Complaint for Refund of Federal Employment Taxes and Employee Retention Credits — Coleman Environmental Engineering, Inc. v. United States of America (Dkt. 1, C.D. Cal.)

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A complaint for refund of federal employment taxes and employee retention credits filed October 5, 2026 as Document 1 in Case 8:26-cv-02922 in the U.S. District Court for the Central District of California, Southern Division, by Coleman Environmental Engineering, Inc. against the United States under 26 U.S.C. § 7422. The company seeks $2,243,694.79 in refundable employee retention credit for the third quarter of 2021, plus statutory interest, claimed on a Form 941-X for qualified wages of $3,205,278.27. It relies on the pathway for employers whose operations were partially suspended by governmental orders due to COVID-19, citing California workplace-safety orders. It states that the IRS disallowed the claim in a Letter 105C dated October 7, 2024.

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Case 8:26-cv-02922     Document 1     Filed 10/05/26    Page 1 of 10 Page ID #:1




 1   Samuel D. Brotman (CA Bar No. 274966)
     sbrotman@sambrotman.com
 2   BROTMAN LAW
     12636 High Bluff Drive, Suite 300
 3   San Diego, California 92130
     Telephone: (619) 378-3138
 4
 5   Attorneys for Plaintiff
     Coleman Environmental Engineering, Inc.
 6
 7
 8                      UNITED STATES DISTRICT COURT
 9                    CENTRAL DISTRICT OF CALIFORNIA
10                              SOUTHERN DIVISION
11
     COLEMAN ENVIRONMENTAL                                    8:26-cv-02922
12   ENGINEERING, INC., a California             Case No. ____________________
13   corporation,

14   Plaintiff,                                  COMPLAINT FOR REFUND
15   v.                                          OF FEDERAL EMPLOYMENT
16                                               TAXES AND EMPLOYEE
     UNITED STATES OF AMERICA,
17                                               RETENTION CREDITS
     Defendant.
18
19                                               (26 U.S.C. § 7422; 28 U.S.C. §
20                                               1346(a)(1))
21
22         Plaintiff Coleman Environmental Engineering, Inc. ("CEE"), by and
23   through its undersigned counsel, alleges as follows:
24                            NATURE OF THE ACTION
25         1. This Court has jurisdiction over this tax refund action under 28 U.S.C. §
26   1346(a)(1). This is an action for refund of federal employment taxes and the
27   refundable Employee Retention Credit (“ERC”) for the third calendar quarter of
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922     Document 1      Filed 10/05/26    Page 2 of 10 Page ID #:2




 1   2021. CEE seeks $2,243,694.79 in refundable ERC, plus statutory interest and
 2   such other amounts as are established by the administrative refund claim and
 3   proof. The claimed ERC is a statutory refundable credit based on qualified wages
 4   and is not limited to the amount of employment-tax deposits reflected on the
 5   original quarterly Form 941.
 6         2. CEE does not base this claim on a decline in gross receipts. CEE relies
 7   on the separate statutory pathway for an employer whose trade or business
 8   operations were fully or partially suspended because of governmental orders
 9   limiting commerce, travel, or group meetings due to COVID-19. During the third
10   quarter of 2021, binding California workplace-safety orders, enforceable by
11   citation, civil penalty, and an order prohibiting the operation, required CEE to
12   keep its field crews in separate groups in its vehicles and in its employer-provided
13   housing, and to maintain the written COVID-19 Prevention Program under which
14   CEE had stopped transporting its crews together and stopped lodging its crews
15   together. The orders prevented CEE from performing field work in the normal
16   course that depended on moving and housing crews together, and CEE will
17   establish the specific affected work, including field work that could not be
18   performed or that CEE declined or delayed, through CEE's records, dispatch and
19   payroll records, prime-contractor records, and the testimony of employees and
20   managers who worked in the field during the quarter.
21         3. CEE performed environmental, vegetation-management, inspection,
22   construction-support, and utility-field services. Its work required employees to
23   travel to and among field locations, work in crews, coordinate at jobsites, use
24   employer-arranged vehicles, and, for distant assignments, use employer-arranged
25   lodging. Those core field functions could not be performed remotely in a
26   comparable manner.
27
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922     Document 1     Filed 10/05/26   Page 3 of 10 Page ID #:3




