Opinion
CASE NO. 01-3154-6B7, ADV. PROC. NO. 02-220
February 12, 2004
ORDER
This matter came on Plaintiff, Ellen L. Marino's ("Debtor") Complaint to Determine the Dischargeability of her personal liability, for 941 withholding taxes, to the Internal Revenue Service ("IRS"). The following Findings of Fact and Conclusions of Law are made after reviewing the evidence.
FINDINGS OF FACT
A trust fund recovery penalty of $78,975.14 was assessed against Debtor on April 9, 2001, related to her duties as president of SUSA/U.S. Financial ("SUSA"). The penalty was imposed due to SUSA's failure to remit trust funds during four (4) quarters in 1999 and 2000.
The four quarters were March 31, 1999: $5,647,57, June 30, 1999: $34,564.28, December 31, 1999: $17,579.08 and March 31, 2000: $21,184.21 for a total of $78,975.14.
SUSA was incorporated in 1995 by James Kunkle ("Kunkle"), Debtor's son, as a Florida corporation that operated as a licensed correspondence mortgage lender. SUSA provided mortgage loans to businesses and individuals. Debtor's live-in companion, Daniel A. Myers ("Myers"), ran the day-to-day operations of the company from 1995 until SUSA ceased operations in 2001,
Myers was never was an officer or had ownership interest in SUSA. Myers could not be an officer because he did not meet the Florida requirements for a mortgage license holder because of past credit problems.
Debtor became the president of SUSA in 1997 and received $74,000 in salary in 1999 and $20,000 in 2000, however, Debtor had little contact with the business or its employees and despite Debtor's title, Myers continued running SUSA's operations.
SUSA began to struggle financially in 1999. Debtor made a capital contribution of $46,000 and helped obtained a line of credit for SUSA from Huntington National bank in 1999 for $50,000 at Myer's request.
Debtor took no active role in the daily operations of SUSA. Debtor did open and close SUSA's bank accounts, sign some checks written by SUSA and consented to the use of her signature on signature stamp, but only pursuant to Myer's instructions.
Debtor began receiving letters, addressed to her personally, from the IRS in mid to early fall of 1999 regarding the company's failure to pay trust fund taxes. She gave the opened letters to Myers.
IRS Revenue Officer Dee Lawson ("Agent Lawson") attempted to meet with a representative of SUSA beginning in late 1999. Agent Lawson went to Debtor's house in early 2000 and served her a summons because the IRS had not been provided financial information it requested from SUSA. The meeting with Agent Lawson gave Debtor actual notice of SUSA's failure to remit Trust Fund Taxes.
Debtor continued receiving a salary as president of the corporation and signing checks after the meeting with Agent Lawson. Agent Lawson met with Debtor again on April 17, 2003. Debtor represented, at Myer's direction, to Agent Lawson that SUSA could continue to operate and pay past due tax amounts if a payment agreement was reached.
Debtor, at Myer's insistence, signed an installment agreement with the IRS on May 24, 2000, on behalf of SUSA, in an effort to pay the company's trust fund liabilities. The installment agreement provided for SUSA to make monthly payments, beginning in May with payments of $2,500, $4,500, and $4,500, and then larger payments of $10,000 each month.
The IRS ceased collection action and released all levies it had issued against SUSA after the installment agreement was signed. SUSA defaulted on the installment agreement after making two or three payments. SUSA did not attempt to pay its delinquent tax liabilities after it defaulted on the installment agreement.
SUSA filed a bankruptcy petition on April 6, 2001, without paying the trust fund liabilities. Debtor filed her personal bankruptcy petition on April 9, 2001.
CONCLUSIONS OF LAW
The standard and penalty for failing to collect, account or turnover Trust Fund Taxes is contained in 26 U.S.C. § 6672 which states,
(a) General rule. — Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over . . .
Liability is imposed only if an individual is determined to be the "responsible person" and that individual willfully fails to collect, account or pay over the Trust Fund Taxes.
Responsible Person
"Courts have generally interpreted broadly who will constitute a responsible person under section 6672." "A responsible person within the meaning of section 6672 includes an officer or employee of a corporation who is under a duty to collect, account for, or pay over the withheld tax." [R]esponsibility is a matter of status, duty and authority, not knowledge.
Williams v. United States. 931 F.2d 805, 810 (11th Cir. 1991).
Mazo v. United States, 591 F.2d 1151, 1156 (5th Cir. 1979).
Williams v. United States 931 F.2d 805. 810 (11th Cir. 1991) (citing Mazo, 591 F.2d at 1156).
"Indicia of responsibility include the holding of corporate office, control over financial affairs, the authority to disburse corporate funds, stock ownership, and the ability to hire and fire employees." "Responsibility is a matter of the power and authority to make payment of withholding taxes, which is not dispositively determined by corporate title or position."
George v. United States, 819 F.2d 1008, 1011 (11th Cir. 1987).
Thosteson v. United States, 331 F.3d 1294, 1299 (11th Cir. 2003).
Debtor lacked any authority or power of the management of SUSA. Debtor's position as president was in title only. Debtor did not have control over the financial affairs, disbursement of corporate funds or the ability to hire or fire employees. Myers had complete decision-making authority over SUSA. Debtor was never the "responsible person" pursuant to 26 U.S.C. § 6672(a).
Willfulness and Reckless Disregard
If Debtor had been determined to be the responsible person to withhold taxes for SUSA the burden would have shifted to her to disprove willfulness. The Eleventh Circuit Court of Appeals "has held that the willfulness requirement of section 6672 is satisfied if the responsible person has knowledge of payments to other creditors after [he or she] becomes aware of the failure to remit the withheld taxes . . .[w]illfulness, however, does not require a fraudulent or other bad motive on the part of the responsible person."
Malloy v. United States, 17 F.3d 329, 331 (11th Cir. 1994).
Debtor's failure to remit taxes, following Agent Lawson's meeting with her at her home in early 2000, was willful. Since Debtor was not the responsible person her willful failure to remit taxes precludes personal liability pursuant to 26 U.S.C. § 6672.
Therefore it is,
ORDERED, ADJUDGED and DECREED that JUDGMENT is entered in favor of Debtor Ellen L. Marino and against the Plaintiff, the United States of America, Department of Treasury, Internal Revenue Service; and it is further
ORDERED, ADJUDGED and DECREED that Debtor, Ellen L. Marino has no personal liability for 941 withholding taxes pursuant to 26 U.S.C. § 6672.