fund confirmation emails and another IRS payment document, showing that Allen Grading Co. paid the IRS $485,699.81 between Dec. 31, 2016, and the first quarter of 2018, which ended March 31.
Allen said he has hired a tax attorney in Raleigh to help deal with the remaining balance on the liens.
Allen said, as a construction contractor, Allen Grading Co. goes through cycles depending on when work becomes available.
“We’re a very, very cash-intense, capital-intense business, and it’s obviously like the cash is going out faster than it’s coming in,” Allen said.
That led to debt, he said, which is what caused the missed payments.
“It’s something I’ve been working on for a couple of years,” Allen said. “We have too much debt and not enough income.
“We’re working through that. I’ve sold property, done all sorts of things over the last few years to try to reduce my debt.”
The company is busy nowadays, he said, which he hopes will allow Allen Grading Co. to have the lien payed up by the start of 2019.
“Business is crazy now,” Allen said. “We’re going back into our element. Cash is our biggest problem, having enough cash every week. I’ve been up and down before. It’s not the first time, and I’ve worked through it.”
Allen Grading Co. is back to being profitable right now, he said. The company also has “significant assets,” which it can use to pay off debt as well, he said.
“I’ve disposed of what I can, when I can, to help with the cash flow,” he said. “So we’re headed in the right direction.”
Allen said the company’s employees have not been told about the liens, but that the company has not fallen behind on payroll. He said that Allen Grading Co. is hiring more people now that business is picking up again.
Despite being optimistic about taking care of the debt, Allen said that the lien did not look good for him or Allen Grading Co. He said that the most recent missed payment, in March, will be the last one.
“Whether I’m mayor or not mayor, the lien is a huge, huge black eye on my company,”Allen said. “It’s a huge black eye on me personally. “It’s something I take full responsibility for, but I’m also certainly embarrassed about it. It’s certainly a big goal of mine to get this thing removed.”