Moser v. USA
ORDER denying 35 Motion for Summary Judgment. Signed by Judge Susan Webber Wright on 5/27/2014. (ks)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
UNITED STATES OF AMERICA,
OPINION AND ORDER
Robert Moser brings this action for refund and abatement of trust fund recovery
penalties assessed against him by the Internal Revenue Service (IRS) under 26 U.S.C. §
6672 concerning unpaid federal taxes withheld by MDH Builders, Inc. (MDH) for the
second and third quarters of 2009. The United States has counterclaimed for the unpaid
trust fund recovery penalties, claiming there is an unpaid balance of $48,041.77 for the
second quarter of 2009 (ending June 30), and an unpaid balance of $63,057.65 for the
third quarter of 2009 (ending September 30).
The matter is before the Court on motion of Moser for summary judgment
[doc.#35]. The United States has responded in opposition to Moser’s motion and Moser
has filed a reply to the United States’ response. For the reasons that follow, the Court
denies Moser’s motion for summary judgment.
MDH was a construction company owned 100% by Mike Hill. Hill served as the
president of MDH and Moser served as MDH’s vice president and construction manager.
MDH went out of business in 2009 and Hill filed for bankruptcy.
At its peak in 2006, MDH had $55 million in annual revenues. Subsequently,
however, MDH began to experience cash flow problems (apparently as a result of the
financial crisis in 2008) and, according to Hill, was forced to choose between paying its
subcontractors to keep its projects moving forward lest “the jobs shut down and
everything implodes” or pay its payroll taxes. In this respect, while MDH collected
payroll taxes from its employees, in six quarters of 2008 and 2009 MDH failed to pay
those taxes to the IRS. At issue is whether, pursuant to 26 U.S.C. § 6672, Moser was a
“responsible person” and acted “willfully” in failing to pay over trust fund taxes for the
second and third quarters of 2009.1
Moser states that although he was vice president of MDH and had check signing
authority, he had no significant role in the company’s tax planning. In support of this
claim, Moser has submitted several affidavits from MDH employees stating that Moser
did not have significant decision-making authority over MDH’s tax matters.
Mike McNew, MDH’s comptroller, states that Moser did not have authority to
decide independently that MDH funds should be disbursed for any purpose except for
projected related expenses. He states that all invoices were reviewed and approved for
The United States also brought a third-party complaint against Hill seeking unpaid trust
fund recovery penalties. The United States and Hill subsequently consented to judgment against
Hill for, inter alia, unpaid liabilities assessed against him under 26 U.S.C. § 6672 for the tax
periods ending March 31, 2008, September 30, 2008, December 31, 2008, March 31, 2009, June
30, 2009, and September 30, 2009, in the amount of $468,815.48. See Doc.#14.
payment by a project manager and sent to the accounting department for future checks to
be issued and that these checks were signed by Moser as a convenience and as an audit
function. McNew states that Moser did not prepare any payroll tax returns or discuss any
payroll tax issues with the IRS, he never participated in a formal company strategy
session about the payroll tax liability, and that in his role in the company, he did not have
the authority to fail willfully to disburse any funds in avoidance of the payroll tax
Similarly, Sharon Bryant, an assistant project manager for MDH, Sheilia
Colclasure, who worked in MDH’s accounting department, Stuart Brent, who worked for
MDH doing marketing and project managing, and Valerie Culbreath, a project manager
assistant for MDH, all state that Moser’s primary responsibility at MDH was managing
construction projects and construction managers but that Moser had no financial control
over the company, that he had no authority to operate, develop or administer the financial
policy of the company, that his signing of any checks was as a convenience and audit
function, that he did not prepare any of the company’s payroll tax returns, that he did not
have authority to decide independently that company funds should be disbursed for any
purpose, and that in his role in the company, he did not have the authority to fail willfully
to disburse any funds in avoidance of the payroll tax obligations. In addition, Amy
Atterberry, who worked in accounting for MDH, states that to her knowledge, Moser did
not prepare any of MDH’s payroll tax returns.
Hill likewise testified in his deposition that Moser “didn’t have the authority to
make the call on not paying the taxes” after August 2008. In this respect, Hill testified
that in August 2008, his outside Certified Public Accountant (CPA) notified him that
there was a payroll tax issue and that he immediately contacted Moser and McNew to
discuss the issue. Hill states that he clarified to McNew that he no longer had to take
direction from Moser when it came to “stuff” like unpaid payroll tax liability, noting that
after August 2008, Moser was not in a position to direct MDH not to pay its taxes.
