Source: http://openjurist.org/436/us/268
Timestamp: 2013-05-18 22:11:28
Document Index: 682037848

Matched Legal Cases: ['§ 6672', '§ 6672', '§ 6672', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 6672', '§ 6672', '§ 6672', '§ 6672', '§ 6672', '§ 17', '§ 35', '§ 6672', '§ 17', '§ 35', '§ 6672', '§ 6672', '§ 17', '§ 35', '§ 6672', '§ 17', '§ 6672', '§ 17', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 6672', '§ 6672', '§ 6672', '§ 17', '§ 6672', '§ 6672', '§ 17', '§ 6672', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 17', '§ 17', '§ 6672', '§ 6672', '§ 17', '§ 17', '§ 17', '§ 35', '§ 17', '§ 17', '§ 35', '§ 17', '§ 35', '§ 17', '§ 17', '§ 17', '§ 17', '§ 17', '§ 17', '§ 17', '§ 17', '§ 17', '§ 6672', '§ 6672', '§ 17', '§ 17', '§ 17', '§ 6672', '§ 17', '§ 6672', '§ 35', '§ 6672', '§ 6672', '§ 6672', '§ 57', '§ 93', '§ 3304', '§ 6672', '§ 17', '§ 35', '§ 6672', '§ 17', '§ 35', '§ 6672', '§ 6672', '§ 7421', '§ 6672', '§ 6671', '§ 6671', '§ 6672']

436 US 268 United States v. J Sotelo | OpenJurist
436 U.S. 268 - United States v. J Sotelo	Home436 us 268 united states v. j sotelo
436 US 268 United States v. J Sotelo 56 L.Ed.2d 275
98 S.Ct. 1795
UNITED STATES, Petitioner,v.Onofre J. SOTELO and Naomi Sotelo.
Decided May 22, 978.
Section 6672 of the Internal Revenue Code of 1954 provides that "[a]ny person required to collect, truthfully account for, and pay over" federal taxes who "willfully fails" to do so, shall be liable to a "penalty" equal to the amount of the taxes in question. Section 17a(1)(e) of the Bankruptcy Act makes nondischargeable in bankruptcy "taxes . . . which the bankrupt has collected or withheld from others . . . but has not paid over." Respondents, husband and wife, were adjudicated bankrupt, as was a corporation in which he was the principal officer and majority stockholder. The bankruptcy court found respondent husband (hereafter respondent) personally liable to the Government under § 6672 for his failure to pay over taxes withheld from employees of the corporation. Subsequently, in proceedings by the Government to collect from respondent on his § 6672 liability, the bankruptcy judge, rejecting respondent's contention that such liability was a "penalty" and as such had been discharged, reasoned that although § 6672 liability was denominated a "penalty," it was in substance a tax, and thus was nondischargeable under § 17a(1), and more particularly § 17a(1)(e). The District Court affirmed. The Court of Appeals reversed. Though recognizing respondent's § 6672 liability, the court held that § 17a(1)(e) was inapplicable because it was not respondent himself but his corporation that was obligated to collect and withhold the taxes, and because in any event the money involved constituted a "penalty," whereas § 17a(1)(e) renders only "taxes" nondischargeable. Held : Respondent's liability under § 6672 is nondischargeable in bankruptcy under § 17a(1)(e). Pp. 273-282.
* In mid-1973, respondents Onofre J. and Naomi Sotelo were adjudicated bankrupts, as was their corporation, O. J. Sotelo and Sons Masonry, Inc. The individual bankruptcy proceedings of the two Sotelos were consolidated. In November 1973, the Internal Revenue Service filed against respondents' estate a claim in the amount of $40,751.16 "for internal revenue taxes" that had been collected from the corporation's employees but not paid over to the Government. Respondents were alleged to be personally liable for these taxes under Internal Revenue Code § 6672, 26 U.S.C. § 6672, as corporate officers who had a duty "to collect, truthfully account for, and pay over" the taxes and who had "willfully fail[ed]" to make the requisite payments.1 Respondents objected to the Government's claim, arguing that they should not be held personally liable for "taxes of the corporation." Memorandum Opinion of Bankruptcy Court (Nov. 29, 1974).
