Filed: Nov. 05, 2013
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1739 MARY JOHNSON, Plaintiff - Appellant, FORD JOHNSON, Counter Defendant - Appellant, v. UNITED STATES OF AMERICA, Defendant - Appellee. Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, Chief District Judge. (8:09-cv-00787-DKC) Argued: September 17, 2013 Decided: November 5, 2013 Before WILKINSON, DUNCAN, and AGEE, Circuit Judges. Affirmed by published opinion. Jud
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1739 MARY JOHNSON, Plaintiff - Appellant, FORD JOHNSON, Counter Defendant - Appellant, v. UNITED STATES OF AMERICA, Defendant - Appellee. Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, Chief District Judge. (8:09-cv-00787-DKC) Argued: September 17, 2013 Decided: November 5, 2013 Before WILKINSON, DUNCAN, and AGEE, Circuit Judges. Affirmed by published opinion. Judg..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1739
MARY JOHNSON,
Plaintiff - Appellant,
FORD JOHNSON,
Counter Defendant - Appellant,
v.
UNITED STATES OF AMERICA,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Deborah K. Chasanow, Chief District
Judge. (8:09-cv-00787-DKC)
Argued: September 17, 2013 Decided: November 5, 2013
Before WILKINSON, DUNCAN, and AGEE, Circuit Judges.
Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Wilkinson and Judge Duncan joined.
ARGUED: Diana M. Schobel, DMS LAW, LLC, Frederick, Maryland, for
Appellants. Gretchen M. Wolfinger, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Rod J.
Rosenstein, United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Baltimore, Maryland; Kathryn Keneally, Assistant
Attorney General, Teresa E. McLaughlin, Tax Division, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
2
AGEE, Circuit Judge:
Mary Johnson (“Mrs. Johnson”) brought this suit against the
United States seeking a refund of payments on a federal
withholding tax penalty assessed against her under 26 U.S.C.
§ 6672. 1 The Government counterclaimed against both Mrs. Johnson
and her husband, Ford Johnson (“Mr. Johnson”), individually, to
reduce to judgment the remaining balance of the trust fund
recovery penalties assessed against them. The Johnsons now
appeal the district court’s grant of summary judgment to the
Government against each of them. For the reasons that follow,
we affirm the judgment of the district court.
I.
The following facts are either uncontroverted, taken in the
light most favorable to the Johnsons, or have been admitted by
the Johnsons in their pleadings. 2 In 1969, Mr. Johnson formed a
1
The § 6672 assessment was made against Mrs. Johnson for
the following tax quarters ending: December 31, 2001; September
30, 2002; March 31, 2003; June 30, 2003; June 30, 2004;
September 30, 2004; and December 31, 2004. (J.A. 27.)
2
When reviewing the district court’s grant of summary
judgment, we construe the facts in the light most favorable to
the Johnsons, the nonmoving party. Laber v. Harvey, 438 F.3d
404, 415 (4th Cir. 2006) (en banc); see also Bright v. QSP,
Inc.,
20 F.3d 1300, 1305 (4th Cir. 1994), cert. denied, 513 U.S.
(1994) (statements in a party’s pleadings are conclusively
binding on that party).
3
non-profit corporation, Koba Institute, Inc. (“Koba Institute”), 3
to perform various government contracts in conjunction with Koba
Associates, Inc. (“Koba Associates”), a for-profit corporation
that he owned and managed. When Koba Associates failed to pay
its payroll taxes in the mid-1990s, the Internal Revenue Service
(“IRS”) assessed trust fund recovery penalties against Mr.
Johnson pursuant to 26 U.S.C. § 6672. 4 The outstanding payroll
taxes, accompanied by the lien subsequently imposed on Mr.
Johnson for the § 6672 trust fund recovery penalties, ultimately
led Mr. Johnson to close Koba Associates. 5 The presence of the
lien severely limited Mr. Johnson’s ability to obtain credit for
Koba Institute.
3
Koba Institute provides residential and educational
services to special needs children in Maryland.
4
Section 6672 provides in pertinent part:
Any person required to collect, truthfully
account for, and pay over any tax imposed by
this title [a “responsible person”] who
willfully fails to . . . 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.
26 U.S.C. § 6672(a).
5
When the IRS assessed trust fund recovery penalties
against Mr. Johnson for the failure of Koba Associates to pay
its payroll taxes, the IRS considered assessing the same
penalties against Mrs. Johnson but ultimately declined to do so.
4
This fiscal reality led Mr. Johnson to approach Mrs.
Johnson about restructuring Koba Institute so as to facilitate a
continuation of their business. In 1998, Koba Institute
converted to a for-profit corporation under Maryland law, with
Mrs. Johnson as its sole shareholder. Because Mrs. Johnson “was
not encumbered by a lien” like Mr. Johnson, her status as the
corporation’s owner enabled Koba Institute to enter into leases
and other contracts, as well as obtain lines of credit based on
Mrs. Johnson’s endorsement. (J.A. 998.)
