Legal Document

42 United States Supreme Court Reports Lawyer’s Edition 2d Series KF101.8 U54 212 95 Reporter 247 419 U.S. 43 William OTTE, Trustee in Bankruptcy of Freedomland, Inc., Petitioner,v.UNITED STATES and the City New York. Number 73—375. Argued Oct. 15, 1974. Decided Nov. 19, Syllabus[ 1. A trustee bankruptcy for an employer is required by withholding provisions Internal Revenue Code 1954 (IRC) similar York Administrative to withhold taxes from payment priority claims wages earned employees prior employer's bankruptcy, but unpaid at inception proceeding. The wage 'payment wages' under § 3402(a) requiring income taxes, 3102(a) social security 'employer,' defined 3401(d)(1) include 'the person having control payment' wages, present 3402(a). same rationale applies city provisions. Pp. 48—52. 2. From obligation it follows that also prepare submit claimants taxing authorities reports returns employers §§ 6051(a), 6001, 6011 Code, Pacific KF135 P2 52. 3. Requiring withhold, report, file does not unduly burden administration bankrupt estates so as contravene spirit Act, any employer, or receiver, arrangement debtor, other fiduciary, with a like number must bear; moreover, both allow flat rate, thus facilitating tax computation. 52—54. 4. Proofs claim respect on are required. Since liability accrues only when paid, since subject here, although before were paid thereto, came into being during debts which proofs be filed. 54—55. 5. federal entitled, they emerge, second 64a(2) Act. Such within fourth 64a(4), did become due owing until after following bankruptcy. Nor such entitled first 64a(1), costs expenses estate, part themselves carved out those claims. 55—58. 2 Cir., 480 Federal Reporter, 2nd 184, affirmed. BLACKMUN, J., delivered opinion unanimous Court. Howard Karasik, City, petitioner. Keith Atlantic Jones, Washington, D.C., respondent States. Samuel Judge Warms, respondent. Mr. Justice BLACKMUN 1 This case raises issues (a) whether proceeding, and, if so, (b) entities claim, (c) payment, any, enjoy 64a Act (the Act), 11 KF62 104(a).1 * On September 1964, corporation, filed petition District Southern Chapter XI 701—799. failed, August 30, 1965, Freedomland was adjudicated bankrupt. Petitioner, Otte, appointed qualified trustee. 3 During statutorily prescribed six-month period filing against see 57 63 93 103, 413 former (each amount $600 less all aggregating approximately $80,000) had been three months preceding petition. These concededly 64a(2). No Insurance Contributions these claims, withholdable Chapters 24 21, respectively, 1954, 26 3401—3404 3101—3126, States, no personal tax, 46, Titles T U, city. 4 In November 1969 motion order directing distribution without deduction federal, state, taxes. He asked referee declare pay report return relative thereto respective authorities. State York, served, response trustee's motion. respond. issued granting relief he requested. App. 48a—50a. supporting memorandum decision, stated reporting requirements statutes 'would impose further entirely inconsistent objective efficient expeditious economic estates,' 'compliance . utterly letter Act.' 36a, 37a. 5 petitions review referee's decision. After hearing, reversed decision insofar pertained It directed concluded amounts withheld 'taxes became legally bankrupt,' language therefore, priority. court observed little more than simple bookkeeping effort would involved 25% distributions. held because employees' gave notice creditors total distributable account Court, however, ruled ground city's effective 1966, 1964 re 341 F.Supp. 647 (1972). 6 trustee, the—United appealed. Appeals Second Circuit affirmed part. obligated over claim. held, however—and this extent disagreed Court—that 184 (1973). 7 We granted certiorari (unopposed States) primarily circuits disarray accorded prebankruptcy claims.3 414 1156, 94 912, 39 108 (1974). cross-petition either II Withholding, Reports, Returns 8 Every has faced issue, including case, contrary ruling referee, state municipal statutes, require payments claimants, employers. versus Fogarty, 164 26, 30—33 (CA8 1947); Curtis, 178 268, 269 (CA6 1949), cert. denied, 339 965, 70 1001, L.Ed. 1374 (1950); Lines California Dept. Employment, 242 201, 202, reh. den., 246 (CA9), 355 857, 78 86, 64 (1957); Connecticut Motor Lines, 336 96 (CA3 1964). To effect Daigle, 111 109, (Me.1953). 9 requirement withholding. Section 3402(a), requires '(e)very making 'deduct upon determined ..' 3401(a) defines 'wages' purposes mean, certain exceptions, 'all remuneration services performed employee his employer,' 3401(d) 'employer' whom individual performs service, whatever nature, person.' latter section makes exception where have services'; means wages.' Sections T46—51.0(a) U46—8.0 generally effect.4 10 contends meaning that, event, claimant's relates. who them their commencement proceeding There is, can be, dispute this. fact bankrupt, rather made employment relationship terminated, do convert something 'wages,' Code. That statute, noted, broadly include, exceptions material remuneration.' And 3401(d), defining twice refers 'performs performed.' speaks past tense well thereby plainly reveals continuing prerequisite payment's qualification 'wages.' regulations 1943 provided specific terms. Regulations 31.3401(a) 1(a)(5); Treas.Reg. 120 406.205(b) (1954); 116 405.105 (1944 1951 eds.); 115 404.101(a) (1943). conflict statute; statutory purpose reasonable; valid exercise rule-making power. Cammarano 358 498, 507—512, 79 524, 530—532, 462 (1959).5 12 13 effected one odes defeat requirement. Although 'employer wages,' (1), provides 'does services,' term then obviously intended place responsibility point control. petitioner suggests rests former's duty, 39a(5) 67 (a)(5), 'declare dividends.' need determine 47a(8) (11) 75(a)(8) (11), recommendations actual payments, supervision general estate itself, 'control One such, duty withholding, may be.6 An present. 