Scott v. United States

• Decision Date: 14 June 2016
• Docket Number: No. 14-14649,14-14649
• Citation: 825 F.3d 1275
• Parties: Ashley Scott, Plaintiff–Counter Defendant–Appellant, v. United States of America, Treasury, Department, Internal Revenue Service, Defendant–Third Party Plaintiff–Counter Claimant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

825 F.3d 1275

Ashley Scott, Plaintiff–Counter Defendant–Appellant

v.United States of America, Treasury, Department, Internal Revenue Service, Defendant–Third Party Plaintiff–Counter Claimant–Appellee.

No. 14-14649

United States Court of Appeals, Eleventh Circuit.

June 14, 2016

Keith H. Johnson, Adam Louis Heiden, Michael P. Tyson, Johnson & Johnson, PA, Jacksonville, FL, for Plaintiff–Appellant.

Janet Arlene Bradley, Marion E.M. Erickson, Jonathan S. Cohen, Philip Doyle, Pascale Guerrier, U.S. Department of Justice, Chief Appellate Section Tax Division, Washington, DC, Arthur Lee Bentley, III, U.S. Attorney's Office, Tampa, FL, for Defendant–Appellee.

Before TJOFLAT, ROSENBAUM, and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge:

This case presents the issue of whether Ashley Scott(“Scott”) is a “responsible person” under 26 U.S.C. § 6672.¹A responsible person is required to pay over to the Internal Revenue Service trust fund taxes—i.e., taxes withheld by a business from employees' wages.The district court granted partial summary judgment for the Government, holding that Scott was a responsible person.Scott's primary argument on appeal is that the district court erred in that regard.A responsible person is personally liable if she acted willfully in failing to pay over the trust fund taxes.The district court also granted partial summary judgment in favor of the Government on the willfulness issue with respect to the 2007 quarters, but submitted the willfulness issue to the jury with respect to the other quarters at issue.Scott also appeals the willfulness issues, and urges us to vacate the jury's finding that she acted willfully.We first address the responsible person issue, and then the willfulness issues.

I.FACTS AND PROCEDURAL HISTORY²

AppellantAshley Scott worked for her father's business, Scott Air, beginning shortly after her graduation from high school in 1995 until its closing in 2008.At the beginning, Scott worked full-time, for an hourly wage.Later, she began to receive a salary and her hours decreased as she went back to school, took many trips, and traveled often to see a band.Scott's father, Tyrene Scott, who owned all of the stock in the company, made her secretary of the company in 1999 without her knowledge or consent; her brother Ryan was also added as vice president of the company, unbeknownst to him.Ryan began working for Scott Air in 1998 and continued working for it until its demise; he never dealt with office matters and instead worked in the field.He did, however, sign occasional checks, but only if their father or Scott was unavailable.

Within the company, Scott's role was very limited.She did not make financial decisions or authorize the payment of any bills to vendors or creditors; she did not open or close bank accounts, or otherwise perform banking functions; she did not guarantee or co-sign loans; and she did not hire or fire employees.She wrote checks when directed to by her father, to buy office supplies, or to give herself advances on her salary.Although she signed the payroll checks, she did not authorize or compile the payroll information.Although Scott did sign two Forms 941 (Employer's Quarterly Federal Tax Return) in 2005 and 2006, she did not recall doing so and states that she only did so because her father was out of town.

Scott Air did well from 2000 to 2004.It provided cell phones and vehicles for Scott, some of the other employees, and even non-employees.But by late 2004 or early 2005, the company began to have financial troubles and began to fail to pay its payroll taxes.Bank records reveal that although Scott Air had money in its accounts, it did not have enough to pay employees, vendors, expenses, and taxes.Although the company filed all of the required quarterly Forms 941 reporting the taxes withheld from employees, it opted to not pay the payroll taxes.The company ultimately closed its doors in 2008, and thereafter Scott and her brother opened a similar business.