 1         4. These binding requirements stopped two operations of CEE's field
 2   business outright. First, CEE stopped transporting its field crews together in
 3   shared vehicles, and its field employees instead drove alone. Second, CEE
 4   stopped lodging its field employees together in shared rooms, and its field
 5   employees instead were lodged singly. Transporting and housing crews together
 6   was how CEE moved and staffed its field workforce for distant and multi-site
 7   assignments, and neither operation could be performed during the covered period.
 8         5. CEE remained in operation as an essential or infrastructure-related
 9   business. Continued operation did not eliminate a partial suspension, because
10   binding governmental requirements restricted a more-than-nominal portion of
11   CEE's field business and had a more-than-nominal effect on its ability to provide
12   services in the normal course.
13                                      PARTIES
14         6. Plaintiff Coleman Environmental Engineering, Inc. is a California
15   corporation, California Secretary of State Entity No. 3873316, organized
16   February 8, 2016. When this action was filed, CEE's principal place of business
17   was in Anaheim, Orange County, California, at 2331 West Lincoln Avenue, Main
18   Suite, Anaheim, California 92801, where CEE's officers direct, control, and
19   coordinate its business. CEE moved its principal place of business from Upper
20   Lake, California to Anaheim in October 2023. The facts establishing CEE's
21   Anaheim principal place of business are set out in the concurrently filed
22   Declaration of Jacob L. Morrow. During the quarter at issue, CEE employed
23   workers and conducted substantial field operations throughout California.
24         7. The taxpayer name appearing on the Form 941-X is Coleman
25   Environmental Engineering, Inc. The taxpayer identification number ends in
26   6282. The address appearing on the Form 941-X is 101 W. Main Street, Suite 101,
27   Norfolk, Virginia 23510.
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922      Document 1      Filed 10/05/26    Page 4 of 10 Page ID #:4




 1         8. Defendant is the United States of America.
 2                  JURISDICTION, VENUE, AND TIMELINESS
 3         9. This Court has jurisdiction under 28 U.S.C. § 1346(a)(1). CEE satisfied
 4   the administrative-claim requirement of 26 U.S.C. § 7422(a) by filing a Form 941-
 5   X for the third quarter of 2021. Venue is proper in this District and in the Southern
 6   Division under 28 U.S.C. §§ 1402(a)(2) and 84(c) because, when this action was
 7   filed, CEE's principal place of business was in Anaheim, Orange County,
 8   California, as alleged in paragraph 6.
 9         10. CEE signed the Form 941-X for the third quarter of 2021 on April 4,
10   2023. The paid preparer, Michelle Abel of Premier Small Business Services, Inc.,
11   transmitted the Form 941-X to the Internal Revenue Service by certified mail on
12   CEE's behalf. The IRS's Letter 105C for the third quarter of 2021 records April
13   10, 2023 as the date the refund claim was received. More than six months elapsed
14   after filing of the claim before commencement of this action.
15         11. For the third quarter of 2021, the IRS issued a Letter 105C dated
16   October 7, 2024, sent by certified mail, disallowing CEE's claim of $2,243,694.79
17   for the tax period ending September 30, 2021. The Letter 105C states that the
18   claim was received April 10, 2023. It bears certified-mail article number
19   9307110756202930019584 and was addressed to CEE at P.O. Box 665108,
20   Dallas, Texas 75266-5108. It states that the IRS disallowed the claim because it
21   concluded that no governmental orders fully or partially suspended CEE's trade
22   or business and that CEE did not satisfy the gross-receipts test. CEE contests the
23   governmental-order determination and relies on the partial-suspension ground
24   presented in its administrative claim. This action is commenced within the two-
25   year period prescribed by 26 U.S.C. § 6532(a)(1).
26                       ADMINISTRATIVE REFUND CLAIM
27
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922     Document 1     Filed 10/05/26    Page 5 of 10 Page ID #:5




