Opinion ID: 6209
Heading Depth: 2
Heading Rank: 2

Heading: The Issue: Does Sec. 6672 Have an Applicable Tax Period?

Text: 27 Stallard contends that although the district court erred in its reasoning, it reached the right result. 16 Specifically, he argues that the presumption of validity that attached to the assessment because of the documentation provided by the supporting record, Form 4340, has been rebutted by the IRS's own documents and by admissions made in the instant case. Stallard maintains that these documents and admissions conclusively prove that the assessment made on Form 23C on June 13, 1988 was made for the wrong tax period: the one ending June 30, 1983. Relying on the mandatory language of Sec. 301.6203-1, which states that [t]he summary record, through supporting records, shall provide identification of ... the taxable period, if applicable, 17 Stallard concludes that the June 13, 1988 assessment is invalid for failure to identify the correct taxable period. 28 The government attempts a preemptive strike by arguing that the Sec. 6672 penalty tax does not have a taxable period--hence the taxable-period requirement in Sec. 301.6203-1 is not applicable. The government reasons that, because a responsible person is liable for the total liability accumulated while he was a responsible party--instead of being liable for discrete and separate amounts based on individual tax periods--the liability under Sec. 6672 does not pertain to particular tax periods. The government declares that the IRS's various cites to the period ending June 1983--which were premised on taxes owed by another taxpayer (i.e., J & E Petroleum), for another type of tax (i.e., corporate taxes)--were merely reference device[s] used for administrative convenience. Thus, according to the government, the June 13th assessment in the instant case need not identify any taxable period to be valid. We find this argument to be patently specious. 29 A taxpayer is liable for a penalty under Sec. 6672 if, and only if, that person is a responsible party. 18 That taxpayer is a responsible party if he was both 1) under a duty to collect and pay over the taxes, and 2) willfully failed to do so. 19 But liability under Sec. 6672 does not exist in the air--such liability is imposed only on those persons responsible for particular taxes of a particular entity. And we are satisfied that both logic and precedent mandate a temporal requirement for Sec. 6672: such liability is imposed only on those who were responsible parties for particular tax periods. 30 We have consistently presumed such a requirement when seeking to determine whether a person has the effective power--and hence the duty--to pay the trust fund taxes due. To determine whether a person is liable because he has the power to pay those taxes without also considering whether he held that power in the particular tax periods in which the deficiency accrued would be nonsensical. 20 31 Likewise, we have imposed a temporal requirement on the willfulness prong of Sec. 6672: If a person is a responsible person both before and after withholding tax liability accrues (and liability accrues per tax period), then that person has a duty to pay over unencumbered funds acquired after the trust fund obligation becomes payable. Failure to do so when there is knowledge of the obligation constitutes willfulness. 21 Once again, to speak of willfulness under Sec. 6672 without considering the tax periods during which the person in question was responsible would be nonsensical. 32 Requiring the assessment to refer to the correct taxable period is also necessary to preserve accuracy in assessments under Sec. 6672. The instant case aptly illustrates this need, as the government admits that the reference period used here referred to the wrong taxes, owed by the wrong taxpayer, for the wrong tax period. And accurately ascertaining the correct tax period is more than a mere technicality. Once again, the instant case illustrates this proposition, given that Stallard has been subjected to the concurrent imposition of two tax liens: one based on the tax period ending March 31, 1982, and the other based on the tax period ending June 30, 1983. Thus, even though--as admitted by the government in court--neither Stallard nor J & E Petroleum Co. ever owed trust fund taxes for this latter period, he has been subjected to an additional tax lien based solely on this later period for no other reason than that the IRS could not, would not, or simply did not bother to ascertain accurately the correct tax period. 33 Finally, we emphasize the narrowness of our determination today. As the government correctly notes, Sec. 6672 liability applies to the total amount due; of course, the total amount due for a responsible party is predicated on accruals for each tax period in which that taxpayer is a responsible party. Nonetheless, an assessment based on the last period for which that taxpayer is a responsible party would be sufficient as that assessment would be for a particular tax period in which that taxpayer is liable, and that assessment would accurately reflect that an accrued amount is due for that period. A properly executed Form 4340 referring to the tax periods making up this accrued liability would, in such a case, invoke the presumption of validity as to that assessment, subject, of course, to the evidence at trial as to when that taxpayer was a responsible party. 22 34 Thus, our holding today would not necessarily affect the typical case in which the government assesses a taxpayer for the last of several periods for which that taxpayer had Sec. 6672 liability. In the instant case, though, Stallard was assessed for but one tax period, one for which he owed nothing. The predicate for that assessment--a reference to a tax period for which Stallard was liable--was missing.