As the sole shareholder of Koba Institute, Mrs. Johnson
elected herself as chair of the corporation’s board of directors
in 2001. The corporation’s bylaws require that the chair of the
board “be elected President of the Institute.” (J.A. 615.) 6
6
The bylaws describe the president’s role as follows:
The President [who] shall be chairperson of
the Board of Directors . . . shall preside
at all meetings of the Board and/or
officers. [S]he shall review, approve and
recommend to the Board all proposed projects
and budgets on an annual basis. [S]he shall
be authorized to execute . . . legal papers,
documents and instruments on behalf of the
Institute. [S]he shall have general
authority to manage the business and affairs
of the Institute on a day to day basis,
subject to and in accordance with the
directions of the Board of Directors.
(J.A. 617–18.) The bylaws also authorize the board members to
“approv[e] . . . proposed projects and budgets,” “establish[ ] .
. . banking relations including [the] power to borrow money,”
(Continued)
5
According to the Johnsons, because they had agreed that Mrs.
Johnson would be the primary caregiver of the couple’s children,
Mrs. Johnson “delegated” and “entrusted” her authority in the
corporation to Mr. Johnson, and thereafter elected Mr. Johnson
president of Koba Institute on February 20, 2001,
notwithstanding the contrary bylaw requirement. (See J.A. 16,
478, 480, 1481–82, 1515.) Mrs. Johnson, in turn, served as the
corporation’s vice president.
The same day that Mrs. Johnson appointed herself as board
chair, February 20, 2001, Koba Institute’s board of directors—
comprised of the Johnsons and an unrelated corporate secretary—
unanimously approved the following resolution:
The present holders of the offices of
President, Vice-President, Treasurer and
Secretary are authorized to sign checks,
drafts, instruments, . . . and . . . orders
for the payment of money from [Koba
Institute] accounts, to endorse checks,
instruments, evidences of indebtedness and
orders payable, owned or held by [Koba
Institute], and to . . . sign any
application, deposit agreement, signature
card or other documentation required by the
Bank [of America], with the following
limitation: . . . that either Ford T.
Johnson, Jr. (President of the
Company/Treasurer) or Mary L. Fogg Johnson
(Vice-President of the Company/Chairperson)
may act alone or with any other named
signatory to said accounts in any
and “control and manage[ ] . . . property, including [the] power
to purchase, . . . and dispose of the same.” (J.A. 616–17.)
6
transactions with the Bank; however, any
transactions . . . which are not signed by
either [of them] must be signed by at least
two of the following people . . . .
(J.A. 612 (emphasis added).) Koba Institute’s payroll account
expressly provided that Mrs. Johnson had the power to “sign
singularly” on that account. (J.A. 647, 651, 670; see also J.A.
537–38, 1486–87.)
Having “delegated” her authority to Mr. Johnson, Mrs.
Johnson’s actual involvement at Koba Institute was limited
during the 2001 through 2004 period. Nonetheless, she had an
office at Koba Institute and received a significant annual
salary ranging from approximately $100,000 to $193,000, as well
as a corporate car and cell phone. In addition, the rent for
Mrs. Johnson’s residence, shared with Mr. Johnson, was provided
by Koba Institute. 7
In the 2001 to 2004 period, Mrs. Johnson only came to work
once per month. When she did so, she would approve any board
resolutions, such as ratification of Mr. Johnson’s acts as
president, or perform tasks in the human resources department.
Thus, while Mrs. Johnson may have given an opinion regarding
7
During the same periods, Mr. Johnson received no direct
salary from the corporation, instead having Koba Institute pay
the rent for the couple’s home. In 2001, 2002, and 2004, these
rent payments totaled between $40,000 and $50,000. (J.A. 468–
69, 473, 556, 594–95.) In 2003, however, Koba Institute did not
make any rent payments on Mr. Johnson’s behalf, and he received
no compensation from the corporation.
7
hiring and firing employees during the relevant time frame, Mr.
Johnson made the ultimate decisions regarding employment. (See
J.A. 1508–09, 1608, 1661.) Indeed, because Mr. Johnson oversaw
the corporation’s day-to-day operations, other employees viewed
him as “the one who decides everything” and went to Mr. Johnson—
rather than Mrs. Johnson—with any questions that arose in the
business, including financial matters such as the payment of
payroll taxes. (J.A. 1605.)
When Mr. Johnson was out of the office, he left explicit
instructions for Mrs. Johnson to follow on Koba Institute
business, including which checks to sign in his absence.
Because of her limited involvement with the corporation’s daily
operations, however, Mrs. Johnson was unaware of “the background
or the context” for these checks and did not feel comfortable
signing any checks that Mr. Johnson had not authorized. (J.A.
1576.) Accordingly, from 2001 through 2004, she never attempted
to write checks that Mr. Johnson had not already approved.
Near the end of 2004, Mrs. Johnson received a notice from
the IRS that Koba Institute had not paid its payroll taxes for
several quarters from 2001 through 2004. Prior to that time,
Mrs. Johnson was unaware that the payroll taxes were unpaid.
Upon receipt of the notice, she had “a serious talk” with Mr.