In upholding the Government's claim to the extent of $32,840.71, the bankruptcy court found that Onofre Sotelo had formerly operated the masonry business as a sole proprietorship and that, since the formation of the corporation, he had been its president, director, majority stockholder, and chief executive officer. Naomi Sotelo, on the other hand, though named the corporation's secretary, "did not take an active part in the business." Id. at 1. The court concluded that Onofre Sotelo was personally liable to the Government under Internal Revenue Code § 6672, since he "was charged with the duty and responsibility to see that the [withheld] taxes were paid." Memorandum Opinion, supra, at 3.2 The record does not reflect any appeal of this ruling.
In October 1975 the Government, seeking to collect part of the money owed by Onofre Sotelo under § 6672, served a notice of levy on respondents' trustee with regard to $10,000 that belonged to respondents and was not available for general distribution to creditors in bankruptcy.3 Respondents objected to the levy, in part on the ground that the liability is described i § 6672 itself as a "penalty" and as such had been discharged in bankruptcy.4 The Government argued that, to the contrary, the liability was for "taxes," which § 17a(1) of the Bankruptcy Act, 30 Stat. 550, as amended, 11 U.S.C. § 35(a)(1) (1976 ed.), makes nondischargeable. The bankruptcy judge agreed with the Government, reasoning that, "[t]hough denominated a 'penalty,' [the § 6672 liability] is in substance a tax." 76-1 USTC ¶ 9435, p. 84,157 (SD Ill. 1976). The judge also noted, ibid., that subdivision (e) of Bankruptcy Act § 17a(1) makes specifically nondischargeable "taxes . . . which the bankrupt has collected or withheld from others . . . but has not paid over." 11 U.S.C. § 35(a)(1)(e) (1976 ed.). Respondents appealed to the United States District Court for the Southern District of Illinois, which affirmed on the opinion of the bankruptcy court.
The United States Court of Appeals for the Seventh Circuit reversed. In re Sotelo, 551 F.2d 1090 (1977). It first noted that "Sotelo does not challenge his liability under 26 U.S.C. § 6672 . . . [but] only argues that the liability should have been discharged by his personal bankruptcy petition." Id., at 1091. The court then held that the liability had been discharged, finding persuasive the fact that § 6672 terms the liability a "penalty" and rejecting the Government's argument with respect to the specific language referring to withholding taxes in Bankruptcy Act § 17a(1)(e). 551 F.2d, at 1092.5 The court recognized that its ruling was in conflict with "an uncontroverted line of cases." Id., at 1091.6
"(1) are taxes which became legally due and owing by the bankrupt to the United States or to any State . . . within three years preceding bankruptcy: Provided, however, That a discharge in bankruptcy shall not release a bankrupt from any taxes . . . (e) which the bankrupt has collected or withheld from others as required by the laws of the United States or any State . . . but has not paid over . . . ." 11 U.S.C. § 35(a) (1976 ed.).
Relying on this statutory language, the Government presents what it views as two independent grounds for holding the § 6672 liability of Onofre Sotelo (hereinafter respondent) to be nondischargeable. The Government's primary argument is based on the specific language relating to withholding in § 17a(1)(e); alternatively, it argues that respondent's liability, although called a "penalty," IRC § 6672, is in fact a "tax" as that term is used in § 17a(1).7
Regardless of whether these two grounds are in fact independent,8 § 17a(1)(e) leaves no doubt as to the nondischargeability of "taxes . . . which the bankrupt has collected or withheld from others as required by the laws of the United States or any State . . . but has not paid over." The Court of Appeals viewed this provision as inapplicable here for two reasons: first, because "it was not Sotelo himself, but his employer-corporation, that was obligated by law to collect and withhold the taxes"; and second, because in any event the money involved constituted a "penalty," whereas § 17a(1)(e) "renders only 'taxes' nondischargeable." 551 F.2d at 1092. We believe that the first reason is inconsistent with the Court of Appeals' recognition of respondent's undisputed liability under Internal Revenue Code § 6672, and that the second is inconsistent with the language of § 17a(1)(e).
