Court Opinion

ID: 9487764
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:25:39.008536+00
Date Added: 2024-06-11T17:52:28.120909
License: Public Domain

NYGAARD, Circuit Judge,
dissenting.
26 U.S.C. § 6672 provides that a person responsible for withholding and paying over taxes who willfully fails to do so is liable for a penalty equal to the total amount of the unpaid taxes. Because I think the facts of this case do not establish Greenberg’s responsibility as a matter of law, I would reverse the summary judgment of the district court. Hence, I dissent.
Responsibility under § 6672 “is a matter of status, duty or authority, not knowledge.” Quattrone Accountants, Inc. v. IRS, 895 F.2d 921, 927 (3d Cir.1990). A person is responsible within the meaning of § 6672 “if the person has significant, though not necessarily exclusive, control over the employer’s finances.” Id. at 927. “Significant control” means “the final or significant word over which bills or creditors get paid.” Id.; see Gephart v. United States, 818 F.2d 469, 473 (6th Cir.1987) (stating that the test for responsibility focuses on “the degree of influence and control which the person exercised over the financial affairs of the corporation and, specifically, disbursements of funds and the priority of payments to creditors.”); Godfrey v. United States, 748 F.2d 1568, 1576 (Fed.Cir.1984) (defining responsibility in terms of a person’s “power to compel or prohibit the allocation of corporate funds.”). Thus, in Quattrone, we found an accounting firm to be a responsible person because it
paid UDF’s [the employer’s] monthly bills without prior approval. Consistent with this authority, [it] had possession of signature stamps of the treasurer and president of UDF. The only limitation on this authority was that each month [it] had to present to the Board of UDF the bills it had paid for the previous month....
Quattrone, 895 F.2d at 927. Factors we have looked to in determining whether a person has significant control over an employer’s finances include:
(1) that person’s duties under the employer’s corporate bylaws; (2) his or her ability to sign checks on the employer’s bank account; (3) the signature on the employer’s federal quarterly and other tax returns; (4) the payment of other creditors in lieu of the United States; (5) the identity of the officers, directors and principal stockholders of the employer; (6) the identity of the individuals in charge of hiring and firing employees; and (7) the identity of the individuals in charge of the employer’s financial affairs.
Brounstein v. United States, 979 F.2d 952, 954 (3rd Cir.1992).
The district court held that Greenberg was a responsible person as a matter of law. It correctly noted that the definition of “responsible person” is not limited to the person with the final say on which bills get paid, but includes others as well. See Quattrone, 895 F.2d at 927; see also United States v. Vespe, 868 F.2d 1328, 1332 (3rd Cir.1989) (“More than one individual may be a responsible [pe]rson for a given employer.”). The district court concluded, primarily from Green-berg’s authority to sign checks, that he had such significant say. Greenberg v. U.S., 873 F.Supp. 912 (M.D.Pa.1993).
I disagree that Greenberg’s responsibility was established here as a matter of law. I think that the district court placed too much reliance on Greenberg’s check-writing role. That is one factor relevant to the question of responsibility, but not the only one. See Godfrey, 748 F.2d at 1575 (“The mechanical duties of signing checks and preparing tax returns are ... not determinative of liability under § 6672.”). The reason that check-writing ability is often significant is because it generally comes with the ability to choose which creditors will be paid. Burack v. United States, 461 F.2d 1282, 1291, 198 Ct.Cl. 855 (1972). Here, however, it may not have. Greenberg has offered evidence that his check-writing functions were merely ministerial, done at Tuchinsky’s behest and requiring his prior approval, and that, although Greenberg could write the checks, they were worthless unless and until Tuchinsky deposit*246ed money into the checking account to cover them.
The government does not dispute this evidence, but it simply points to the other indi-cia of Greenberg’s status. I think that this makes Greenberg’s responsibility a question for the jury. The issue is “for the trier of fact to determine, upon all the evidence, taking into account questions of credibility and those reasonable inferences flowing-from the evidence which may establish, or fail to establish, that [Greenberg] possessed a sufficient degree of authority over corporate deci-sionmaking so as to make him a responsible person within section 6672....” Jay v. United States, 865 F.2d 1175, 1179 (10th Cir.1989).
The district court reasoned that a finding of responsibility was dictated by Brounstein. I disagree. Brounstein was not only the treasurer of the company (like Greenberg), but also was president and under the corporate bylaws had the authority to exercise managerial control. Brounstein, 979 F.2d at 955. Additionally, although most of the checks Brounstein wrote for the company were at the direction of its principal, he also (unlike Greenberg) issued checks without the principal’s approval. Id.
We did say in Brounstein that “[instructions from a superior not to pay taxes do not, however, take a person otherwise responsible under section 6672(a) out of that category ...” Id. at 955 (emphasis added). That, however, does not foreclose the possibility that Greenberg might not be responsible in the first place. The government’s reliance on Howard v. United States, 711 F.2d 729 (5th Cir.1983) and other courts of appeals cases following Howard1 is, for the same reason, misplaced. In Howard, the Fifth Circuit stated:
The fact that Jennings [Howard’s superior] might well have fired Howard had he disobeyed Jennings’ instructions and paid the taxes does not make Howard any less responsible for their payment. Howard had the status, duty and authority to pay the taxes owed, and would only have lost that authority after he had paid them. Authority to pay in this context means effective power to pay. That Howard had that authority is demonstrated by the fact that he did issue small checks without Jennings’ approval on a number of occasions....
Id. at 734 (citations omitted). These cases simply say that, if a person is responsible, a superior’s instructions not to pay the taxes is not a defense to a § 6672 penalty. They do not, however, answer the threshold question of responsibility in this (or any other) case. I would reverse and remand for trial.

. Gephart v. United States, 818 F.2d 469 (6th Cir.1987); Roth v. United States, 779 F.2d 1567 (11th Cir.1986).