Johnson and “told him” that the situation was “unacceptable” and
that Koba Institute had “to take steps to make sure that it [did
8
not] happen again.” (J.A. 1501.) Mrs. Johnson then fired the
finance director, who had been tasked with making payroll tax
payments, and “directed Mr. Johnson to personally handle all
future tax payments as of January 2005.” (J.A. 17.) She
“required” Mr. Johnson to provide her with “visual proof” of all
withholding tax payments that Koba Institute subsequently made.
(J.A. 17.) Additionally, at least with regard to the payroll
account, Mrs. Johnson no longer followed the prior procedure for
check authorization; that is, she no longer required instruction
from Mr. Johnson before writing checks herself from the payroll
account for payment of the taxes.
Due to Mrs. Johnson’s “revamped oversight of tax payments,”
Koba Institute began remitting its post-2004 payroll taxes to
the IRS in full and, generally, on time. (J.A. 17.) The
corporation did not, however, pay the outstanding delinquent
payroll taxes for the 2001 through 2004 delinquent periods
although it continued to pay its other business debts, such as
employee wages and Mrs. Johnson’s compensation. Subsequently,
the IRS assessed trust fund recovery penalties (the “100%
penalty”) against Mr. and Mrs. Johnson individually, pursuant to
9
26 U.S.C. § 6672. 8 Mrs. Johnson later paid $351.00 toward her
assessed penalty.
On March 30, 2009, Mrs. Johnson filed suit in the United
States District Court for the District of Maryland seeking a
refund of the penalty she had paid, asserting that the § 6672
assessment against her was erroneous. 9 The Government filed a
counterclaim against both of the Johnsons in order to reduce its
assessments to judgment, seeking to recover the balance of
assessments due, including penalties, interest, and costs.
Based upon transcripts of account showing the balances due as of
August 22, 2011, the Government ultimately sought to recover
$304,355.90 from Mrs. Johnson and $240,071.12 from Mr. Johnson.
The Government filed separate motions for summary judgment
against Mr. and Mrs. Johnson, contending that each was liable
under § 6672 as a “responsible person” who had “willfully”
failed to pay over the withheld payroll taxes. The Government
supported the assessments with Forms 4340—Certificates of
Assessments, Payments, and Other Specified Matters, noting that
the assessments on the Forms 4340 were presumptively correct and
that the burden fell on the Johnsons to demonstrate otherwise.
8
The § 6672 trust fund recovery penalty is commonly termed
the “100% penalty” by tax practitioners and we use that term
here for the § 6672 penalties assessed.
9
Mrs. Johnson initially named the IRS as the defendant in
this action. The parties subsequently agreed that the proper
defendant was the United States, which was substituted as such.
10
The Government also moved to strike the reports and testimony of
an expert witness the Government anticipated the Johnsons would
rely upon in opposing summary judgment.
The Johnsons jointly opposed the Government’s motion to
strike, and separately opposed the Government’s motions for
summary judgment. Mr. Johnson also moved for partial summary
judgment against the Government as to him.
The district court granted the Government’s motions for
summary judgment, denied Mr. Johnson’s motion for partial
summary judgment, and denied the Government’s motion to strike
as moot. With respect to Mr. Johnson, the district court
determined that the assessment against him was valid, rejecting
his argument that the assessment was not made within the three-
year limitations period established by I.R.C. § 6501. The
district court then concluded that no material issue of disputed
fact remained as to Mr. Johnson.
With respect to Mrs. Johnson, the district court held that
she had also failed to show a genuine dispute of material fact
regarding her liability. The court determined that “Mrs.
Johnson was a responsible person at Koba Institute during the
relevant quarters even though her participation in the
corporation’s affairs was minimal,” and that she had acted
“willfully” in failing to see to it that the outstanding tax
liabilities were paid. (J.A. 253, 268.)
11
The district court also concluded that the judgment entered
against Mrs. Johnson would not result in a double recovery for
the Government. The court noted the Government’s policy of
retaining only one full satisfaction of an underlying tax
liability despite it being able to attempt to collect against
any responsible party, and reasoned that any potential issues
could be avoided through careful drafting of the final judgment
order.
Finally, the district court denied as moot the Government’s
motion to strike the reports of the Johnsons’ expert and to
exclude his testimony at trial, finding that in their opposition
to the Government’s motions for summary judgment, the Johnsons
had “neither relied upon [the expert’s] reports nor produced any
evidence to create an issue of material fact” that would
prohibit the entry of summary judgment against them. (J.A.
271.)
The district court accordingly entered judgment in favor of
the Government and against Mrs. Johnson for $304,955.90 and
against Mr. Johnson for $240,071.12, plus interest in each
instance at the rate specified in I.R.C. § 6601 from August 22,
2011 until payment. The judgment order provided that the
judgment would “be reduced to the extent that the United States
. . . has collected or will collect on those debts pursuant to
the offer in compromise it approved with Koba Institute.” (J.A.
12
274.) The Johnsons filed a joint motion to alter, amend, or
relieve the judgment, which the district court denied.
The Johnsons timely noted this appeal, and we have
jurisdiction pursuant to 28 U.S.C. § 1291.
II.
