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Jefferson v. United States

October 8, 2008


Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 04 C 50291-Philip G. Reinhard, Judge.

The opinion of the court was delivered by: Williams, Circuit Judge


Before BAUER, WILLIAMS, and SYKES, Circuit Judges.

Charles E. Jefferson previously served as the president of the board of directors of a day care center that owed substantial back taxes to the Internal Revenue Service. After Jefferson was personally assessed for the back taxes, he filed suit to recover the amounts he paid to the IRS. The district court granted the govern-ment's motion for summary judgment, finding that Jefferson could be assessed for the day care's tax liability. Because Jefferson is a "responsible person" under 26 U.S.C. § 6672(a) who "willfully" failed to pay the day care's taxes, we agree with the district court, and we affirm.


Jefferson serves as a state representative in the Illinois House of Representatives, and until 2001, he served as president of the board of directors of New Zion Day Care Center, Inc., a Rockford, Illinois day care facility. Jefferson filed suit against the IRS to recover a trust fund penalty of $41,432 that the IRS assessed and collected from him after New Zion failed to remit federal payroll taxes to the IRS for the second, third, and fourth quarters of 2000, and the first and second quarters of 2001.

Jefferson's position as board president from the early 1980s until June 2001 was voluntary and uncompensated. He and the other board members were responsible for the direction of the day care, while Velma Hayes, the paid director of New Zion from 1982 until 2001, ran New Zion's day-to-day operations. As a board member, Jefferson had the authority to direct and authorize payment of New Zion's bills, to authorize payment of its federal tax deposits, to determine its financial policy, and to obtain loans for New Zion, such as the loan he obtained in 1998 for a new day care building. Jefferson was also a signatory on New Zion's bank accounts and co-signed checks on behalf of New Zion.

The day care was funded in part by the United Way organization. In February 1998, the Executive Director of the United Way informed Jefferson that New Zion was not properly paying its payroll taxes. After New Zion lost its United Way funding, partly because of the unpaid taxes, Jefferson secured a loan on New Zion's behalf so the day care could pay the delinquent taxes. On August 31, 2000, Jefferson co-signed two checks payable to the IRS, indicating that the checks were for penalty and interest. After the 1998 delinquency, the board retained an accounting firm and ordered Hayes to pay any taxes that New Zion owed to the IRS.

By 2000, New Zion's financial condition was precarious, and it failed to pay income and FICA taxes for its employees from April 2000 to June 2001. Hayes informed the board, including Jefferson, at its monthly meetings that the day care was unable to pay its bills and tax liabilities. She also provided the board members with a copy of her "director's report" and a "financial report," and she maintained a file with the financial reports at New Zion's office. Jefferson was aware of this file and instructed board members to review the financial reports at each meeting before they were accepted by a majority vote.

On May 13, 2002, the IRS made assessments against Jefferson and Hayes for the delinquent tax payments. Jefferson filed suit in the district court to reclaim the $41,432 he paid to the IRS. The court denied Jefferson's motion for summary judgment and granted the government's motion for summary judgment, finding that Jefferson was a "responsible person" under 26 U.S.C. § 6672 and that he "willfully" failed to pay taxes. The court also found that Jefferson did not qualify for the "honorary member" exception of section 6672(e) because he was not serving in an honorary capacity at New Zion. Finally, the court determined that section 904(b) of Public Law 104-168 did not preclude the government from assessing tax liabilities although it failed to develop materials explaining the circumstances in which Jefferson incurred the tax liability. Jefferson appeals.


We review the district court's grant of summary judgment de novo. Peirick v. Ind. Univ.-Purdue Univ. Indianapolis Athletic Dep't, 510 F.3d 681, 687 (7th Cir. 2007). When, as in this case, the parties have filed cross-motions for sum-mary judgment, "we construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Samuelson v. Laporte Cmty. Sch. Corp., 526 F.3d 1046, 1051 (7th Cir. 2008).Summary judgment is appropriate only when the materials before the court demonstrate "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

A. Jefferson Was Liable For New Zion's Tax Liability Because Jefferson Was a Responsible Person ...

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