 1         12. On April 4, 2023, CEE, through its then-Chief Executive Officer Lee
 2   Weisenberg, signed the Form 941-X for the third quarter of 2021. Michelle Abel
 3   of Premier Small Business Services, Inc. was identified on the Form 941-X as the
 4   paid preparer.
 5         13. The Form 941-X asserted that CEE had been partially suspended
 6   through the third quarter of 2021 because government mandates required
 7   employees to distance in performing CEE's work, identifying operational
 8   consequences including employees driving separately and altered lodging
 9   arrangements. CEE's judicial claim rests on that same governmental-order and
10   partial-suspension ground.
11         14. The Form 941-X for the third quarter of 2021 claimed qualified wages
12   of $3,205,278.27 and an ERC of $2,243,694.79.
13         15. A true and correct copy of CEE's Form 941-X for the third quarter of
14   2021 is attached as Exhibit A and incorporated by reference.
15         16. A true and correct copy of the IRS Letter 105C dated October 7, 2024
16   for the third quarter of 2021, together with the related IRS correspondence and
17   certified-mail imaging presently available to CEE, is attached as Exhibit B and
18   incorporated by reference.
19                         TAX REFUND INFORMATION
20         17. The tax period for which a refund is sought is the third calendar quarter
21   of 2021.
22         18. CEE made federal employment-tax deposits with respect to wages paid
23   during the quarter through the Electronic Federal Tax Payment System. Those
24   deposits are the underlying employment-tax payments reflected in CEE's payroll-
25   tax records; they are not the measure or ceiling of CEE's ERC claim. The
26   refundable amount of the ERC that exceeds the employment taxes otherwise due
27   for the quarter is treated as an overpayment under 26 U.S.C. §§ 6402 and
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922     Document 1      Filed 10/05/26    Page 6 of 10 Page ID #:6




 1   3134(b)(3) and is refundable as an overpayment. CEE's retained Form 941 and
 2   Schedule B for the third quarter of 2021 reflect underlying federal employment-
 3   tax deposits of $1,531,498.68.
 4         19. For purposes of the refund-limitation rules, 26 U.S.C. § 6513(c) treats
 5   employment taxes with respect to remuneration paid during 2021 that were paid
 6   before April 15, 2022 as paid on April 15, 2022, and treats a qualifying quarterly
 7   employment-tax return filed before that date as filed on April 15, 2022.
 8         20. CEE filed its refund claim in April 2023 by certified mail through
 9   Michelle Abel of Premier Small Business Services, Inc. The Letter 105C confirms
10   the IRS received the claim on April 10, 2023.
11     GOVERNMENTAL RESTRICTIONS AND PARTIAL SUSPENSION
12         21. Beginning before 2021, Title 8, California Code of Regulations §§
13   3205, 3205.3, and 3205.4, the COVID-19 Prevention Emergency Temporary
14   Standards, were binding workplace rules applicable to covered California
15   employers, enforced by the California Division of Occupational Safety and
16   Health. Through June 16, 2021, those rules required, among other things, that
17   employees generally be separated by at least six feet, that a vehicle operator and
18   passengers be separated by at least three feet in all directions regardless of the
19   vehicle's normal capacity, and that employer-provided housing assign residents
20   by household, crew, or worksite, keep beds at least six feet apart, and not use bunk
21   beds. To comply, CEE stopped transporting its field crews together and had each
22   field employee drive alone, and CEE stopped lodging its field employees two to
23   a room and lodged them singly.
24         22. Effective June 17, 2021, California revised the Emergency Temporary
25   Standards, and the revised standards continued binding controls through the third
26   quarter of 2021. Revised § 3205.4 required covered employer-provided
27   transportation, to the extent feasible, to assign employees who share vehicles to
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922     Document 1      Filed 10/05/26   Page 7 of 10 Page ID #:7




 1   distinct groups and to keep those groups separate during transportation, work
 2   activities, and employer-provided housing, prioritized by household, crew, or
 3   workplace, and reached transportation of employees among different workplaces
 4   and jobsites. Revised § 3205.3 likewise required distinct resident groups in
 5   covered employer-provided housing, including hotels and motels, prioritized by
 6   household, crew, or workplace. Throughout the third quarter of 2021, revised §
 7   3205 also continued to require every covered employer to establish, implement,
 8   and maintain an effective written COVID-19 Prevention Program.
 9         23. CEE's written COVID-19 Prevention Program continued the separated
10   crew transport and separated crew lodging it had adopted, and abandoning those
11   controls would have exposed CEE to citation for failing to implement an effective
12   program.
13         24. During the third quarter of 2021, CEE's affected field crews were not
14   fully vaccinated within the meaning of 8 California Code of Regulations §
15   3205(b)(9), so the exceptions in §§ 3205.3 and 3205.4 for housing and vehicles
16   in which all occupants are fully vaccinated did not apply, and those sections
17   continued to require CEE to keep its crews in distinct, separated groups in its
18   vehicles and housing to the extent feasible.
19         25. These standards were occupational safety standards enforced by the
20   California Division of Occupational Safety and Health, which could cite an
21   employer for each violation and assess civil penalties (California Labor Code §§
22   6317, 6319, and 6427), and, where an operation exposed workers to the risk of
23   COVID-19 infection so as to constitute an imminent hazard, prohibit the operation
24   (California Labor Code § 6325, as amended by Assembly Bill 685, effective
25   January 1, 2021, a provision that governed the 2021 quarters and was later
26   repealed effective January 1, 2023). CEE's compliance was compelled, not
27   voluntary.
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922      Document 1     Filed 10/05/26    Page 8 of 10 Page ID #:8