The Internal Revenue Code (“I.R.C.” or the “Code”) requires
employers to withhold federal social security and income taxes
from the wages of their employees. See 26 U.S.C. §§ 3102(a),
3402(a); Erwin v. United States, 591 F.3d 313, 319 (4th Cir.
2010). Because the employer holds these taxes as “special
fund[s] in trust for the United States,” 26 U.S.C. § 7501(a)
(emphasis added), the withheld amounts are commonly referred to
as “trust fund taxes,” Slodov v. United States,
436 U.S. 238,
243 (1978) (internal quotation marks omitted).
The Code “assure[s] compliance by the employer with its
obligation . . . to pay” trust fund taxes by imposing personal
liability on officers or agents of the employer responsible for
“the employer’s decisions regarding withholding and payment” of
the taxes. Id. at 247 (interpreting 26 U.S.C. § 6672). To that
end, § 6672(a) of the Code provides that “[a]ny person required
to collect, truthfully account for, and pay over any tax . . .
who willfully fails” to do so shall be personally liable for “a
penalty equal to the amount of the tax evaded, or not . . . paid
13
over,” the 100% penalty. 26 U.S.C. § 6672(a). Although labeled
as a “penalty,” § 6672 is not primarily a punitive provision as
it “brings to the government only the same amount to which it
was entitled by way of the tax.” Turnbull v. United States, 929
F.2d 173, 178 n.6 (5th Cir. 1991) (internal quotation marks
omitted).
Personal liability for a corporation’s unpaid trust fund
taxes extends to any person who (1) is “responsible” for
collection and payment of those taxes; and (2) “willfully
fail[s]” to see that the taxes are paid. Plett v. United
States, 185 F.3d 216, 218 (4th Cir. 1999); O’Connor v. United
States,
956 F.2d 48, 50 (4th Cir. 1992). Once the IRS assesses
a taxpayer for this liability, the taxpayer has the burden of
proof at trial on both elements of § 6672 liability. See
O’Connor, 956 F.2d at 50.
We review de novo a district court’s grant of summary
judgment to the Government, resolving all disputed facts in
favor of the taxpayer. See O’Connor, 956 F.2d at 50. To defeat
summary judgment, however, the taxpayer—like any other litigant—
must identify an error of law or a genuine issue of disputed
material fact. See Fed. R. Civ. P. 56(a); Anderson v. Liberty
Lobby, Inc.,
477 U.S. 242, 256 (1986); see also Bouchat v. Balt.
Ravens Football Club, Inc.,
346 F.3d 514, 522 (4th Cir. 2003).
“[I]n the absence of disputed material facts, summary judgment
14
represents a favored mechanism to secure the ‘just, speedy, and
inexpensive determination’” of taxpayer liability under § 6672.
Plett, 185 F.3d at 223 (emphasis in original) (quoting Fed. R.
Civ. P. 1).
III.
With the foregoing principles in mind, we turn to the
claims of error raised on appeal. Mr. Johnson contends that the
grant of summary judgment was erroneous because the assessment
of the 100% penalty as to him was time-barred under § 6501 of
the Code. Mrs. Johnson argues that the grant of summary
judgment against her was erroneous because she was neither a
“person responsible” for the payment of Koba Institute’s
withholding taxes nor “willfully” failed to do so. Lastly, the
Johnsons posit that the amounts of their respective tax
liabilities under § 6672 were incorrectly calculated because
disputed issues of material fact remained to be determined. We
consider each argument in turn.
A.
Mr. Johnson contends that the assessment of the 100%
penalty against him was not “made within the limitations period
set forth in 26 U.S.C. § 6672.” (Br. 29.) However, Mr.
Johnson’s one-page “argument” on brief as to this issue gives no
15
description as to the basis at law for his contention. Even
after questioning at oral argument, we are left with no firm
guide as to why Mr. Johnson contends the assessments are time-
barred.
Mr. Johnson has not challenged the basis for the district
court’s decision in any meaningful way. See Fed. R. App. P.
28(a)(9)(A) (requiring argument section of an appellant’s
opening brief to contain “appellant’s contentions and the
reasons for them, with citations to the authorities and parts of
the record on which the appellant relies”). Here, Mr. Johnson
has failed to comply with the dictates of Federal Rule of
Appellate Procedure 28(a)(9)(A), as he offers no argument
explaining how the district court erred; rather, he simply
states the issue he wishes to raise and cites several sections
of the Code, but without analysis of how these statutes would
apply to him. As a result, we consider Mr. Johnson to have
abandoned or waived his challenge to the district court’s
determination that the assessment of the 100% penalty against
him under § 6672 was not timely. See Edwards v. City of
Goldsboro, 178 F.3d 234, 241 n.6 (4th Cir. 1999) (“Failure to
comply with the specific dictates of [Federal Rule of Appellate
Procedure 28(a)(9)(A)] with respect to a particular claim
triggers abandonment of that claim on appeal.”); see also Oken
v. Corcoran,
220 F.3d 259, 274 n.2 (4th Cir. 2000) (Michael, J.,
16
concurring) (“In order to preserve an issue on appeal, however,
it is not enough to simply assert the claim; a party must
provide supporting argument.”).