The fact that respondent was found liable under § 6672 necessarily means that he was "required to collect, truthfully account for, and pay over" the withholding taxes, and that he willfully failed to meet one or more of these obligations. IRC § 6672; see n. 1, supra.9 Since the § 6672 "require[ment]" of collection presumably derives from federal or state law, both of which are referred to in Bankruptcy Act § 17a(1)(e), it is difficult to understand how the court below could have recognized respondent's § 6672 liability, see supra, at 272, and nonetheless have concluded that he was not "obligated by law to collect . . . the taxes," 551 F.2d, at 1092. It is undisputed here, moreover, that the taxes in question were "collected or withheld" from the corporation's employees and that the taxes, though collected, have not been "paid over" to the Government. It is therefore clear that the § 6672 liability was not imposed for a failure on the part of respondent to collect taxes, but was rather imposed for h § failure to pay over taxes that he was required both to collect and to pay over. Under these circumstances, the most natural reading of the statutory language leads to the conclusion that respondent "collected or withheld" the taxes within the meaning of Bankruptcy Act § 17a(1)(e).
"concer[n] with the inequity of granting a taxpayer a discharge of his liability for payment of trust fund taxes which he has collected from his employees and the public in general. . . . The Department does not believe that it is equitable or administratively desirable to permit employers and other persons who have collected money from third parties to be relieved of their obligation to account for an[d] pay over such money to the Government . . . ." Quoted in H.R.Rep.No. 372, p. 6 (emphasis added).
There is no reason to believe that Congress did not intend to meet Treasury's concerns in their entirety. While the Department may not have focused on the specific question presented here, it left no doubt as to its objection to the discharge of "persons . . . charged with the responsibility of paying over . . . moneys collected from third persons." Letter from Assistant Secretary Surrey to Chairman of Senate Judiciary Committee, supra. Respondent without question is such a person, a point essentially conceded here by virtue of the recognition of respondent's liability under Internal Revenue Code § 6672, see supra, at 274-275, and n. 9. Because Congress specifically contemplated that those with withholding-tax-payment obligations would remain liable after bankruptcy for their "conver[sion]" of the tax funds to private use, S.Rep.No. 114, p. 10,10 we must conclude that the liability here involved is not dischargeable in bankruptcy.
Even without these indications of an intent to make nondischargeable the withholding tax obligations of persons in respondent's situation, moreover, Congress' perception of the consequences of corporate bankruptcy makes it most unlikely that the legislature intended § 17a(1)(e) to apply only to the corporation's liability for unpaid withholding taxes. Both the Committee reports and the floor debates contain repeated references to the fact that a corporation "normally ceases to exist upon bankruptcy," H.R.Rep.No. 372, p. 2; see S.Rep.No. 114, p. 2, thereby rendering "uncollectable" the corporation's tax liabilities, 112 Cong.Rec. 13818 (1966) (statement of Sen. Ervin). As one of the bill's principal sponsors observed, corporate dissolution has "the practical effect of discharging all debts including taxes," regardless of statutory declarations of nondischargeability. Id., at 13821 (remarks of Sen. Hruska).11 In view of this congressional assumption, the interpretation of § 17a(1)(e) adopted by the Court of Appeals is untenable, for the combination of corporate dissolution with the personal bankruptcies of those found liable under Internal Revenue Code § 6672 would leave no person within the corporation obligated to the Government for unpaid withholding taxes. Such a result would be directly inconsistent with Congress' declarations that the amendment which became § 17a(1)(e) met the Treasury Department's concern about ensuring post-bankruptcy liability for these taxes.
In light of this legislative history, little doubt remains as to the nondischargeability of respondent's liability under § 17a(1)(e). The Court of Appeals did not consider this history, but instead relied on more general policy factors. The court observed that an "inequit[y]" could arise from holding an individual "liable for a tax owed by a corporation" in cases where, because "[t]he corporate liability . . . vastly exceed[s] the individual's present or future resources," his "entire future earnings could be confiscated to compensate for the corporate liability." Such a result, in the court's view, "would contravene the Bankruptcy Act's basic policy of settling a bankrupt's past debts and providing a fresh economic start." 551 F.2d, at 1092-1093.
