A well-known, third-generation, African-American-owned funeral home is facing a tough legal battle with the federal government.
Baker Funeral Home, of 2008 N. Broad St., near Diamond St. in North Philadelphia, repeatedly failed to file tax returns and pay taxes owed to the Internal Revenue Service, according to a copy of a lawsuit obtained by the Tribune.
A 2011 action against the business claimed Baker owed as much as $800,000 in unpaid employment taxes, including penalties and interests that had accrued since 2002.
The 54-year-old owner Vince Baker spoke at length with members of the Philadelphia Tribune about the lawsuit and a two-decades-long battle with the IRS.
Insisting he had already provided the government with “hundreds of thousands of dollars” toward the complaint, Baker painted a picture of a man struggling to maintain a third-generation company whose finances were already troubled when he inherited it following his father’s unexpected death in 1996.
Baker described efforts of having to wrestle loosely manged financial operations from long-time office workers and family members, while also seeking to support dedicated employees who provided work to the funeral home.
“What I have learned in my 20-year time is that a will will kill families and businesses because you have to pay inheritance taxes and estate taxes,” Baker said, painting his plight as a cautionary tale for other third-generation business owners.
Of the approximate $180,000 in liquid assets the firm had upon his father’s death, the business was hit with an inheritance tax bill of $133,000, and other legal obligations.
“The lesson here is primarily to have a trust and not a will, for it to be clearly spoken and talked about and worked out with your family so that you don’t lose lifelong assets behind the presumption of tax obligations,” Baker said.
The case has been assigned to District Judge Eduardo C. Robreno and the matter is pending in court. The court will determine what sanctions should be imposed against the Bakers and Baker Funeral Home, which remains in operation.
Baker said he believes the business will avoid the prospect of being seized and liquidated by the IRS, but nevertheless offered, “We are in limbo.”
Founded by Edward M. Baker, the North Philadelphia-based funeral home has been providing funeral and cremation services since 1975.
Throughout the years, local families have looked to the home for its “standard of excellence.”
“We have an undeniable standard of excellence in the service that we provide and it shows in the work that we do everyday to the people who come into that building who entrust us with their loved ones,” Baker said. “We do excellent work. We do beautiful restorations. We take care and pride in what we do and it shows.”
However, the home’s history of federal tax non-compliance stems back to 1995, when Wendell Baker, the second-generation owner, ran the business.
Prior to his death Nov. 19, 1996, the elder Baker hadn’t paid taxes for three years. Baker acknowledged that his father didn’t pay taxes because he had loss carry overs.
Since his father had left a will, Baker ended up having to pay $133,000 in inheritance taxes and other legal obligations.
Baker, who has been working in the funeral home business since he was 13, reflected, “If you have a trust the business and or assets transfer from heir-to-heir, or owner-to-owner, as opposed to probate-to-heir. When you go from probate to heir, you have to pay bequeaths to family and moral and legal obligations.”
According to a court memorandum, beginning in 1999, the IRS sought to bring the funeral home into tax compliance through administrative means. However, the IRS’s efforts were unsuccessful and Baker Funeral Home’s liabilities continued to accrue.
The IRS attempted to seize Baker Funeral Home Ltd.’s business assets and real property, but Baker made the minimal payments to avoid seizure.
In that lawsuit, the government sought to obtain a monetary judgement against Baker Funeral Home, Ltd., for past due tax liabilities and an injunction mandating the business and Vince Baker to file timely tax returns and make timely tax payments.
According to court documents, the parties consented to a permanent injunction order and judgement of $813,657 against Baker Funeral Home, Ltd., which the court entered on April 12, 2012.
The injunction required Baker Funeral Home and Baker to withhold and pay to the IRS all required employment and unemployment taxes, file tax returns going forward, make timely and full payroll tax deposits and notify the IRS if Baker began operating a new business enterprise.
The government alleges that Baker Funeral Home, Ltd. and Baker violated the permanent injunction almost immediately. According to court documents, first the funeral home failed to file timely tax returns, pay its taxes timely and make timely bi-weekly payroll tax deposits.
Secondly, in March 2012, the Bakers transferred all of Baker Funeral Home Ltd corporation’s business assets to Baker Funeral Home, PC, an entity formed in May 2011, which was owned solely by Marcia Baker. They violated the permanent injunction’s terms by failing to inform the government that they created a new business enterprise.
At the time, Marcia Baker took an active role in managing Baker Funeral Home PC for years. Vince Baker remained the funeral supervisor for the new business entity and had no ownership interest in Baker Funeral Home, PC. The ownership interest was recently transferred back to Baker. Marcia Baker stopped working at the funeral home in 2015.
On June 28, 2012, the government filed its first motion to hold the Bakers in contempt for not complying with the permanent injunction. On Sept. 21, 2012, the government moved to modify the injunction to include Baker Funeral Home, PC and any of Baker Funeral Home Ltd.’s other successors.
The government filed its second motion for contempt in July 2014 and submitted that Baker Funeral Home, PC had failed to timely file seven out of 12 tax returns and incurred more than $50,000 in additional unpaid taxes, penalties and interest.
The court issued an order appointing a receiver to oversee the preparation of required federal tax returns and assist the funeral home in making required federal tax payments. The government alleged that the Bakers did not cooperate with the receiver. According to court documents, even under receivership, the funeral home failed to meet its federal tax obligations.
However, Baker contends that he wasted thousands of dollars on a receiver who didn’t do his job.
“If the receiver had done exactly what the IRS wanted him to do that lawsuit would not be viable because the receiver would have done his job and made sure that as the receiver, every bill would have been paid and the IRS was the first to be paid and the receiver never did that,” he said.
Last year, the government filed its third motion for contempt for non-compliance and failing to meet federal tax obligations. The motion was granted in July and the court found the Bakers and the Baker Funeral Home PC were in civil contempt of the courts prior orders.
According to legal documents, the government had asked to the court to shut down Baker Funeral Home PC and bar the Bakers from owning, controlling, consulting for or serving as an officer of any funeral home business for 10 years. The government also seeks to compel the Bakers to pay the past-due balance of $23,328 owed to the receiver and the government’s attorney fees.
Baker said he focused on keeping the business afloat while grappling with internal issues when he assumed ownership of the funeral home. At the time, he was dealing with long term employees who disrupted the business and engaged in theft.
When those employees were removed, Baker and his wife, Marcia Baker kept the business going.
“You have a third generation institution that is trying to survive off of no resources but a great name and a reputation and a service that we provide on a daily basis,” Baker said.
The funeral home currently has four full time employees and about six part-time workers.
“We are waiting for the judge as to what his direction will be. He’s been very fair and reasonable. I think we are beyond the point of him considering shutting us down. The government wanted us to be completely out of business. We’ve come through two or three subsequent meetings in which that has been prolonged.”
Baker underscored that he’s paid thousands of dollars toward his tax obligations within an eight-year period.
“There is no reason for all of the things that I’ve been through and all of the money that I’ve paid that I’m still in position,” he added.