Accordingly, we affirm the district court’s grant of
summary judgment against Mr. Johnson individually.
B.
We next address the argument that the district court erred
in granting summary judgment against Mrs. Johnson.
Specifically, Mrs. Johnson contends that she was not (1) a
“person responsible” for the payment of Koba Institute’s
withholding taxes; and (2) did not “willfully” fail to pay over
those taxes. We must disagree with Mrs. Johnson because the
undisputed record shows that she was properly liable for the
100% penalty.
1.
The Code defines a “responsible person” as one “required to
collect, truthfully account for, and pay over any tax,” 26
U.S.C. § 6672(a) (emphasis added). The Supreme Court has
interpreted this statutory language to apply to all “persons
responsible for collection of third-party taxes and not . . .
[only] to those persons in a position to perform all three of
the enumerated duties.” Slodov, 436 U.S. at 250. Thus, the
17
Code deems anyone required to “collect” or “account for” or
“remit” taxes a “responsible person” for purposes of § 6672.
See Plett, 185 F.3d at 219.
In determining whether a person is “responsible” under
§ 6672, we undertake a “pragmatic, substance-over-form inquiry”
focused on the person’s status, duty, and authority within the
corporation. Id. The “crucial inquiry is whether the person
had the ‘effective power’ to pay the taxes—that is, whether he
[or she] had the actual authority or ability, in view of his
status within the corporation, to pay the taxes owed.”
Id.
(quoting Barnett v. IRS,
988 F.2d 1449, 1454 (5th Cir. 1993)).
Because this analysis focuses “on substance rather than
form,” holding a corporate title alone does not render a
taxpayer a “responsible person.” O’Connor, 956 F.2d at 51.
While a determination of that status is necessarily fact-based,
summary judgment is nonetheless appropriate where, in the
absence of genuine disputes of material fact, it is clear “as a
matter of law” that the taxpayer satisfies this test and is a
“responsible person.”
Barnett, 988 F.2d at 1454 & n.10
(acknowledging that “countless courts have found responsibility
[for purposes of § 6672] as a matter of law” because “extensive
caselaw . . . narrowly constrains a factfinder’s province in
§ 6672 cases”). Our analysis is guided by a list of non-
exclusive factors common in the § 6672 case law, such as whether
18
the taxpayer served as an officer of the corporation or a member
of its board of directors, controlled the corporation’s payroll,
determined which creditors to pay and when to pay them,
participated in the corporation’s day-to-day management, had the
ability to hire and fire employees, and possessed check-writing
authority. Erwin, 591 F.3d at 321;
Plett, 185 F.3d at 219.
Although “a party cannot be presumed to be a responsible
person merely from titular authority,” O’Connor, 956 F.2d at 51,
status as an officer or director is “nevertheless material” to
this determination, Teets v. United States,
29 Fed. Cl. 697, 706
(Fed. Cl. 1993). Mrs. Johnson had been the corporation’s sole
shareholder since 1998 and consequently had the effective power
to change the officers and directors as she chose and thereby
direct the business of the corporation. Separately as both vice
president and chair of the board of directors since early 2001,
Mrs. Johnson enjoyed considerable actual authority at Koba
Institute.
The corporation’s bylaws, board resolutions, and banking
documents demonstrate that Mrs. Johnson was a “responsible
person,” as it is clear that she had effective control of the
corporation, including its finances. See Taylor v. IRS, 69 F.3d
411, 416–17 (10th Cir. 1995) (holding corporate director and
officer a “responsible person” as a matter of law because he
“possessed sufficient control over corporate finances, had
19
authority to borrow funds and write checks and thereby had the
‘effective power’ to pay those taxes” (quoting Barnett, 988 F.2d
at 1454)). The foregoing corporate documents indicate that Mrs.
Johnson, while serving as chair of the board, would also serve
as president of the corporation, a role that included authority
to manage Koba Institute’s daily affairs and to execute checks
and other legal documents on its behalf. Although Mrs. Johnson
“delegated” and “entrusted” this authority to Mr. Johnson prior
to 2005, (See J.A. 16, 478, 480, 482, 1481–82, 1515), remaining
only minimally involved in the corporation’s affairs as board
chair and vice president, delegation of such authority does not
relieve a taxpayer of responsibility under § 6672, Purcell v.
United States,
1 F.3d 932, 937 (9th Cir. 1993) (That a
taxpayer’s function in an enterprise “is unconnected to
financial decision making or tax matters is irrelevant where
that individual has the authority to pay or to order the payment
of delinquent taxes.”);
Erwin, 591 F.3d at 322. A taxpayer may
be a “responsible person” if she “had the authority required to
exercise significant control over the corporation’s financial
affairs, regardless of whether [s]he exercised such control in
fact.”
Purcell, 1 F.3d at 937 (concluding that a president and
sole shareholder, who was also an authorized signatory on the
corporation’s checking account, was a “responsible person” even
though he had fully delegated all financial duties to another
20
employee). Thus, despite delegating her authority to Mr.
