In re: J.J. Re-Bar Corp.
Decided: 6/24/2011
No. 09-60054
Circuit Judge McKeown for the Court; Circuit Judge Paez and Fifth Circuit Court Judge Reavley
Full Text: http://www.ca9.uscourts.gov/datastore/opinions/2011/06/24/09-60054.pdf
J.J. Re-Bar Corporation did not pay employment taxes, a large part of which were income and social security taxes that the corporation withheld from employee paychecks and held in trust for the government. In January 1998, the corporation filed for Chapter 11 Bankruptcy, submitted a plan of reorganization and continued operations as a debtor-in-possession. At the same time, the IRS was in extensive auditing of the corporation. In 2002 the IRS issued a bill to J.J. Re-Bar for unpaid payroll taxes, fraud penalties, and interest, and the corporation began to make monthly payments. In 2007 the IRS informed the Skokan family, officers of the corporation, about a Trust Fund Recovery Penalty issued against them. Under 26 U.S.C. § 6672, the IRS may recover this penalty against individual officers of a corporation. J.J. Re-Bar filed a motion to enjoin the IRS from collecting the penalty arguing that because the corporation was the primary obligor on the underlying trust-fund tax obligation, the collection from the Skokans violated the express terms of Article X, which provided for the discharge of all debts to which J.J. Re-Bar was the “primary obligor.” The Court affirmed the ruling of the Bankruptcy Court, holding that even though a corporation may be the primary obligor on its own tax obligation, the corporate officers are the primary obligors on trust-fund liabilities, as these liabilities are assessed independently under § 6672 for the officers own willful conduct. AFFIRMED.
Summary by Willamette Online writer Loren B. Roth.
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