However, Hill also testified that Moser remained vice president of MDH, that all
his other responsibilities remained intact, that Moser had the authority to prioritize which
of MDH’s creditors were paid when money was tight, and that Moser “was part of the
decision process” of deciding to pay MDH’s subcontractors instead of paying MDH’s
payroll taxes (at least prior to August 2008). Hill testified as follows:
Q. Was it a big secret in the office that this payroll tax issue was ongoing?
A. I don't think it was a big secret. I just -- I was not in -- I was not in the
middle of that particular decision that happened, I guess it was August or
maybe it happened in -- I don't know when it happened, but I wasn't in that
conversation. Like I said, I found about it through our CPA.
Q. Okay. That was a decision that was made between McNew and Moser,
to start paying net payroll; is that fair?
A. That would be fair. Yes.
Q. Now, subsequent to August 2008, there isn't any question the company
continued to pay creditors. Correct?
A. Correct. There was -- you know, there was always -- the cash -- yes, for
the most part, yes.
Q. I mean, the company kept operating; correct?
In addition, Hill, in protesting the assessment of penalties against himself,
informed the IRS in May 2011 that it was Moser who made the decision to divert funds
that had been set aside to pay trust fund taxes and instead pay those same funds to
subcontractors and suppliers. Hill testified as follows:
Q. Mr. Hill, do you recognize your signature on the second page of this
A. I do.
Q. And does this appear to be a letter that you wrote to Mr. [Willie] Howard
[IRS’s Compliance Services department] regarding the trust fund penalties
in this case?
Q. Okay. At the bottom here I'm going to read a line from this letter that
you wrote. You tell me if I read this correctly. "Robert Moser and Michael
McNew made the final decision on all matters related to the payment of
funds from the company on a day to day basis." Did I read that correctly?
A. You did.
Q. And the next paragraph reads. "Robert Moser in his capacity as VPOperations made the decision to divert funds that had been set aside to pay
Trust Fund Taxes and instead pay those same funds to subcontractors and
suppliers against the outspoken objection of the CFO (Michael McNew) of
MDH Builders, Inc." Did I read that correctly?
A. You did.
Q. Now, is that -- can that be reconciled with your testimony today, is that
the conversation that you are talking about when Mr. McNew and Mr.
Moser made this decision to -A. Correct.
Q. -- pay subs instead of the taxes?
Q. Okay. Now, the next sentence, if you flip to next page, you wrote in May
11, May 2011, "Robert Moser alone made the decision not to pay the Trust
Fund Taxes and hid this fact from me nearly one year."
A. I don't know if the timing on that is accurate. Like I said, Moser, his job
was to keep the jobs going, and his thought process was, if we didn't keep
the jobs going, it wouldn't matter anyway, everything was going to go
down. McNew, knowing the severity of having to pay trust fund taxes and
how important it was, urged -- urged Moser to pay -- we need to be paying
the taxes and Moser was like, I've got to keep the jobs going. It was a -- and
they had a lot of conflicting -- they had a lot of conflict between them. I
mean, it was kind of a hate/hate relationship. And I don't -- the only thing
I'm not a hundred percent sure about is the year. I don't know that it was
long when we all of that occurred.
Moser, however, states that Hill later disavowed his representations to the IRS
regarding Moser’s culpability as his attempt to wriggle his way out of the tax liability
MDH had incurred. Hill testified as follows:
Q. That [letter] was after Willie Howard had decided to assess the unpaid
taxes against you; is that correct?
A. Yes, sir.
Q. Okay. And the purpose of this letter was to protest the assessment; is
Q. And at that time were you trying to get – get it assessed against Robert
instead of you, Robert Moser? You can reread the letter if you need to.
A. Well, it reads that way. The main focus of it was, you know, letting the
IRS know that, you know, I wasn’t involved in the decision that got it
started, and then the company crumbling got me in the position where we
couldn’t take care of the obligation. But it – anyway.
Q. So was your intent when you wrote this to take liability away from you
and instead put it on Robert?
A. No, I wasn’t necessarily trying to put it on Robert. I was basically trying
to, I guess limit the liability on me.
Q. Okay. Would you agree that this letter implicates Mr. Moser being the
responsible party for not paying the withholding taxes at MDH?
A. It has that tone, yes.
Hill also testified that he “would assume” that Moser would “had to have known”
that MDH wasn’t paying their payroll taxes and he acknowledged that he didn’t have any
direct knowledge as to how and when Moser would have found out that the payroll taxes
weren’t paid. Moreover, in contrast to the affidavits of McNew, Bryant, Colclasure,
Brent, Culbreath, and Atterberry, Jeremy Thompson, one of MDH’s project managers,
testified that Moser had the authority to direct payment of trust fund taxes to the IRS:
Q. In your opinion based on the decision-making authority at MDH, who in
your mind would have the authority to decide whether payroll taxes were
paid over to the IRS?
