Opinion ID: 2623226
Heading Depth: 5
Heading Rank: 1

Heading: Hartung could have paid the taxes prior to bankruptcy.

Text: Pursuant to the AESA, employee contributions are deducted by the employer from employees' wages and  held in trust by the employer for the commissioner [of labor] until the employee contributions are required by regulation to be deposited with the commissioner. [5] The statute further provides that [t]hese funds are not subject to garnishment or attachment, and in the event of lien, judgment, or bankruptcy proceedings are not considered assets of the employer.  [6] Accordingly, MarkAir was not barred by federal bankruptcy law from contributing at least this portion of the taxes it owed ($26,578). [7] Neither federal bankruptcy laws in general, nor the bankruptcy court's orders in MarkAir's case in particular, barred MarkAir from forwarding the employee contributions to the state. Therefore Hartungas an employer under AS 23.20.240can be held liable for MarkAir's failure to forward them.
While Hartung could have paid the $26,578 in employee contributions to the state, MarkAir's required employer contribution to the unemployment insurance fund ($108,438) remains at issue. But the record shows that there was a significant pre-bankruptcy period during which (1) the contributions were due and (2) Hartung couldin a real-world sensehave caused MarkAir to pay them. Because he failed to do so, his argument that it is inequitable to hold him personally liable for the contributions is unpersuasive. This is especially true because he was acutely aware of the possibility that a failure to see that MarkAir paid the contributions might result in the state holding him personally liable. The regulation setting forth the time when contributions are due provides: Contributions by employers and employees are due and shall be paid for each calendar quarter on or before the last day of that month which follows the calendar quarter for which contributions have accrued. [8] The first quarter endedand the last of the contributions accruedon March 31, 1995. Therefore, MarkAir's contributions were due beginning April 1 and had to be paid on or before April 30. MarkAir declared bankruptcy on April 14. After that time, the bankruptcy workout made it impossible for Hartung to cause MarkAir to make the contributions, since SeaFirst refused to allow such payments. However, from April 1 to April 13, Hartung had the ability to compel MarkAir to pay the contributions which were due. Hartung himself testified that we did have sufficient funds in the bank accounts to [make] the payments, and his authority as CFO to order the payments is unquestioned. As MarkAir's chief financial officer, Hartung had the opportunity to behave strategically in this case: He could have directed that payments be made during the pre-petition period when they were due and during which time he had the power to effectuate the payments. [9] Or he could have declined, or neglected, to do so. Holding him personally liable as a statutory employer is therefore not inequitable. This conclusion is further supported by Hartung's awareness that he might be held personally liable for the contributions if MarkAir did not pay them. After MarkAir's first bankruptcy filing in 1992, he was personally assessed under an analogous federal statute for unpaid corporate excise taxes. Further, during the administrative hearing on his liability, Hartung testified that he included the pre-petition unemployment taxes in the budget he submitted to SeaFirst because it was my desire to avoid any possibility of this particular event happening. The particular event to which Hartung referred is the department's proceeding against him personally for MarkAir's unemployment taxes. Therefore, it is clear that Hartung was well aware of what personal consequences he might incur from MarkAir's failure to pay the taxes. Under these circumstances, Hartung was properly held liable for MarkAir's unpaid unemployment contributions.