Opinion
Civil Action No. 00-10483-GAO.
January 10, 2002
MEMORANDUM AND ORDER
Joseph V. Stuart initiated for a refund of penalties he has paid to the Internal Revenue Service ("IRS") after it found him responsible for paying taxes on behalf of Buyers Business Network, Inc. ("BBN"). The government has counterclaimed for a small balance still remaining to be paid, and it has added a claim against I. Franklin O'Dell, who it alleges is also personally liable for BBN's tax obligation.
The government moves for partial summary judgment as to the amount of the penalty assessment. Stuart moves for full summary judgment in his favor, arguing that the government's assessment was invalid, that he was not a person responsible for payment, and that he was improperly assessed for tax periods outside the applicable statute of limitations. He also seeks to sever the government's claims against O'Dell.
A. Summary of Facts
In 1997, the IRS conducted an examination of BBN for unpaid withholding taxes for the year beginning with the fourth quarter of 1993 and ending at the conclusion of the third quarter of 1994. The IRS determined that while BBN had filed Employer's Quarterly Federal Tax Returns (Form 941) for the fourth quarter of 1993 and the first quarter of 1994, BBN had not made full payment to the IRS for those quarters. The IRS further determined that BBN had failed to file Form 941 for the second and third quarters of 1994. Consequently, the IRS prepared substitute 941s on behalf of BBN for those two quarters and determined that BBN owed the IRS $15,000 for each quarter. The IRS estimated the amount at $15,000 for each of the quarters based on the total withholding taxes BBN owed in the fourth quarter of 1993 and the first quarter of 1994, as well as corporate bank records.
On April 13, 1999, the IRS assessed a trust fund recovery penalty against Stuart and against O'Dell in the amount of $19,001.20 for the tax period ending March 31, 1994, and $23,498.58 for the tax period ending September 30, 1994. See United States Mot. for Partial Summ. J., Exs. 5, 6, 7 and 8. Each of these penalty amounts covered two quarters; $19,001.20 included the fourth quarter of 1993 and the first quarter of 1994, while $23,498.58 included the second and third quarters of 1994. The penalties were based on the IRS's determination that Stuart and O'Dell were personally responsible for BBN's withholding tax liability under 26 U.S.C. § 6672. Stuart has been credited with having paid all but $1,728.25 of the total amount owed.
On March 15, 2000, Stuart filed this suit to recoup the amount of money he had paid to the IRS and to abate the payment of the balance. The IRS has responded with a counterclaim for the $1,728.25 balance plus interest.
B. The IRS's Assessments Are Not Irrational or Excessive
The United States Supreme Court has held that a taxpayer seeking to recoup payments from the IRS bears the burden of proving the amount he is entitled to recover. United States v. Janis, 428 U.S. 433, 440 (1976). "It is not enough for him to demonstrate that the assessment of the tax for which refund is sought was erroneous in some respects." Id. Instead, to shift the burden onto the government, the taxpayer must show that the assessment is "without rational foundation and excessive." Id. at 441 (quotations and citations omitted).
On the present motions, Stuart has not produced any specific evidence to refute the sums the IRS calculated. He simply states that the IRS's calculations "are clearly without rational foundation, arbitrary and erroneous." Pl.'s Opp'n to United States Mot. for Partial Summ. J. at 3. This flat assertion is not enough to overcome the presumption in the government's favor. The IRS's "certificates of assessments" adequately establish Stuart's liability. See Guthrie v. Sawyer, 970 F.2d 733, 737 (10th Cir. 1992) (finding that certificates of assessment are routinely used to prove that tax assessment has in fact been made and that they are presumptive proof of a valid assessment); Gentry v. United States, 962 F.2d 555, 557 (6th Cir. 1992) ("Certificates of assessments and payments are generally regarded as being sufficient proof, in the absence of evidence to the contrary, of the adequacy and propriety of notices and assessments that have been made.").
The IRS also did not act improperly by combining the amounts owed for the four quarters into two lump sum assessments. See Taylor v. Internal Revenue Serv., 69 F.3d 411, 419 (10th Cir. 1995) (holding that the IRS may make lump sum assessments for purposes of assessing penalties under 26 U.S.C. § 6672).
C. The IRS Did Not Violate the Applicable Statute of Limitations
Stuart argues that the IRS is improperly assessing him for tax periods outside the applicable three-year statute of limitations under 26 U.S.C. § 6672(b)(3). However, that section provides that notices of proposed Section 6672 assessments must be:
mailed or delivered in person before the expiration of [the limitations period] for the assessment of such penalty . . ., the period . . . shall not expire before the later of —
(A) the date 90 days after the date on which such notice was mailed or delivered in person, or
(B) if there is a timely protest of the proposed assessment, the date 30 days after the Secretary makes a final administrative determination with respect to such protest.26 U.S.C. § 6672(b)(3) (emphasis added). The IRS mailed a proposed assessment to Stuart on April 8, 1997, within three years of the date of BBN's filing of its fourth quarter 1993 and first quarter 1994 tax filings. Stuart timely protested the assessment on April 16, 1997. The Secretary made a final determination in the case on April 6, 1999 and issued an assessment against Stuart on April 13, 1999. Thus, the final assessment made on April 13, 1999 was timely because it was made within thirty days of the final determination.
D. Stuart Could Be a "Person" Liable for BBN's Debt
Under the Internal Revenue Code, a "person" may be personally liable for the amount of taxes owed by a business if that person was "required to collect, truthfully account for, and pay over" any of those taxes. 26 U.S.C. § 6672(a). For purposes of such liability, "[t]he term `person' . . . includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs." Id. § 6671(b). As is indicated by the word "includes" in the definition of "person," the Code's list of employees and corporate officers is illustrative, not exclusive. See Harrington v. United States, 504 F.2d 1306, 1311 (1st Cir. 1974). Instead, the First Circuit has outlined seven commonly used indicia to determine whether a person is liable under Section 6672. See Vinick v. United States, 205 F.3d 1, 7 (1st Cir. 2000). Since the scope of Stuart's responsibilities with respect to BBN is disputed, Stuart's personal liability for BBN's debt will have to be resolved at trial.
E. Conclusion
Stuart has not made the requisite showing to overcome the presumption of correctness afforded to the IRS's assessments. Therefore, the IRS's motion for partial summary judgment as to the amounts at issue is GRANTED. Stuart's motion for summary judgment is DENIED.
The IRS's motion in limine to exclude Internal Revenue Officers John P. Cashman, Michael Morris, Donald E. Mavrides, and Department of Justice attorney Stephen J. Turanchick from being called as fact witnesses by Stuart is GRANTED, subject to possible reconsideration if events at trial make their testimony relevant.
Finally, Stuart's motion to bifurcate is DENIED.