A. Based on my knowledge with, you know, getting issues resolved on my
jobs and such, those three folks: Mike Hill, I would think Robert, and Mike
McNew would have seen -- they would have had to have seen at some
point, you know, what was available from the jobs coming in and had to
make those hard choices. I know that they cut checks for our subs and
suppliers; I can only assume the other administrative fees and so on and so
forth, they would be a part of that.
The United States has also submitted checks to numerous creditors and vendors
other than the IRS that Moser signed after he was aware that MDH was failing to pay its
payroll taxes, and Moser acknowledges that he signed payroll checks–including his
own–after he was aware that MDH was failing to pay its payroll taxes that reflected “net”
wages (although he appears to claim that it was McNew’s doing):
Q. And on the top right-hand corner do you see a check made out to Robert
A. Yes, I do.
Q. And that is your signature; correct?
A. It is my signature.
Q. And what's the amount?
Q. Any recollection as to what this check would have been for?
A. That would have been a payroll tax -- I mean a -- sorry, doesn't say any
of that. That was a payroll check without taxes being held. That's what
Mike McNew started doing, evidently with me, him and Mike McNew and
Q. So, that's what I was going to ask you, because it looked to me like
there's a lot of employee names on some of these checks, so these are
essentially payroll checks; correct?
A. That is correct.
Q. So the company was paying net payroll without paying over any
withholding taxes to the government?
A. Yeah, I think that's -- yeah.
In addition, Moser, although having the authority to prioritize which of MDH’s
creditors were paid when money was tight, acknowledged that he never as vice president
directed that MDH’s payroll tax liabilities be paid prior to payment of MDH’s other
obligations, such as subcontractors.
Moser moves for summary judgment on grounds that he did not have the actual
authority to direct payment of MDH’s payroll taxes or decide whether the company’s
payroll taxes were paid. Moser argues no reasonable jury would find that he is liable for
the taxes owed by MDH and Hill and therefore summary judgment should be granted in
Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to a judgment as a matter of
law.” Fed.R.Civ.P. 56(a). To support an assertion that a fact cannot be or is genuinely
disputed, a party must cite “to particular parts of materials in the record,” or show “that
the materials cited do not establish the absence or presence of a genuine dispute,” or “that
an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P.
56(c)(1)(A)-(B). “The court need consider only the cited materials, but it may consider
other materials in the record.” Fed.R.Civ.P. 56(c)(3). The inferences to be drawn from
the underlying facts must be viewed in the light most favorable to the party opposing the
motion. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986) (citations
omitted). Credibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge. Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (citation and quotation marks
omitted). However, “[w]here the record taken as a whole could not lead a rational trier of
fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita,
475 U.S. at 587 (citation omitted). “Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Factual disputes
that are irrelevant or unnecessary will not be counted.” Id.
In Dintleman v. United States, No. 3:07-cv-00081-SWW, 2010 WL 78182 (E.D.
Ark. Jan. 7, 2010), this Court set forth the applicable statutory background and legal
standards for actions under 26 U.S.C. § 6672 as follows:
The Internal Revenue Code requires employers to withhold income
and Federal Insurance Contribution Act (“FICA”) taxes from the wages of
employees, when those wages are paid. See 26 U.S.C. §§ 3102(a), 3402(a).
Withheld amounts, commonly referred to as trust fund taxes, “shall be held
to be a special fund in trust for the United States,” see 26 U.S.C. § 7501,
and the willful failure to pay over trust fund taxes to the United States
subjects a responsible person to personal liability. See 26 U.S.C. § 6672.
Title 26 U.S.C. § 6672(a) provides in pertinent part as follows:
Any person required to collect, truthfully account for, and pay
over any tax imposed by this title who willfully fails to collect
such tax, or truthfully account for and pay over such tax, or
willfully attempts in any manner to evade or defeat any such tax
or the payment thereof, shall, in addition to other penalties
provided by law, be liable to a penalty equal to the total amount
of the tax evaded, or not collected, or not accounted for and paid
Section 6672(a) imposes liability on any person, also known as a
“responsible person,” who is under a duty to collect, truthfully account for,
or pay over taxes. See Slodov v. United States, 436 U.S. 238, 249, 98 S. Ct.
1778, 1786 (1978) (holding that a “responsible person” is one who has a
duty to perform at least one of the three functions listed under § 6672).
