Schiffmann v. United States
811 F.3d 519
1st Cir.2016Background
- ICOA, a Rhode Island corporation, struggled to meet federal trust fund tax obligations since 2002.
- Schiffmann became ICOA's president/CEO in 2004–2005; Cummings became CFO in 2005.
- Board authorized check-signing powers up to certain limits; Schiffmann up to $100,000, Cummings up to $75,000.
- Despite notices, ICOA paid other creditors with available funds while IRS trust fund taxes remained unpaid.
- IRS assessed trust fund penalties; district court granted summary judgment for the government, affirmed on appeal.
- Record showed both Schiffmann and Cummings had control over finances and could have paid taxes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Schiffmann a responsible person under 6672? | Schiffmann had CEO/director role with authority over funds. | Government contends Schiffmann exercised sufficient control and power to pay taxes. | Yes; Schiffmann was a responsible person. |
| Was Cummings a responsible person under 6672? | Cummings, as CFO with signing authority and access to finances, was responsible. | Government contends Cummings had control to pay taxes. | Yes; Cummings was a responsible person. |
| Did Schiffmann's actions show willfulness in failing to pay trust fund taxes? | Schiffmann lacked knowledge of specific liabilities but failed to act when aware. | Willfulness requires conscious disregard; Schiffmann knowingly prioritized other creditors. | Yes; willfulness established for Schiffmann. |
| Did Cummings' actions show willfulness in failing to pay trust fund taxes? | Cummings knew of taxes and used funds for other purposes contrary to obligation. | Cummings consciously preferred other creditors over IRS obligations. | Yes; willfulness established for Cummings. |
| Did the district court properly grant summary judgment on liability? | Record shows disputed facts; issues of responsibility contested. | Record, undisputed for first motion, supports liability; second motion likewise supported. | No error; judgments affirmed (liability established). |
Key Cases Cited
- Vinick v. United States (Vinick II), 205 F.3d 1 (1st Cir. 2000) (identify who can pay taxes; heart of responsible-person analysis)
- Vinick v. Comm'r of Internal Revenue (Vinick I), 110 F.3d 168 (1st Cir. 1997) (quarter-by-quarter responsibility rule)
- Moulton v. United States, 429 F.3d 352 (1st Cir. 2005) (distinguishes technical vs actual power in liability)
- Caterino v. United States, 794 F.2d 1 (1st Cir. 1986) (willfulness and responsibility elements)
- Stuart v. United States, 337 F.3d 31 (1st Cir. 2003) (control over corporate affairs to avoid default)
- Harrington v. United States, 504 F.2d 1306 (2d Cir. 1974) (willfulness may be shown by prioritizing other creditors)
- Jean v. United States, 396 F.3d 449 (1st Cir. 2005) (sufficient control to avoid default; factors for responsibility)
- Lubetzky v. United States, 393 F.3d 76 (1st Cir. 2004) (emphasizes examination of officer's control over finances)