 1         26. The requirements stopped CEE's shared-vehicle crew transport and
 2   shared crew lodging and prevented CEE from performing field work in the normal
 3   course that depended on moving and housing crews together. The precise crews,
 4   dates, locations, and affected work will be established through CEE's records,
 5   detailed payroll records, third-party records from prime contractors and payroll
 6   and ERC service providers, and the testimony of employees and managers who
 7   worked in the field during the quarter.
 8         27. CEE's affected California field operations, including its crew-transport
 9   and crew-lodging operations and the field work that depended on them,
10   constituted more than a nominal portion of CEE's business, and the government-
11   required controls had more than a nominal effect on CEE's ability to provide
12   services in the normal course during the quarter.
13         28. CEE paid qualified wages during the quarter. CEE will establish the
14   employee-level qualified-wage calculations through payroll records, IRS records,
15   and other competent evidence, including records being obtained from Premier
16   Small Business Services, Inc., Payroll Vault-related entities, prime contractors,
17   and other third parties.
18     COUNT I - REFUND OF EMPLOYMENT TAXES AND EMPLOYEE
19                                RETENTION CREDIT
20         29. CEE realleges and incorporates paragraphs 1 through 28.
21         30. For the third quarter of 2021, the Employee Retention Credit was
22   available under 26 U.S.C. § 3134 for wages paid after June 30, 2021 and before
23   October 1, 2021.
24         31. CEE was an eligible employer during the quarter because governmental
25   orders and binding governmental requirements related to COVID-19 partially
26   suspended or materially restricted CEE's trade or business operations. CEE's
27   eligibility does not depend on the gross-receipts test.
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922      Document 1     Filed 10/05/26   Page 9 of 10 Page ID #:9




 1          32. CEE paid qualified wages during the quarter and timely claimed the
 2   credit on its Form 941-X for the third quarter of 2021. The refundable ERC
 3   claimed is determined from qualified wages under 26 U.S.C. § 3134 and is not
 4   limited to the aggregate employment-tax deposits reflected on the original Form
 5   941.
 6          33. The IRS formally disallowed CEE's claim by Letter 105C. The United
 7   States therefore has money belonging to CEE that should be refunded.
 8          34. CEE is entitled to judgment of $2,243,694.79, or such other amount as
 9   the Court determines is established by the evidence and within the administrative
10   refund claim, together with statutory interest under 26 U.S.C. § 6611 and other
11   relief permitted by law.
12                               PRAYER FOR RELIEF
13          WHEREFORE, Plaintiff Coleman Environmental Engineering, Inc.
14   requests that the Court enter judgment:
15          1. Awarding CEE a refund of $2,243,694.79 for the third quarter of 2021,
16          or such amount as is proven and legally recoverable within the
17          administrative claim;
18          2. Awarding statutory interest under 26 U.S.C. § 6611;
19          3. Awarding allowable costs; and
20          4. Granting such other relief as the Court deems just and proper.
21
22   Dated: October 5, 2026
23   Respectfully submitted,
24   BROTMAN LAW
25
26   By: /s/ Samuel D. Brotman
27   Samuel D. Brotman
28
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

Case 8:26-cv-02922    Document 1    Filed 10/05/26   Page 10 of 10 Page ID #:10




 1   Attorney for Plaintiff
 2   Coleman Environmental Engineering, Inc.
 3
 4                                  EXHIBIT LIST
 5   Exhibit A - Form 941-X, third quarter of 2021
 6   Exhibit B - IRS Letter 105C dated October 7, 2024, and related certified-mail
 7   and IRS correspondence, third quarter of 2021
 8
 9
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       COMPLAINT FOR REFUND OF FEDERAL EMPLOYMENT TAXES AND EMPLOYEE RETENTION
                                        CREDITS

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