Johnson and permitting him to run the corporation’s daily
affairs, Mrs. Johnson remained a “responsible person” because
she had effective control of the corporation and the effective
power to direct the corporation’s business choices, including
the withholding and payment of trust fund taxes.
Although Mrs. Johnson maintains that any authority she held
was merely technical in nature, the undisputed evidence
establishes that she possessed both legal and actual authority
over Koba Institute. See United States v. Landau, 155 F.3d 93,
103 (2d Cir. 1998) (if taxpayer fails to show a genuine dispute
of material fact on nature of authority, the court “may
reasonably conclude that the documentary evidence of authority
reflects the reality”). Mrs. Johnson’s voluntary minimal
involvement in daily corporate affairs before 2005, however, and
assertions that Mr. Johnson exercised all daily operating
authority fail to create a genuine dispute of material fact
regarding limitations on her effective power as to the trust
fund taxes. Any deferral by Mrs. Johnson in the exercise of her
authority never altered the fact that she possessed “effective
power” over Koba Institute at all times. See
Barnett, 988 F.2d
at 1454. Indeed, Mrs. Johnson’s actions immediately after
learning of the tax delinquencies in December 2004—a period that
“cast[s] light” on her responsibility from 2001 through 2004—
21
demonstrate that her actual authority was co-extensive with the
legal authority she possessed. Erwin, 591 F.3d at 321.
Mrs. Johnson admits in her pleadings that she “fired the
finance director,” the employee tasked with making payroll tax
payments, as soon as she discovered that Koba Institute had not
remitted these taxes as required by law. (J.A. 17.) She also
“directed Mr. Johnson to personally handle all future tax
payments as of January 2005” and “required” him to provide her
with “visual proof” of all tax payments the corporation made.
(J.A. 17.) These admissions indicate that Mrs. Johnson’s status
in the corporation during the quarters at issue enabled her to
have “substantial input into [its financial] decisions [from
2001 through 2005], had [s]he wished to exert [her] authority.” 10
Barnett, 988 F.2d at 1455 (quotation marks omitted).
10
Although not singly determinative, Mrs. Johnson’s
execution of corporate leases and lines of credit as a guarantor
for Koba Institute offers additional support for the conclusion
that she was a “responsible person” for § 6672 purposes. See
Erwin, 591 F.3d at 322 (discussing a taxpayer’s personal
guarantees of corporate loans in determining his responsibility,
but noting that this fact “[did] not alone establish” his status
as a “responsible person”). Without these acts by Mrs. Johnson,
the corporation’s financial capacity would have been adversely
affected. Because Mrs. Johnson actively intervened to keep the
corporation financially viable, Koba Institute was able to pay
its creditors. The record further reflects that Mrs. Johnson
made more than a dozen loans to Koba Institute between 2001 and
2003, after Mr. Johnson had informed her that the corporation
needed additional funds to cover its operating expenses.
22
Moreover, the fact that, from 2001 through 2004, Mrs.
Johnson followed the corporation’s internal policy and did not
write checks without knowing that Mr. Johnson had previously
approved them does not negate § 6672 “responsible person”
status. (See J.A. 1484–91, 1576.) Although she followed
corporate procedure without exception during that time, it is
undisputed that Mrs. Johnson ceased following this policy almost
immediately upon learning of the 2001-2004 payroll tax
deficiencies and could have done so at any earlier time.
Following her “revamped oversight of tax payments,” Mrs. Johnson
would write checks from the payroll account without any
instruction from Mr. Johnson. (J.A. 17, 1484–85.) Accordingly,
the fact that Mrs. Johnson previously chose not to write checks
without Mr. Johnson’s approval does not show that she was
prevented earlier from doing so other than by her own choice.
See, e.g., Thosteson v. United States, 331 F.3d 1294, 1299–1300
(11th Cir. 2003) (holding corporate officer and stockholder a
“responsible person” as a matter of law even though he had
“limited check writing authority, up to only $750, without a
countersignature”); Lyon v. United States, 68 F. App’x 461, 469
(4th Cir. 2003) (unpublished) (per curiam) (“The fact that [the
taxpayer] chose not to exercise his legal authority is not
enough to show that he had no actual authority. . . . [He] has
not demonstrated that his father actually prevented him, or that
23
he could have prevented him, from paying the taxes if [he] had
attempted to do so.”). The record also indicates that Koba
Institute opened several operating accounts between 2001 and
2005, and that on each of those accounts, Mrs. Johnson was fully
authorized to write checks and execute other bank documents.
While she may not have been running the day-to-day
operations of the corporation between 2001 and 2004, Mrs.
Johnson had a non-delegable responsibility to monitor Koba
Institute’s financial affairs. See Barnett, 988 F.2d at 1457
(“[W]e believe that not only is it a bad business practice for a
high-level company official such as [Mrs. Johnson] to fail to
monitor [the corporation’s] finances, it also subjects [her] to
being held a responsible party under § 6672.”). Mrs. Johnson
had the effective power to exercise authority when she chose to
do so, even though she chose at times to voluntarily limit her
involvement in corporate affairs. Although Mrs. Johnson often
chose not to exercise the authority which she possessed, such a
decision is insufficient to permit a taxpayer to avoid § 6672
responsibility. See Kinnie v. United States,
994 F.2d 279, 284
(6th Cir. 1993) (stating that a taxpayer need not “always
exercise his powers” to remain responsible for seeing that
withholding taxes are paid, and “may not escape liability by
delegating the task of paying over the taxes to someone else”).