However persuasive these considerations might be in a legislative forum, we as judges cannot override the specific policy judgments made by Congress in enacting the statutory provisions with which we are here concerned. The decision to hold an individual "liable for a tax owed by a corporation," even if there is a wide disparity between the corporation's liability and the individual's resources, was made when Internal Revenue Code § 6672 was passed, since it is that section which imposes the liability without regard for the individual's ability to pay.12 And while it is true that a finding of nondischargeability prevents a bankrupt from getting an entirely "fresh start," this observation provides little assistance in construing a section expressly designed to make some debts nondischargeable. We are not here concerned with the entire Act's policy, but rather with what Congress intended in § 17a(1) and its subdivision (e). The statutory language and legislative history discussed in Parts II and III, supra, demonstrate an intention to make a liability like respondent's nondischargeable.13
The Court of Appeals' approach, moreover, would have the effect of allowing a corporation and its officers to escape all liability for unpaid withholding taxes, see supra, at 278-279, while leaving liable for such taxes after bankruptcy those individuals who do business in the sole proprietorship or partnership, rather than the corporate, form.14 In passing § 17a(1), however, Congress was expressly concerned about the fact that the operation of prior law was "unfairly discriminatory against the private individual or the unincorporated small businessman." H.R.Rep.No. 372, p. 2; see S.Rep.No. 114, pp. 2-3. As discussed above, Congress recognized that a bankrupt corporation "dissolves and goes out of business," 112 Cong.Rec. 13817 (1966) (remarks of Sen. Ervin), thereby avoiding IRS tax claims; it was thought inequitable that a sole proprietor or other individual would remain liable after bankruptcy for the same type of claims. See generally sources cited at 278, and n. 11,supra. This inequity between a corporate officer and an individual entrepreneur, both of whom have a similar liability to the Government, frequently would turn on nothing more than whether the individual was "sophisticated" enough "to, in effect, incorporate himself." 112 Cong.Rec. 13817 (1966) (remarks of Sen. Ervin).15 Were we to adopt the Court of Appeals' approach, we would be instituting precisely the kind of "arbitrary discrimination" that § 17a(1) was designed to alleviate. 112 Cong.Rec. 13818 (1966) (statement of Sen. Ervin).16
The Government undoubtedly needs the revenues it receives from taxes, but great as that need may be I cannot join the Court's thrice-twisted analysis of this particular statute to gratify it. The issue involved is the dischargeability in the corporate officer's bankruptcy proceedings of taxes which the corporation is obligated to collect and pay over to the Government. In order to conclude that the corporate officer remains liable for this corporate obligation the Court turns to an unlikely source indeed: a 1966 amendment to the Bankruptcy Act, the only apparent purpose of which was to ameliorate the lot of at least some bankrupts, see infra, at 284-285, and n. 1. The Court then proceeds to slog its way to its illogical conclusion by reading a proviso obviously intended to limit dischargeability of the debts of a bankrupt so as to expand that category of debts. It then attempts to bolster this inexplicable interpretation by construing not the legislation which Congress enacted but a letter from the Assistant Secretary of the Treasury not unnaturally opposing any expansion of the dischargeability in bankruptcy of tax-related liabilities. The net result of this perverse approach to an amendment to the Bankruptcy Act is to make nondischargeable a liability which might well have been dischargeable before Congress stepped in to alleviate some of the hardships resulting from the making of the debts of a bankrupt nondischargeable. In the background of this remarkable decision is § 6672 of the Internal Revenue Code which imposes a "penalty" upon a "person required to collect, truthfully account for, and pay over any tax imposed by this title." 26 U.S.C. § 6672. Perhaps recognizing that this provision not only does not support its conclusion but seriously undermines it, the Court not surprisingly attempts to keep this provision in the background, addressing it only obliquely in a footnote where it summarily concludes, again in a remarkable tour de force of linguistics and logic, that a penalty must mean the same thing as a tax. The underlying debt in this case is that of a third person to pay the tax liability of another. I would want far clearer language than can be found in this statute to reach the conclusion that this liability is not dischargeable in the bankruptcy proceedings of that third person. I therefore dissent.