On October 22, 2010, the IRS assessed Trust Fund Recovery Penalty (“TFRP”) taxes against Scott for quarters covering the period March 31, 2004, through December 31, 2007.Scott responded by sending 13 Forms 843 (Claim for Refund and Request for Abatement) with a check for $300 that paid the taxes owed for one employee.She then filed suit against the IRS, the United States, and Michael Jenkins, the former manager at Scott Air.She sought a refund of the $300 plus an adjudication that she was not responsible or if she were deemed the responsible person, contribution from other responsible persons.The Government responded by counterclaiming for the full amount and filing a Third-Party Complaint against Scott's father.The district court dismissed Jenkins and granted the Government's partial summary judgment motion, holding that Scott was a responsible party for all thirteen quarters and was willful with respect to the 2007 quarters, but leaving for later jury determination whether Scott was willful in the earlier period.Scott filed for reconsideration and for interlocutory appeal, both of which the district court denied.After a three-day trial, the jury found Scott willfully failed to pay for 6 of the 9 quarters at issue.

II.STANDARD OF REVIEW

We review the district court's order granting summary judgment de novo , “viewing all the evidence, and drawing all reasonable inferences” in favor of the non-moving party.Owen v. I.C. Sys., Inc. , 629 F.3d 1263, 1270(11th Cir.2011).Summary judgment is appropriate if there are no genuine issues of material fact, and the movant is entitled to judgment as a matter of law.Fed. R. Civ. P. 56(a).A genuine issue of material fact exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202(1986).

III.DISCUSSION

A.Are There Genuine Issues of Material Fact on the Responsible Person Issue?

TFRP taxes are not a penalty but a statutory means for the IRS to pursue trust fund taxes, i.e., those that employers withhold and pay directly to the government.Under the governing statute, § 6672, a person responsible for paying the taxes is personally liable if he has “willfully failed to perform a duty to collect, account for, or pay over federal employment taxes.”Thosteson v. United States , 331 F.3d 1294, 1298–99(11th Cir.2003)(citing26 U.S.C. § 6672 ).The Code defines the person responsible for paying as “including 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.”26 U.S.C. § 6671.We have interpreted the statute broadly, Smith v. United States , 894 F.2d 1549, 1553(11th Cir.1990), and have stated that responsibility is “a matter of status, duty, and authority,”Mazo v. United States , 591 F.2d 1151, 1156(5th Cir.1979).³We have further stated that “[i]ndicia 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.”George v. United States , 819 F.2d 1008, 1011(11th Cir.1987).The essential question is whether the person had sufficient control over corporate affairs to avoid non-payment of the employment taxes.Id.

Our cases addressing what constitutes responsibility are necessarily fact-intensive.The issue of liability as a responsible person is a mixed issue of law and fact, and one with respect to which a party is entitled to summary judgment only if there are no genuine issues of material fact.Jay v. United States , 865 F.2d 1175, 1179(10th Cir.1989).⁴All of our cases involve facts that are far more clearcut than those found here.For instance, in Thosteson v. U.S. , the alleged responsible person helped incorporate the company, served as both vice president and president, owned initially 24 percent and then 100 percent of the stock, and possessed the authority to hire and fire.331 F.3d at 1299.Additionally, the person was able to write checks without a co-signer up to $750.Id.Finally we also noted that the taxpayer was especially knowledgeable about the payment of withholding taxes because the company provided employee leasing, explicitly offering the service so that the leasing employer would not have to handle withholding taxes.Id.

In Mazo v. United States , the taxpayers were all director-officers-stockholders or their manager, who all had the authority to sign checks on the regular business account.591 F.2d at 1155.The manager and directors had complete control of the affairs of the company while the manager signed most of the checks from the payroll and salvage account.Id. at 1155–56.And, in Williams v. United States , 931 F.2d 805, 810(11th Cir.1991), we held the taxpayer was a responsible person when he was the president and chief operating officer, had check-writing authority, owned 50 percent of the corporation during one quarter at issue and 100% during the other, and had control over and supervised all of the corporation's daily operations.See alsoBrown v. United States , 591 F.2d 1136(5th Cir.1979)(holding taxpayers were responsible because they managed the daily operations of the corporation, owned half of the stock, had check-writing authority, and personally guaranteed the corporation's debts).

Cases have rejected the taxpayers' defense that they lacked responsibility for paying the taxes because they had been directed by the company's owner not to pay them.In Roth v. United States , 779 F.2d 1567(11th Cir.1986), the taxpayer was executive vice president, hired employees, signed payroll checks, paid most of the bills, had signature authority on all of the company's checking accounts, signed for the company's mortgage, had an option to buy up to 50 percent of the corporate stock,...