Moreover, after 2004, while the prior periods’ payroll taxes
24
remained unpaid, Mrs. Johnson actively exercised her authority
over the affairs of Koba Institute while continuing to receive
substantial compensation and benefits from the corporation. 11
We therefore conclude that the Government presented
undisputed evidence that established as a matter of law that
Mrs. Johnson was a “responsible person” under § 6672 during the
relevant tax periods because she had the effective power to pay
the trust fund taxes of Koba Institute. 12
11
While also relevant to the “willfulness” finding
discussed in the next section, the same evidence of Mrs.
Johnson’s knowing receipt of substantial assets from the
corporation while the payroll taxes remained unpaid also
bolsters the proof of her “responsible person” status. The
record shows that Mrs. Johnson received an annual salary ranging
from approximately $100,000 to $193,000 from 2001 through 2004,
as well as a corporate car and cell phone. Koba Institute also
paid the rent for the Johnsons’ home, totaling between $40,000
and $50,000 in 2001, 2002, and 2004.
12
We note that other courts have reached precisely the same
conclusion in considering similar facts. See, e.g., Jefferson
v. United States, 546 F.3d 477, 481 (7th Cir. 2008) (holding
board president “responsible person” as a matter of law because
he secured loans and directed past payment of taxes for the
corporation, reviewed financial reports, and had check-signing
authority);
Thosteson, 331 F.3d at 1299–1300 (holding corporate
officer and stockholder a “responsible person” as a matter of
law even though he had “limited check writing authority, up to
only $750, without a countersignature”);
Taylor, 69 F.3d at 417
(holding corporate director and officer a “responsible person”
as a matter of law because he “possessed sufficient control over
corporate finances, had authority to borrow funds and write
checks and thereby had the ‘effective power’ to pay those taxes”
(quoting
Barnett, 988 F.2d at 1454)); Greenberg v. United
States,
46 F.3d 239, 243–44 (3d Cir. 1994) (holding in-house
controller a “responsible person” as a matter of law even though
he took instructions from the controlling stockholder and
“feared for his job were he to independently issue a check for
(Continued)
25
2.
Having found Mrs. Johnson a “responsible person,” we turn
to the other necessary element of § 6672 liability, whether she
“willfully” failed to collect, account for, or remit payroll
taxes to the United States. 26 U.S.C. § 6672(a); Plett, 185
F.3d at 219. This inquiry focuses on whether Mrs. Johnson had
“knowledge of nonpayment or reckless disregard of whether the
payments were being made.”
Plett, 185 F.3d at 219 (quoting
Turpin v. United States,
970 F.2d 1344, 1346 (4th Cir. 1992)).
Mrs. Johnson contends that she did not act “willfully” in
failing to remit Koba Institute’s delinquent payroll taxes
because she did not learn of the deficiency until the IRS
notified her in December 2004. This argument, however,
overlooks that a taxpayer may act “willfully” for purposes of §
6672 even though she does not learn about unpaid taxes until
after the corporation has failed to pay them. “[W]hen a
responsible person learns that withholding taxes have gone
unpaid in past quarters for which he [or she] was responsible,
the [tax] delinquency”); Kinnie, 994 F.2d at 284 (holding
corporate vice president and fifty-percent shareholder a
“responsible person” as a matter of law because he had check-
signing authority, hired an accountant to review the books, and
eventually took control of the business); Mazo v. United States,
591 F.2d 1151, 1156 (5th Cir. 1979) (holding corporate
stockholders, officers, and directors “responsible persons” as a
matter of law even though others handled all day-to-day
operations and prepared all corporate checks).
26
he [or she] has a duty to use all current and future
unencumbered funds available to the corporation to pay back
those taxes.” Erwin, 591 F.3d at 326. If the taxpayer
thereafter knowingly permits payments of corporate funds to be
made to other creditors, a finding of willfulness is
appropriate. See
id. (“Even assuming . . . that [the taxpayer]
did not act willfully prior to learning of the full extent of
the tax deficiencies . . ., his conduct after that point
unquestionably evidences willfulness as a matter of law.”
(emphasis in original)).
The record demonstrates that Koba Institute continued to
make payments to other creditors using unencumbered funds
following Mrs. Johnson’s receipt of the IRS notice in December
2004. The Government has produced numerous salary checks that
the corporation issued to Mrs. Johnson in 2005, which Mrs.
