Opinion ID: 767352
Heading Depth: 2
Heading Rank: 1

Heading: Withholdings

Text: 14 Thayer appeals his conviction for violations of I.R.C. S 7202, arguing as a matter of law he could not be found guilty of the withholding tax offenses charged. I.R.C. S 7202 penalizes [a]ny person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax.... Thayer claims S 7202 is inapplicable because he was not a person required to pay over withheld taxes and because he truthfully accounted for the unpaid taxes.
15 As noted, only a person required under this title to collect, account for, and pay over withholding taxes is criminally liable under S 7202. Thayer argues that only employers such as MIS and ELOP who are required to withhold employees' taxes under I.R.C. SS 3402-03 qualify. Thayer contends he was merely an officer and part-owner of the corporations, and not an employer as defined by the Internal Revenue Code. 6 Because this is a question of statutory interpretation, we will exercise plenary review. See Parise, 159 F.3d at 794; Hayden, 64 F.2d at 128. 16 I.R.C. S 6672(a), applying the same language in S 7202, imposes civil penalties on any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax. In Slodov v. United States, 436 U.S. 238 (1978), the Supreme Court held that S 6672(a) applies to corporate officers or employees responsible for the collection and paying over of withholding taxes. See id. at 244-45. 7 Although the government in Slodov sought only civil penalties, the Court stated that persons civilly liable under S 6672(a) could also be held criminally liable under S 7202. See id. at 245, 247. Thayer urges us not to follow this apparent dicta in Slodov. He contends that a corporate officer is a person for purposes of S 6672(a) only because S 6671(b) specifies that the term person, as used in I.R.C. ch. 68, subchapter B, encompassing SS 6671-24, includes 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. But for purposes of S 7202, the term person is defined by identical language. See I.R.C. S 7343 (The term `person' as used in this chapter [I.R.C. ch. 75, encompassing SS 7201-44], includes 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.). Therefore, Thayer, as the president and majority owner of MIS and ELOP, was properly charged and convicted as a person under S 7202.
17 Thayer contends the statute imposes criminal liability only on one who neither accounts for nor pays over withholding taxes. Since he did account for the withheld funds, Thayer argues the evidence was insufficient to convict him under S 7202. 18 As noted, S 7202 applies to one who willfully fails to collect or truthfully account for and pay over employees' income taxes. Thayer and the government both interpret this language to criminalize either of two acts: (1) willful failure to collect employees' income taxes or (2) willful failure to truthfully account for and pay over withheld taxes. Because Thayer accounted for the withheld taxes by reporting the withholdings on the corporations' quarterly tax returns, he can be convicted only under the second prong. Therefore, the question is whether a person who collects and accounts for but does not pay over taxes has failed to account for and pay over those taxes. Because this is a question of statutory interpretation, we will exercise plenary review. See Parise, 159 F.3d at 794; Hayden, 64 F.2d at 128. 19 The Court of Appeals for the Second Circuit faced the identical question and, relying on the reasoning in United States v. Brennick, 908 F.Supp. 1004 (D. Mass. 1995), ruled that S 7202 requires employers to both account for and pay over the taxes. The court held the plain language of the statute supported this reading:  `The phrase truthfully account for and pay over is... unambiguously conjunctive. A person who was required to truthfully account for and pay over a tax would be required to do both things to satisfy the requirement.'  United States v. Evangelista, 122 F.3d 112, 121 (2d Cir. 1997) (quoting Brennick, 908 F. Supp. at 1016) (omission in original). The court also noted that a contrary interpretation `would result in a greater penalty for one who simply failed to collect trust fund taxes than for one who collect[ed] them and, as is charged here, used them for his own selfish purposes..., so long as he notified the IRS that he had collected the tax. That Congress intended to make such a distinction is simply inconceivable.'  Id. at 121 (quoting Brennick, 908 F. Supp. at 1017) (omission in original). We agree. 20 Thayer points out that, as the Second Circuit interpreted S 7202, the phrase willfully fails to... truthfully account for and pay over has the same meaning as willfully fails to... truthfully account for or pay over, arguing that Congress might have exempted those who account for but do not pay over withholding taxes to encourage reporting, thereby facilitating collections. Conceding ambiguity, Thayer seeks to rely on the rule of lenity. See, e.g., United States v. Turcks, 41 F.3d 893, 901 (3d Cir. 1994). But [t]he simple existence of some statutory ambiguity... is not sufficient to warrant application of th[e] rule [of lenity], for most statutes are ambiguous to some degree.... The rule of lenity applies only if, after seizing everything from which aid can be derived, we can make no more than a guess as to what Congress intended. Muscarello v. United States, 524 U.S. 125, 138 (1998) (internal quotation marks and ellipses omitted). 21 Thayer suggests a rationale why Congress might have penalized more severely those who neither report nor pay over withholding taxes than those who report but fail to pay over the taxes, but does not convincingly answer the Second Circuit's telling analysis: that on Thayer's reading, those who collect the taxes and spend them on personal expenses, effectively stealing the tax moneys, will receive no criminal penalties, whereas those who never collect the taxes at all face criminal sanctions. We agree with the Court of Appeals for the Second Circuit that Congress could not plausibly have intended Thayer's reading of the statute. 22 We also note the title of a section can assist in resolving ambiguities. See I.N.S. v. National Ctr. for Immigrants' Rights, Inc., 502 U.S. 183, 189 (1991). Section 7202 is entitled, Willful failure to collect or pay over tax, suggesting the section covers willful failure either to collect or to pay over the taxes. For the reasons stated, we hold Thayer was properly convicted under S 7202 for accounting for but failing to pay over withheld income taxes.