Opinion ID: 767352
Heading Depth: 3
Heading Rank: 2

Heading: Truthful Accounting

Text: 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.