As an initial matter, since § 17a(1)(e) of the Bankruptcy Act is a proviso to § 17a(1), I would have thought that respondent would have to fall within the terms of the latter before it is even appropriate to consider whether he falls within the terms of the former. That is, § 17a first provides that a "discharge in bankruptcy shall release a bankrupt from all of his provable debts . . . ." 11 U.S.C. § 35(a) (1976 ed.). It then excepts in § 17a(1) through § 17a(8) eight different categories of debts which are not to be generally discharged, including "taxes which became legally due and owing by the bankrupt to the United States or to any State or any subdivision thereof within three years preceding bankruptcy." 11 U.S.C. § 35(a)(1) (1976 ed.). But this latter exception is itself in turn qualified in § 17a(1)(e): "Provided, however, That a discharge in bankruptcy shall not release a bankrupt from any taxes . . . (e) which the bankrupt has collected or withheld from others as required by the laws of the United States or any State . . . but has not paid over . . . ." 11 U.S.C. § 35(a)(1)(e) (1976 ed.). Thus, the normal reading of § 17a(1) should be to limit the nondischargeability of taxes to only those taxes legally due and owing by the bankrupt within the three years preceding bankruptcy, and the subsections of § 17a(1), including § 17a(1)(e), are to be read as an exception to that limitation. That exception provides that certain of the taxes described in § 17a(1) will not be discharged even if more than three years old; they will be nondischargeable without regard to time. Normal statutory construction would thus suggest that the first inquiry should be whether the liability in question is a tax legally due and owing by the bankrupt. Only if it is, would it become necessary to consider whether it is also a tax collected from others but not paid over.
That this is the correct reading of the statute is further buttressed by the legislative history. All the Committees which reported on the 1966 amendment to § 17a stressed that its central purpose was to enable at least some bankrupts to more nearly achieve the fresh start promised by the Bankruptcy Act. The Senate Committee on Finance, for example, in discussing the purpose of the proposed amendment, agreed with the House Committee on the Judiciary "that present law, by denying any discharge of taxes, presents a substantial deterrent to one fundamental policy of the Bankruptcy Act—effective rehabilitation of the bankrupt." S.Rep. No. 999, 89th Cong., 2d Sess., 9 (1966). The Senate Committee went on to suggest slightly different methods from those advanced by the Judiciary Committee to achieve this goal, but its Report, like the others, leaves no doubt that the central purpose of the amendment was to make the Act more favorable to at least some bankrupts by limiting, with only a few specified exceptions, the nondischargeability of taxes to only those due for the prior three years.
This avowed legislative purpose only heightens the incongruity of the Court's interpretation. The statute's major purpose was to limit the nondischargeability of certain debts. And yet the Court holds today that the enactment of § 17a(1)(e) of that statute results in a nondischargeable debt without regard to whether that debt would have been totally nondischargeable before the passage of § 17a(1)(e)—that is, without the slightest attention to the question of whether it is a tax legally due and owing by the bankrupt within the meaning of § 17a(1). Thus, by passing a statute with a basically beneficent purpose, Congress has, according to the Court, not only made nondischargeable a liability which could potentially run into the hundreds of thousands of dollars but may have worsened, rather than bettered, the lot of the bankrupt.1
Finally, even if the language and the history of this statute were less clear, I would hesitate to depart from our longstanding tradition of reading the Bankruptcy Act with an eye to its fundamental purpose—the rehabilitation of bankrupts. This has always led the Court, at least until today, to construe narrowly any exceptions to the general discharge provisions. See, e. g., Gleason v. Thaw, 236 U.S. 558, 562, 35 S.Ct. 287, 289, 59 L.Ed. 717 (1915). Admittedly § 17a is not "a compassionate section for debtors," Bruning v. United States, 376 U.S. 358, 361, 84 S.Ct. 906, 908, 11 L.Ed.2d 772 (1964), but even it must be read consistently with the doctrine of Gleason, supra. And I simply cannot see anything in this case which justifies the Court in departing from this tradition by straining to read into the statute an exception to the dischargeability provisions that was not clearly there before this amendment was passed, when the very purpose of the amendment which the Court is now construing was intended to be benevolent, at least from the bankrupt's perspective.
