Jenkins v. United States
101 Fed. Cl. 122
Fed. Cl.2011Background
- This is a tax refund suit challenging a §6672(a) trust-fund recovery penalty assessed against Tim Jenkins for DDI's unpaid employment taxes.
- DDI was co-founded by Jenkins and Gary Puckrein; Jenkins served as CEO, CFO, Publisher, and board member, and owned substantial stock.
- Jenkins engaged in various financing, leasing, and control arrangements, including a factoring arrangement and a deed of trust securing debts with Brown Printing and others.
- DDI failed to pay over withheld employment taxes for periods ending 1993–1995; IRS proposed and assessed a §6672 penalty against Jenkins in 1998.
- Jenkins sought a refund of penalties collected from his retirement and Social Security accounts; IRS administrative file was lost, influencing trial procedure.
- Trial proceeded with the government bearing the burden to prove a prima facie case for the assessment, and the court ultimately ruled Jenkins liable willfully under §6672.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Jenkins a 'responsible person' under §6672? | Jenkins argues titles were ceremonial and he lacked ultimate authority. | Jenkins held CEO/board roles with power to control funds and prevent default. | Yes; Jenkins was a responsible person. |
| Was Jenkins' failure to pay over taxes willful under §6672? | He acted to assist the IRS after learning of the liability and did not act with intent to evade. | His prior knowledge and ongoing control showed reckless disregard and intentional prioritization of self over taxes. | Yes; willful failure established. |
| Did the purported encumbrance of funds by Jenkins’ factoring lien excuse nonpayment under §6672? | Lien priority over tax funds justified preserving funds for creditors, not for IRS. | Encumbrance cannot excuse willful nonpayment when funds could be used to satisfy arrears. | No; lien did not excuse nonpayment; funds remained subject to trust-fund obligations. |
| Did the loss of the IRS administrative file affect the burden of proof? | Loss required shifting burdens in favor of Jenkins. | Loss does not shift burden but requires the government to prove a prima facie case; presumption of correctness remained. | Presumption attached and the government proved a prima facie case; burden remained with plaintiff. |
Key Cases Cited
- Slodov v. United States, 436 U.S. 238 (Supreme Court 1978) (trust fund penalties and government’s vested interests in withholdings)
- Godfrey v. United States, 748 F.2d 1568 (Fed. Cir. 1984) (willfulness defined; ultimate authority and responsibility standard)
- McCarty v. United States, 437 F.2d 961 (Ct. Cl. 1971) (presumption of responsibility for founders/officers)
- White v. United States, 372 F.2d 513 (Ct. Cl. 1967) (responsible person analysis and objective considerations)
- Feist v. United States, 607 F.2d 954 (Ct. Cl. 1979) (willfulness and responsibility standards in §6672)
- United States v. Kim, 111 F.3d 1351 (7th Cir. 1997) (duty to use unencumbered funds to pay trust fund taxes)
- Ghandour v. United States, 36 F. Cl. 3d 53 (Fed. Cl. 1996) (reckless disregard and willfulness standards for §6672)
- Thosteson v. United States, 331 F.3d 1294 (11th Cir. 2003) (duty to use funds to pay back taxes when aware of arrearage)