484 Fed. Appx. 511
Fed. Cir.2012Background
- Jenkins appeals a Court of Federal Claims ruling that he is liable under 26 U.S.C. § 6672(a) for withheld trust fund taxes of Dialogue Diaspora, Inc. (DDI).
- DDI was formed in 1992 with Jenkins as CEO/CFO and initial 55% voting control, later 50% overall with Puckrein and his wife owning the remainder; Jenkins also served as Publisher of American Visions.
- DDI’s board initially appointed Jenkins to key leadership roles and he financed operations, including leasing property, providing loans, and guaranteeing debts, with a voting trust and lien securing his interests.
- DDI began filing federal employment tax returns in 1993 but did not pay all trust fund taxes; Puckrein signed the returns.
- A 1995 board meeting purged Puckrein, installed Jenkins and his wife in an executive committee, and Jenkins signed IRS forms acknowledging control and DDI’s finances.
- Jenkins paid himself a distribution from DDI funds in 1995 while DDI had delinquent taxes, and later the IRS assessed a § 6672(a) penalty; the Claims Court found him a responsible person and willful.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Jenkins was a responsible person under §6672(a). | Jenkins argues his duties were non-tax related and his stock/control was illusory. | DDI records show Jenkins had CEO/CFO roles, substantial control, board presence, and financial authority. | Yes; Jenkins held significant authority and was a responsible person under §6672(a). |
| Whether Jenkins’ failure to remit taxes was willful." | Jenkins contends he acted negligently, not willfully, and funds paid to himself were subject to a lien. | Record shows Jenkins knew of delinquency by 1995 and continued to authorize payments to others. | Yes; willful conduct established by reckless disregard of known risk and payments to creditors over taxes. |
| Whether the liability should be limited to the specific amount paid to himself ($16,668.47). | Liability should be limited to the amount diverted to self. | Liability is for the total trust fund taxes due, not limited to the specific disbursement. | Liability encompassed the total delinquent trust fund taxes, not limited to the single disbursement. |
Key Cases Cited
- Godfrey v. United States, 748 F.2d 1568 (Fed. Cir. 1984) (defines willfulness and duties of a responsible person under §6672(a))
- Thomsen v. United States, 887 F.2d 12 (1st Cir. 1989) (knowledge of prior failures does not absolve continued responsibility)
- Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (U.S. 1982) (standard for clear error review of factual findings)
- Columbia Gas Sys., Inc. v. United States, 70 F.3d 1244 (Fed. Cir. 1995) (review standard for factual findings; deference to factual rulings)
- Slodov v. United States, 436 U.S. 238 (U.S. 1978) (trust fund taxes concept and obligation to withhold)