"It is further believed by the Department that this bill is intended to discharge not only taxes but also penalties and interest. However, the bill makes reference only to taxes. In this connection, it is pertinent to point out that the U.S. Court of Appeals for the 10th Circuit in the case of United States v. Mighell (C.A. 10th, 1959) 273 F.2d 682, held that the word 'taxes' in section 17 of the Bankruptcy Act (11 U.S.C. 35) does not include penalties and, by inference, interest. This apparent ambiguity could cause future litigation." H.R.Rep. No. 687, 89th Cong., 1st Sess., 7 (1965).
Finally the very existence of § 6672 bears testimony to the fact that there is no other section of federal law which makes the employee charged with the duty of collecting withholding taxes liable for those "taxes." If there were such a section, § 6672 would be unnecessary. But it is the absence of such other provision which is dispositive of this case in my opinion.2
The Court next relies on certain concerns expressed by the Treasury Department in a letter from the Assistant Secretary to the Chairman of the House Judiciary Committee. No doubt § 17a(1)(e) was included partially in response to that letter. But there is certainly nothing contained in that or any other provision to indicate that in adding § 17a(1)(e) Congress also intended to extend the concept of "taxes" in § 17a(1) to include the 100% penalty imposed by § 6672 or to encompass a corporate official's responsibility (presumably under the corporate charter and state law) to collect and pay over federal withholding taxes. The Court emphasizes the phrase "and other persons" in the letter and then observes that "[t]here is no reason to believe that Congress did not intend to meet Treasury's concerns in their entirety." Ante, at 277. But emphasizing that phrase to the exclusion of the rest of the letter and the language and structure of the statute places a weight upon that phrase which it cannot bear. Indeed, one could reach a much different conclusion by simply emphasizing other parts of the letter, such as the Department's
"concer[n] with the inequity of granting a taxpayer a discharge of his liability for payment of trust fund taxes which he has collected from his employees . . . ." (Emphasis supplied.) H.R.Rep. No. 372, 88th Cong., 1st Sess., 6 (1963).
Finally, the Court emphasizes the fact that corporations often dissolve upon bankruptcy, thus making all corporate debts dischargeable in fact if not in form. Ante, at 278. Thus, reasons the Court, it is "most unlikely that the legislature intended § 17a(1)(e) to apply only to the corporation's liability for unpaid withholding taxes." Ibid. But clearly Congress, had it really intended to alleviate the problem to which the Court refers, could and hopefully would have used language more suited to the purpose. It is also incongruous to impute the intent to Congress to make this particular liability nondischargeable as to the employee because the corporation will dissolve upon bankruptcy and yet to make no other corporate liability nondischargeable as to the employee even though dissolution of the corporation is just as likely in those cases. Such a statutory scheme not only seems at odds with the basic notion of what a corporation is all abut, i. e., limited liability, but it also imposes a potentially crushing liability on corporate officials—a liability that is nondischargeable in its entirety and virtually in perpetuity. I certainly would not impute such an intent to Congress without a much clearer statutory directive.
While the lifelong liability which the Court imposes today falls on the shoulders of one who was the chief executive officer of a small family business, there is unfortunately nothing in the Court's reasoning which would prevent the same liability from surviving bankruptcy in the case of a comptroller, accountant, or bookkeeper who reaped none of the fruits of entrepreneurial success other than continued employment in the corporation, and in some cases possibly not even that, see n. 3, infra. So long as the Government in its zeal for the collection of the revenue may persuade a bankruptcy court that a corporate employee comes within the Court's Delphic construction of 26 U.S.C. § 6672 and 11 U.S.C. § 35(a)(1)(e) (1976 ed.), such a person will be denied the "fresh start" which Congress clearly intended to enhance by the 1966 amendments to the Bankruptcy Act.3 Before the Government may randomly sweep such persons into a net whereby they are denied a discharge, not of their own tax liability but of a penalty imposed upon them for failure to pay over taxes which had been withheld by another, I would at least insist on a statute which seemed to point in that direction, rather than in the opposite one.
