United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ Nos. 96-1021/96-1302

___________ Floyd E. Riley, * * Appellee/Cross-Appellant, * * Appeal and Cross-Appeal from the v. * United States District Court for the * Eastern District of Missouri. United States of America, * * Appellant/Cross-Appellee. *

___________ Submitted: April 14, 1997 Filed: July 7, 1997

___________ Before McMILLIAN, Circuit Judge, HENLEY, Senior Circuit Judge, and BEAM , Circuit Judge.

___________ BEAM, Circuit Judge. Th e United States appeals the district court's summary judgment orde r concluding t

hat Floyd E. Riley is entitled to a $2,000 tax refund. Riley cross-appeals the court's denial of his motion for attorney fees. We reverse the court's summary judgment order and remand for further proceedings.-2-

I. BACKGROUND Through 1990, Floyd E. Rile y was associated, in various capacities, with Ferco Fabrica tors, Inc., a company in Moberly, Missouri. During this time Riley wa s majority shareholder and at one point served as chairman of the board of directors. The governmen t

alleges that in 1990, while Riley was still involved with Ferco, th e company failed to remit to the government more than $680,000 it had withheld from employees for social security and income taxes. Riley filed for Chapter 7 bankruptcy in September of 1991, and received hi s discharge in June of 1992. During this time, the Bankruptcy Cod e's automatic stay was in effect, entitling Riley to protection from all actions to rec over claims against him that arose before he filed his bankruptcy petition. See 11 U.S.C. § 362(a)(6). On May 18, 1992, during the period of the automatic stay, the Internal Revenue Service issued to Riley a notice of proposed assessment of a penalty for Ferco's unpaid taxes, pursuant to I.R.C. § 6672. The notice informed Riley that he could either agree to pa y the proposed assessment or could file an appeal with the agency within thirty days. Riley protested the propose d assessment, claiming that it violated the automatic stay and tha t, in any event, he was not responsible. In August of 1993, more than a ye ar after the stay expired, the IRS issued the assessment. Riley paid $2,000 , representing a portion of the assessment, and made a claim for a refund. After the IRS denied his claim, Riley brought this refund action in the district court. On Riley's motion for summary judgment, the district court f ound that the notice of proposed assessment

violated the automatic stay. The district court concluded that th is rendered the assessment void and granted Riley's request for a refund. Riley v

. United S tates , 192 B.R. 727, 730 (E.D. Mo. 1995). In a later order, the court denied Riley's request for attorney fees and costs, concluding that the IRS's position, though-3-

erroneous in the court's view, was substantially justified. The government appeals the court's grant of summary judgment, and Riley appe als the denial of his motion for fees.
II. DISCUSSION
When a corporation fails to pay withheld employee "trust fund" taxes, the IRS may impose a penalty equal to one hundred perc ent of the deficiency on any individual who is a "responsible person" and who willfully fai led to pay the taxes. I.R.C. § 6672. Olsen v. United States , 952 F.2d 236, 239 (8th Ci r. 1991). A section 6672 assessment is presumed correct, and it is the individual's burden to show, in a refund action, that he or she was not a responsible person or did not willfully fail to pay over the taxes

. Id.
Under the v ersion of the Bankruptcy Code applicable to this case, a notice o f deficiency from the IRS to a taxpayer is specifically exempted from the automatic stay provision. See11 U.S.C. § 362 (b)(9) (1988). The district court rejected the agency's argum ent that a notice of proposed assessment under section 6672 is the same as a "notice of defic iency" for purposes of the stay, and therefore concluded that the IRS's act ions were not exempted from the stay requirements. The agency apparentl y concedes this issue on appeal. I ndeed, assuming that a notice of proposed assessment
was not exempted from the stay requirements of the applicable version of th e Bankruptcy Code, it is apparent that the agency's proposed assessment to Ri ley violated the st ay. The notice forced Riley to either submit to the assessment, pursue appeal s within the agency, or (as Riley did) make a partial payment and then bring a refun d action. T he proposed assessment thus intruded on the period of repose that th e automatic stay provides the bankruptcy petitioner.
The actual assessment, however, was issued long after the automatic sta y expired. Riley argues, and the district court concluded, that the agency's issuance of the not ice of proposed assessment during the stay renders the subsequent assessmentThe district court held that the stay violation rendered the assessment void ab 1 initio, rather than merely

"voidable." Riley , 192 B.R. at 729. We find this theoretical question beside the point in this case, and so decline to address it. -4- "void ab initio." Riley suggests two ways that the improper issuance of the notic e 1 might render the later assessment void. We find neither theory persuasive. First, the assessment might be invalid if the improperly issued notice means that the IRS failed to follow required procedures, and so failed to perfect its claim. Th e problem for Riley is that at the time of the events in question, the Internal Revenu e Code did not require the agency to issue any notice before assessing a penalty under section 6672. No t until 1996 did Congress amend section 6672 to require the agency to issue a preliminary notice to the taxpayer before imposing an assessment. Se e Taxpayer Bill of Rights 2, Pub. L. No. 104-168, § 901(a), 110 Stat. 1452, 1465 (1996) (c odifying notice requirement at 26 U.S.C. § 6672 (b)). Riley argues that Revenu e Pro cedure 84-78, 1984-2 C.B. 754 (1984), imposed such a requirement. Revenu e Procedures that involve distinctly procedural matters not otherwise controlled b y statute, however, are not binding on the agency. See, e.g. , Estate of Jones v

. Commissioner , 795 F.2d 566, 571-72 (6th Cir. 1986). Neither the Bankruptcy Code nor the I nternal Revenue Code requires that we render "void ab initio" an assessment for $680,000 in unpaid tax es because that assessment was issued after a "void" notice that the agency was under no obligation to issue in the first place. Second, Riley suggests, it is proper to void the assessment because this would b ea proper remedy for the agency's earlier violation of the stay. Any damages Riley incurred from responding to the agency's proposed assessment , however, were a matter for the bankruptcy court. Whatever remedy Riley might be entitled to fo r the IRS's stay violation is irrel evant to his burden in bringing this refund action: to show that he was not a responsible person or that he did not act willfully in failing to pay Ferco's trus t fund taxes.-5--6-

Because we hold that the IRS should have prevailed belo w on Riley's motion for summary judgment, we affirm on that basis the district court's denial of Riley's motion for attorney fees.
III. CONCLUSION
The district court's grant of summary judgment to Riley is reversed, and th e denial of Riley's motion for attorney fees i s affirmed. The case is remanded for further proceedings not inconsistent with this opinion. A true copy. ATTEST: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.