14 situation FICA 3102(a), collected deducting 'from paid.' Here, too, clearly even though again, time between claimant longer exists. also, long consistently effect. 31.3121(a)—1(i); 128 408.226(a) (1951); 106 402.227(a) (1940). define significance, given narrower construction 15 Because identity definition already observed, n. 4, supra, necessarily tax. 16 finally placing imposition penalty barred 57j 93(j). argument, presence 6672 6672, T46—65.0(g) U46—35.0(g) penalty, apart willfully fails fulfill attempts evade That, obviously, case. 17 baron returns. routinely withhold. 6051(a) furnish written statement showing each duplicate available Service. 6051(d). 6001 every responsible collection keep records make Secretary prescribes. applicable respond statutes. 31.6001—1, 31.6001—2, 31.6001 5, 31.6011(a)—6(a)(1), 31.6051—1; Rev.Proc. 71—18, 1971—1 Cum.Bull. 684. undisputed comply 3402 3102. Nicholas 384 678, 693, 86 1674, 1684, 853 (1966). 18 effect, T46—52.0 T46—54.0, U46—9.0 U46—11.0, we reach conclusions thereunder. 19 C. Expense delay. argues, obligations places odds some reliance, paper Referee Hiller, Folly Fogarty Case, 32 Ref.J. 54 (1958), author states application rule sheer nonsense' 'out harmony sound law.' Id., 54, 56. 20 course, overriding concern keeping fees administrative minimum preserve much possible creditors. 3A W. Collier, 62.05(1), 62.02(5) (14th ed. 1972). cannot denied paperwork takes occasions expense. particular computed claims; (Forms W—2, W—3, 941) prepared furnished Service; maintained; remitted entities. 21 persuaded, undue violative burden, less, size bear, borne receiver debtor fiduciary employees. disproportionate.7 Further, Service endeavored lighten load its alternative combined rate See 2, supra. done 1% rate. Neither should necessary, often easily suggested, employ accountant. Computations rates 1%, elementary arithmetic exercises, hardly worthy accountant's talent; high school student able computations bookkeeper, clerk, himself. added tasks reporting, returning, remitting contemplated, our view, interests entities, creditors, through them, public, outweigh minuscule estate. Swarts Hammer, 194 441, 444, 695, 696, 48 1060 (1904). If considered respect, matter legislative, judicial, concern. nothing relieves duties. Cf. 7507, 108(b), 371, 372 372. III Claim 22 asserts becuase failed thereof barred. said notice, reason Freedomland's schedules, owed six months; could obtain extension time, 57n 93(n), compute chose ignore bar directed, among others, 'taxing agencies,' 24a. 23 misconceives nature withheld. Liability paid. 3101(a) Code; U46—8.0. incurred partake, Furthermore, serve here. apprise existence themselves, cover gross unpaid. increment. 25 conclude, IV With properly placement scale determined.8 choice lies (costs administration), urged States; (wages commissions, limited statute specifies), York; ('taxes bankrupt'), none parties here; all. third fifth priorities 27 readily reject As noted above, constituting book before. situation, thus, differs 'which bankrupt.' John Horne Co., 220 33 (CA7 1955); Pomper 196 211 (CA2 1952). 28 similarly priority, recognize appears favorite conclusion reached courts passed issue. 3, leading approach there, underlying reasons, merely 'should allowed classified expense administration,' F.2d, 33. followed accrued 'subsequent character administration.' 71. 29 think observation arose dignify prime status grant very 64a(1) ('including necessary preserving subsequent petition') indicates items addition develop Withholding strike us doing business. They attributable entirety availability funds accrue assured. addition, anomalous accord higher directly relate. computational base greater payments. are, full derive therefore fully agree Circuit's observation, 190: 'Conceptually treated way part.' 30 Randall, 401 513, 91 991, 273 (1971), id., 515, 993, 'is policy question priorities,' result concerned 7501(a) 7501(a), provision trust fund impact complied with, administration. Randall holding, Brief Petitioner 18—19, themselves. 31 conclude 104(a).9 judgment ordered. 34 Affirmed. '§ 104. Debts '(a) advance dividends estates, shall (1) administration, .; (2) exceed claimant, date workmen (4) subdivision released discharge Under directives, paying option 3101 3402. First priority: 203, (1957). 190 1973). Fourth 96, 102—106, 33, 35 1955), concerning stated: 'We impressed reasoning case.' Note, 56 Mich.L.Rev. 631 (1958); Comment, Bankruptcy—Priorities—Fourth Priority Assigned Payroll Taxes Wages, 40 N.Y.U.L.Rev. 360 (1965); Rutgers L.Rev. 546 (1965). terms appear U meanings T46—1.0(c) U46—1.0(b), (e), (l) (1971). Embassy Restaurant, 359 29, 554, 601 (1959), pressed issue there contributions union welfare fund, collective-bargaining agreement, 'wages workmen.' acknowledges, must, indeed, different argued excepting employee.' 32. received evidence compliance. compliance 'adds slightly inescapable task cost verifying payment.' 647, 654 (SDNY set aside. done, pursuant agreement rights affected thereby. position established 7501(a). (1971); 690—691, 1683, unnecessary consider whether, Government prevail first-priority here modified absence advised estate's assets sufficient first- second-priority full. Tr. Oral Arg. 28—29. Whether first-rather practical consequence

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