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November 30, 1982


The opinion of the court was delivered by: Shadur, District Judge.


Edward J. Brown ("Brown") has sued the United States to recover taxes assessed and collected under Section 6672 of the Internal Revenue Code of 1954, 26 U.S.C. § 6672.*fn1 In response the United States filed a counterclaim against Brown and Wayne D. Ross ("Ross") for civil penalty assessments under Section 6672, and it now seeks summary judgment against Brown.*fn2 For the reasons stated in this memorandum opinion and order the United States' motion is granted in part and denied in part.


From 1967 to 1972 Brown was president, a director and owner of one-third of the voting stock of Marx Industrial Maintenance, Inc. ("MIMI"). Ross became MIMI's comptroller in late 1969 and a director in April 1970, serving in both capacities until sometime in 1971.

In April 1970 MIMI paid over $90,000 in delinquent 1969 employee withholding and social security (FICA) taxes. MIMI failed to make required payments of such taxes due for the second and third quarters of 1970 and for all of 1972. MIMI ceased business operations sometime in 1972, when all its corporate assets were sold and the net proceeds used to pay some of its delinquent federal withholding taxes.

In March 1978 the Internal Revenue Service ("IRS") assessed Brown $188,836.89 ($151,038.59 for the two 1970 quarters, and $37,798.30 for 1972) plus interest under Section 6672.*fn4 Contemporaneously IRS assessed Ross for the 1970 amount plus interest.

In May 1980 Brown paid IRS $607.18, the withholding tax due on his own wages from MIMI in 1972. In May 1980 Brown filed a claim for refund of his $607.18 payment plus interest. In July 1980 the IRS disallowed Brown's claim, and in October 1980 Brown sued to recover his payment. In turn the United States counterclaimed against Brown for $188,229.71 (the IRS assessment less Brown's payment) and against Ross for $151,038.59, in each case plus interest.*fn5 On May 18, 1982 Ross consented to entry of judgment against him in the full amount sought by the United States.

Applicable Law

Section 6672 is obviously strong medicine. It was "designed to assure compliance by the employer with its obligation to withhold and pay the sums withheld, by subjecting the employer's officials responsible for the employer's decisions regarding withholding and payment to civil . . . penalties for the employer's delinquency." Slodov v. United States, 436 U.S. 238, 247, 98 S.Ct. 1778, 1785, 56 L.Ed.2d 251 (1978). Imposition of personal liability on corporate officials is meant to counter the temptation to use the funds collected for corporate purposes. Id. at 243, 98 S.Ct. at 1783. Amounts withheld from employees' wages are, after all, taken from the employees' pockets to satisfy their taxes due the United States. When the United States automatically credits the employees' taxes with the withheld amount, the delinquent employer has converted government money.

Two avenues are potentially available for escape from Section 6672. They stem from its use of the terms "person" and "willfully."

First, Section 6671(b) provides a "person" subject to penalties under Section 6672 is a corporate officer or employee who "is under a duty to perform the act in respect of which the violation occurs." In other words, only a person who had the responsibility for collection and payment of the withheld taxes is liable under Section 6672. Slodov, 436 U.S. at 245, 98 S.Ct. at 1784; Feist v. United States, 607 F.2d 954, 957 (Ct.Cl. 1979).

Second, a finding a corporate official acted "willfully" under Section 6672 requires a showing of personal fault. Slodov, 436 U.S. at 254, 98 S.Ct. at 1788; Feist, 607 F.2d at 962. Our Court of Appeals has held "willful" conduct denotes "intentional, knowing and voluntary acts" or "a reckless disregard for obvious or known risks." Monday v. United States, 421 F.2d 1210, 1215 (7th Cir.), cert. denied, 400 U.S. 821, 91 S.Ct. 38, 27 L.Ed.2d 48 (1970); Garsky v. United States, 600 F.2d 86, 91 (7th Cir. 1979). Mere negligence is not sufficient to constitute "willfulness." Feist, 607 F.2d at 961. But at the same time the government need not show either (1) bad motive — the specific intent to defraud it or deprive it of revenue — or relatedly (2) the absence of reasonable cause or a justifiable excuse. Monday, 421 F.2d at 1216.

In opposing the summary judgment motion, Brown is entitled to all reasonable inferences in his favor from the facts of record, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962), including facts contained in the United States' submissions, see Thornton v. Evans, 692 F.2d 1064 at 1074 (7th Cir. 1982). Granting Brown all the favorable inferences due, this Court finds there is no genuine issue of fact material to Brown's ...

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