Internal Revenue Code § 6672, 26 U.S.C. § 6672, provides:
Respondents' theory apparently was that the § 6672 penalty is compensatory in nature. The Government does not here dispute that a compensatory penalty is generally dischargeable. See Brief for United States 26-27, and n. 16. See generally Bankruptcy Act § 57j, 11 U.S.C. § 93(j); 8 H. Remington, A Treatise on the Bankruptcy Law of the United States § 3304 (6th ed. J. Henderson 1955).
Respondents raised their homestead exemption argument, see n. 3, supra, in the Court of Appeals, but that court believed that it did not have to reach the issue in view of its holding that the entire § 6672 liability was dischargeable, 551 F.2d at 1093 n. 3. The Government contends here that the issue should have been reached regardless of the dischargeability holding, because Bankruptcy Act § 17a(1) makes a discharge irrelevant to the Government's right to proceed "against the exemption of the bankrupt allowed by law and duly set apart to him," 11 U.S.C. § 35(a)(1) (1976 ed.). Brief for United States 33-34, n. 23. In view of our holding that the § 6672 liability is not dischargeable, we need not address this contention. On remand, of course, the Court of Appeals may consider respondents' argument that some or all of the homestead exemption belongs to Naomi Sotelo.
Such individuals would be liable after bankruptcy for "taxes" which they, as employers, "collected or withheld from others . . . but [did] not pa[y] over." Bankruptcy Act § 17a(1)(e), 11 U.S.C. § 35(a)(1)(e) (1976 ed.).
The dissenting opinion recognizes, post, at 285 n. 1, Congress' unquestioned concern about eliminating corporations' "unfair" advantage over individual entrepreneurs. H.R.Rep.No. 372, p. 2; S.Rep.No. 114, supra, pp. 2-3. Elsewhere our Brother REHNQUIST appears to concede that Congress meant "to ameliorate the lot" of only "some bankrupts" when it passed the 1966 amendment to the Bankruptcy Act. Post, at 282; see post, at 285. There is every indication that the 1966 amendment was not intended "to ameliorate the lot" of corporations and their principal officers, at least with regard to taxes collected from employees. And the dissenting opinion has not even attempted to explain how a Congress concerned about "discriminat[ion] against the private individual or the unincorporated small businessman," H.R.Rep.No. 372, p. 2; S.Rep.No. 114, pp. 2-3, could have thought it just to relieve corporate officers of § 6672 liability in bankruptcy, as the dissent's approach would do, while leaving other owners of "small family business[es]," post, at 291—those who happen to operate through noncorporate entities—subject to the same kind of liability.
There are lower court cases to the contrary. See cases cited ante, at 273 n. 6. This line of authority can be traced to Botta v. Scanlon, 314 F.2d 392 (CA2 1963), however, where the plaintiff sought an injunction against the Internal Revenue Service to restrain the collection of the penalty imposed under § 6672. The court denied the injunction on the authority of the Anti-Injunction Act, which provides in pertinent part: "[N]o suit for the purpose of restraining the . . . collection of any tax shall be maintained in any court . . . ." 26 U.S.C. § 7421(a). The court held that this section applied to § 6672 penalties as well as taxes because § 6671(a) of the Code provides: "[A]ny reference in this title to 'tax' imposed by this title shall be deemed also to refer to the penalties . . . provided by this subchapter." 26 U.S.C. § 6671(a). But while there is clear statutory authority for treating a § 6672 penalty as a tax for purposes of administering the Internal Revenue Code, there is no authority for treating such a penalty as a tax for purposes of the Bankruptcy Act. Indeed, the fact that Congress clearly recognized the need to specify that a penalty was a tax for purposes of the Internal Revenue Code strongly suggests that its failure to so specify with respect to the Bankruptcy Act was not an inadvertent omission.
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