Furthermore, § 6672(a) imposes joint and several liability, so more than one
person may be a “responsible person” subject to liability.
* * *
Section § 6672 imposes liability when two requirements are met: (1)
the person must be a “responsible person,” and (2) the person must act
“willfully” in failing to pay over trust fund taxes. See Ferguson v. United
States, 484 F.3d 1068, 1072 (8th Cir. 2007).
* * *
A. Responsible Person
A “responsible person” under § 6672 is someone who has “‘the
status, duty and authority to avoid the corporation’s default in collection or
payment of taxes.’” Id. (quoting Barton v. United States, 988 F.2d 58, 59
(8th Cir. 1993) (quoting Kenagy v. United States, 942 F.2d 459, 464 (8th Cir.
1991)). “As the case law makes abundantly clear, a person’s ‘duty’ under §
6672 must be viewed in light of his power to compel or prohibit the
allocation of corporate funds.” Godfrey v. United States, 748 F.2d 1568,
1576 (Fed. Cir. 1984). Signs of a “responsible person” in this context
include holding a corporate office, control over financial affairs, the
authority to disburse corporate funds, stock ownership, and the ability to
hire and fire employees. “[W]here a person has authority to sign the checks
of the corporation, or to prevent their issuance by denying a necessary
signature, or where that person controls the disbursement of the payroll, or
controls the voting stock of the corporation, he will generally be held
‘responsible.’” Godfrey, at 1576 (internal citations omitted). On the other
hand, whether a person is responsible is a matter of substance, not form. Id.
To trigger liability under § 6672, a person must have significant decisionmaking authority over the corporation’s tax matters, and a person’s
technical authority to sign checks and duty to prepare tax returns are not
enough to make the person responsible under § 6672. See Kenagy v. United
States, 942 F.2d 459, 464 (8th Cir. 1991).
* * *
A “responsible person” acts willfully if he or she “‘acts or fails to
act consciously and voluntarily and with knowledge or intent that as a result
of his [or her] action or inaction trust funds belonging to the government
will not be paid over but will be used for other purposes, or by proceeding
with a reckless disregard of a known or obvious risk that trust funds may
not be remitted to the government.’” Ferguson v. United States, 484 F.3d
1068, 1072-73 (8th Cir. 2007) (quoting Keller v. United States, 46 F.3d 851,
854 (8th Cir. 1995) (quoting Honey v. United States, 963 F.2d 1083, 1087
(8th Cir. 1992)).
Dintleman, 2010 WL 78182 at *1-5 (emphasis in original).
The core question in determining whether Moser qualifies as a responsible person
is whether he had the power to control the decision-making process by which MDH
allocated funds to other creditors in preference to its withholding tax obligations.
Dintleman, 2010 WL 78182 at *4 (citing Haffa v. United States, 516 F.2d 931, 936 (7th
Cir. 1975)). Although Moser has presented evidence showing that after August 2008, he
didn’t have the authority to allocate funds to other creditors in preference to its
withholding tax obligations, the United States has submitted evidence showing that it in
fact was Moser who made the decision to divert funds that had been set aside to pay trust
fund taxes and instead pay those same funds to subcontractors and suppliers. Viewing the
inferences to be drawn from the underlying facts in the light most favorable to the United
States, the Court cannot determine, as a matter of law, that Moser was not a responsible
person under 26 U.S.C. § 6672. Rather, determining whether Moser was a responsible
person will involve credibility determinations, the weighing of the evidence, and the
drawing of legitimate inferences from the facts that are jury functions and not those of a
judge. Reeves, 530 U.S. at 150.
Concerning willfulness, “‘[e]vidence that the responsible person had knowledge of
payments to other creditors, including employees, after he was aware of the failure to pay
over withholding taxes is proof of willfulness as a matter of law.’” Dintleman, 2010 WL
78182 at *5 (quoting Olsen v. United States, 952 F.2d 236, 240 (8th Cir.1991)). Here,
Moser acknowledges that after he was aware that MDH was failing to pay its payroll
taxes, he signed payroll checks (including his own) that reflected “net” payroll, i.e.,
paying net payroll without paying over any withholding taxes to the IRS, and the United
States has presented evidence that Moser also disbursed funds to creditors other than the
IRS after that time. Viewing the inferences to be drawn from the underlying facts in the
light most favorable to the United States, the Court cannot determine, as a matter of law,
that Moser did not willfully fail to pay over trust fund taxes.
For the foregoing reasons, the Court denies Moser’s motion for summary judgment
IT IS SO ORDERED this 27th day of May 2014.
/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE
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