McCray v. U.S.
| Decision Date | 10 September 1990 |
| Docket Number | No. 90-2014,90-2014 |
| Citation | 910 F.2d 1289 |
| Parties | -550, 90-2 USTC P 50,492, Unempl.Ins.Rep. CCH 15704A Michael J. McCRAY, Plaintiff, v. UNITED STATES of America, Defendant-Cross-Plaintiff-Appellee, v. Louis James SCOTT, a/k/a James L. Scott, Cross-Defendant-Appellant. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Michael Louis Minns, Houston, Tex., for cross-defendant-appellant.
Doris D. Coles, William S. Estabrook, Gary R. Allen, Chief, Appellate Section, Tax Div., Dept. of Justice, Washington, D.C., for defendant-cross-plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before CLARK, Chief Judge, REAVLEY and KING, Circuit Judges.
I.
Shannon Advertising, a Texas corporation, was owned in equal shares by Louis Scott, Michael McCray, Andrew Martin, and Leonard Raines. Shannon did not pay over its federal employee withholding taxes for the first, second, and third quarters of 1982. Under 26 U.S.C. Sec. 6672 (1954), the Internal Revenue Service (IRS) assessed each of the four owners a penalty of 100% of the payments due. McCray paid $750 and sued for a refund. The IRS counterclaimed, joining the other owners. McCray and the IRS entered a stipulation of dismissal of his refund claim. The district court entered an agreed judgment between the IRS and Martin stating that Martin is jointly and severally liable for 100% of the penalty. The court also granted the motion of the United States for summary judgment against Scott and Raines, holding each liable for 100% of the Sec. 6672 penalty.
II.
Scott raises two issues. He states that he should not be held responsible for paying the penalty because he did not willfully fail to pay over the trust funds as a matter of law. He claims he relied on the other owners, who were in charge of the affairs of the business, and the business's accountants and lawyers to see that the proper taxes were paid. Scott also contends that the district court erred in entering judgment against him for more than the full amount of the penalty now due. He only received credit for the amount which he has paid, yet two of Scott's jointly liable co-defendants have also made partial payments to the IRS. Scott argues that these amounts should have been credited to him in the court's judgment against him.
The summary judgment proof showed Scott is clearly a person responsible for the payment of the withholding tax. Although Scott was not the corporate officer directly in charge of paying federal taxes, he was chairman of the board of directors and a vice president. He admitted knowing as early as June 1982 that the withheld taxes had not been paid over. After that date, he used corporate funds to pay other creditors before paying the delinquent taxes. This makes him a responsible party who willfully withheld tax payments. Howard v. United States, 711 F.2d 729, 733-36 (5th Cir.1983).
As to the amount of the assessment, the IRS states that it is Service policy to collect only 100% of the amount due from any group of jointly liable persons. Because responsible persons are jointly and severally liable under Sec. 6672 for the delinquent taxes, USLife Title Ins. Co. of Dallas v. Harbison, 784 F.2d 1238, 1243 (5th Cir.1986), IRS procedure is to seek a judgment against each party for the full amount due and later abate the total liability by the accumulation of amounts paid by each responsible party. This abatement does not occur, however, until the "expiration of the statutory period for commencement of a refund suit or, if a refund suit is filed, upon final adjudication of the action." Gens v. United States, 615 F.2d 1335, 1340, 222 Ct.Cl. 407 (1980), cert. denied, 459 U.S. 906, 103 S.Ct. 209, 74 L.Ed.2d 167 (1982) (citation omitted); see USLife, 784 F.2d at 1243-44. The IRS argues that in ...
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