Johnson readily cashed. Yet it is undisputed that Mrs. Johnson,
a “responsible person,” knew that payroll taxes for numerous
quarters from 2001 through 2004 remained unpaid. Mrs. Johnson’s
failure to remedy the payroll tax deficiencies upon learning of
their existence in December 2004, while directing corporate
payments elsewhere, including to herself, constitutes “willful”
conduct under § 6672. This is particularly so given that, at
Mrs. Johnson’s direction, Koba Institute paid other creditors
during this period. And, as noted earlier, during the 2001 to
27
2004 delinquent tax periods, Mrs. Johnson received well in
excess of $500,000 in compensation and benefits from the
corporation while the payroll taxes went unpaid. Cf. Turpin,
970 F.2d at 1347 (“The intentional preference of other creditors
over the United States is sufficient to establish the element of
willfulness under section 6672(a).” (internal quotation marks
omitted)). Even viewing the evidence in the light most
favorable to Mrs. Johnson, we conclude that the record allows no
conclusion other than that the failure to pay the payroll taxes
was willful on Mrs. Johnson’s part.
3.
In sum, we conclude that the Government has presented
undisputed evidence sufficient to establish as a matter of law
that Mrs. Johnson was a “responsible person” under § 6672 during
the relevant tax periods, and that she “willfully” failed to see
that the withholding taxes were paid. No genuine dispute as to
any material fact remains to be decided which would alter this
conclusion. Accordingly, we hold that the district court did
not err in granting summary judgment against Mrs. Johnson
individually.
28
C.
Finally, we briefly address the claims raised by the
Johnsons with respect to the district court’s determination of
the amounts of their respective 100% penalty liabilities.
Relying on the reports of their expert witness, Leo Bruette
(“Bruette”), the Johnsons assert that there is a genuine issue
of material fact as to the amounts of that liability. They
allege that Bruette identified “numerous errors, omissions[,]
and inconsistencies” in the tax assessments made against them,
which therefore undermined the Government’s proof of the amounts
owed. (Br. 26.)
The district court, however, found that the Johnsons
“neither relied upon Bruette’s reports nor produced any evidence
to create an issue of material fact” that would preclude summary
judgment. (J.A. 271.) Indeed, the Johnsons did not discuss or
cite Bruette’s reports in either of their opposition briefs to
the Government’s summary judgment motions, in Mr. Johnson’s
motion for partial summary judgment, or even as exhibits in
opposing summary judgment. Further, the Johnsons do not contest
the district court’s factual conclusion in this regard on
appeal. The reports, therefore, could not—and did not—create a
genuine issue of material fact.
29
We also find that Mrs. Johnson’s concerns regarding double
recovery are without merit. 13 Mrs. Johnson asserts that entering
judgment against her could result in double recovery for the
Government because it may collect a significant portion of the
unpaid trust fund taxes through an offer in compromise that Koba
Institute negotiated with the IRS. We note that Mr. Johnson
raised a similar argument when the Government previously sought
judgment against him for trust fund recovery penalties at Koba
Associates, which was clearly rejected by the district court.
See Johnson v. United States, 203 F. Supp. 2d 416, 425 (D. Md.
2002), aff’d, 50 F. App’x 113 (4th Cir. 2002) (unpublished) (per
curiam), cert. denied, 540 U.S. (2003). In that case, Mr.
Johnson argued that the Government “might attempt to obtain some
sort of double recovery from both Koba [Associates] and [him] in
excess of the established amount of withholding taxes due.”
Id.
After explaining that the Government may attempt to satisfy a
debt for unpaid payroll taxes against the business or the
taxpayer, the district court clarified that the IRS follows an
“established administrative policy” of only collecting such tax
delinquencies once. Id.; see also
id. at 425–26 (“[T]he mere
fact that the [Government] is attempting to secure a second
13
This issue was raised, although obliquely, by Mrs.
Johnson in her opposition to the Government’s motion for summary
judgment, and therefore can only affect her liability. Mr.
Johnson did not raise a double recovery argument.
30
source for the payment of taxes owed does not necessarily mean
that it will attempt to exhaust both sources in excess of the
debt.”). The court reasoned that “any lingering concerns of
double recovery” could be allayed “by a carefully drafted
judgment order of the district court.” Id. at 425. We agree
with the district court’s reasoning in the prior case, and note
that similar precautions were taken in this case. The district
court’s judgment order specifically provides that the judgments
against the Johnsons will “be reduced to the extent that the
United States . . . has collected or will collect on those debts
pursuant to the offer in compromise it approved with Koba
Institute.” (J.A. 274.)
Mrs. Johnson further asserts that the Government might
succeed in obtaining a double recovery because certain voluntary
payments made by Koba Institute were not properly credited. She
does not, however, develop this argument or cite any evidence to
corroborate it. See Fed. R. App. P. 28(a)(9)(A) (requiring
argument section of an appellant’s opening brief to contain
“appellant’s contentions and the reasons for them, with
citations to the authorities and parts of the record on which
the appellant relies”). As a result, we consider her to have
abandoned this claim. See Edwards, 178 F.3d at 241 n.6.
Moreover, while Koba Institute did designate some payments,
those applied to the second quarter of 2001 (ending June 30,
31
2001), which is not a quarter for which Mrs. Johnson was found
liable.
Accordingly, we conclude that the district court correctly
determined the amounts of the Johnsons’ respective tax
liabilities under § 6672.
IV.
For all of the foregoing reasons, we affirm the judgment of
the district court.
AFFIRMED
32
