Opinion ID: 677125
Heading Depth: 2
Heading Rank: 3

Heading: The Responsibility Prong

Text: 9 Under Sec. 6672, persons responsible have the final word as to what bills should or should not be paid and when. Purcell v. United States, 1 F.3d 932, 936 (9th Cir.1993) (quotations omitted) (sole authorized signatory who was president and sole shareholder liable under Sec. 6672 despite delegation of financial matters to chief financial officer). The final word does not mean final but instead the authority required to exercise significant control over the corporation's financial affairs, regardless of whether [the individual] exercised such control in fact. Id. at 937 (emphasis added); see also Turner v. United States, 423 F.2d 448, 449 (9th Cir.1970) (finding that [i]n this context 'final' means significant, rather than exclusive control). 10 [R]esponsibility is a matter of status, duty, and authority, not knowledge. Davis v. United States, 961 F.2d 867, 873 (9th Cir.1992) (president and major shareholder liable under Sec. 6672 because he paid other creditors rather than the delinquent taxes), cert. denied, --- U.S. ----, 113 S.Ct. 969, 122 L.Ed.2d 124 (1993). Authority turns on the scope and nature of an individual's power to determine how the corporation conducts its financial affairs; the duty to ensure that withheld employment taxes are paid over flows from the authority that enables one to do so. Purcell, 1 F.3d at 937. 11 Although an individual's daily functions may be unrelated to financial or tax-related decision-making, that individual may be responsible by having the authority to pay or to order the payment of delinquent taxes. Id. An individual who does not have the authority and control to pay the payroll taxes may not be responsible. See Alsheskie, 31 F.3d at 839-40 (defendant not responsible when he submitted an affidavit indicating that the parent corporation essentially precluded [him] from exercising the degree of autonomy, authority and control necessary to be able to pay the payroll tax liabilities ... on a timely basis). Courts must look beyond official titles to the actual decision-making process. Godfrey v. United States, 748 F.2d 1568, 1575 (Fed.Cir.1984) (chairman of the board of directors not liable under Sec. 6672 because there was no evidence that he had or exercised control over collection, accounting for, or payment of taxes). 12 The Second Circuit outlined factors relevant to whether an individual is responsible under Sec. 6672 in Hochstein, 900 F.2d at 547, stating that the individual's duties as outlined in the corporate bylaws, his ability to sign checks, his status as an officer or director, and whether he could hire and fire employees were important factors to consider. In Hochstein, the Second Circuit found the defendant responsible because as controller of the company, he had check signing authority and the discretion over which creditors to pay. See also Gephart v. United States, 818 F.2d 469, 473 (6th Cir.1987) (general manager responsible because he had authority to initially determine which creditors to pay). The most critical factor was having significant control over the enterprise's finances. Hochstein, 900 F.2d at 547. 13