Plaintiff Stephen Hilton has filed a lawsuit against the United States over tax withholdings he claims were erroneously collected.
On October 21, 2024, Hilton lodged a complaint in the United States District Court for the Eastern District of New York, seeking recovery of internal revenue taxes he argues were incorrectly assessed due to his former employer’s misclassification of settlement payments.
The case centers on a settlement agreement between Hilton and his former employer, Computer Science Corporation (CSC), which later merged with Hewlett Packard's Enterprise Services to become DXC Technology Company. According to the complaint, Hilton was entitled to a settlement payment after his termination from DXC on July 20, 2018. Hilton claims DXC misclassified the entire settlement as an “excess parachute payment,” leading to a 20% excise tax withholding under Internal Revenue Code Section 280G.
Hilton initiated arbitration proceedings and subsequently filed a federal lawsuit seeking damages for breach of contract following his termination. In July 2019, a Settlement Agreement was reached, with DXC agreeing to pay Hilton a settlement amount.
Hilton’s complaint argues that only a portion of the payment tied to the Change in Control Agreement was subject to excise tax as an “excess parachute payment.” He contends that other portions of the settlement, related to separate agreements and unrelated to any change in control, should not have been subject to this tax. However, DXC withheld taxes on the entire settlement.
After submitting a refund claim to the IRS in October 2020, which was denied in November 2022, Hilton is now seeking judicial intervention. He requests a judgment for no less than the disputed tax amount, plus interest and litigation costs. His attorneys assert that he has met all filing prerequisites and has paid all required taxes.
Hilton is represented by attorneys Arthur M. Rosenberg and Jonathan M. Sabin from Kane Kessler, P.C. The case is filed under Case ID: 1:24-cv-07363.