Slodov v. United States
436 U.S. 238 (1978)

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U.S. Supreme Court

Slodov v. United States, 436 U.S. 238 (1978)

Slodov v. United States

No. 76-1835

Argued February 22, 1978

Decided May 22, 1978

436 U.S. 238

Syllabus

Petitioner assumed control of three corporations at a time when a delinquency existed for unpaid federal taxes withheld from employees' wages, while the specific funds withheld but not paid had been dissipated by predecessor officers and when the corporations had no liquid assets with which to pay the overdue taxes. During the six-month period of petitioner's control, the corporations acquired funds sufficient to pay the taxes, but petitioner used the funds to pay employees' wages, rent, suppliers and other creditors, and to meet current business expenses. On petitioner's withdrawal from the corporations' business, he instituted a bankruptcy proceeding, in which the Internal Revenue Service filed a claim, including the delinquent back taxes, under § 6672 of the Internal Revenue Code of 1954, which imposes personal liability for taxes on

"[a]ny 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. . . ."

The Court of Appeals held that petitioner was personally liable for the unpaid taxes under § 6672. While petitioner concedes liability for the collection, accounting, and payment of taxes required to be withheld during the period of his control, he disclaims responsibility with respect to taxes withheld prior thereto, arguing that its conjunctive phrasing made § 6672 inapplicable to him, since he was clearly under no duty to collect and account for taxes incurred before that period. The Government maintains that the statutory language could be construed as describing in terms of their general responsibilities the persons potentially liable under the statute without regard to the fulfillment of all the duties with respect to specific tax dollars, and that § 6672 imposed liability on petitioner as a "responsible person" because sums received during the period of his control were impressed with a trust in favor of the Government for the satisfaction of the overdue taxes and petitioner's willful use of such sums to pay other creditors violated the statute's "pay over" obligation. Though relying primarily on § 6672 for its trust theory of liability, the Government suggests as also applicable § 7501, which

Page 436 U. S. 239

provides that,

"[w]henever a person is required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount of the tax . . . shall be held to be a special fund in trust for the United States [which] shall be assessed, collected, and paid in the same manner and subject to the same provisions and limitations (including penalties) as are applicable with respect to the taxes from which such fund arose."

Held:

1. The phrase "[a]ny person required to collect, truthfully account for, and pay over any tax imposed by this title" was meant to limit § 6672 to persons responsible for paying over taxes that require collection (third-party taxes), and not to limit it to persons in a position to perform all three functions with respect to the specific taxes as to which the employer is delinquent. Petitioner's construction could lead to ready evasion of responsibility under § 6672, and is thus at odds with the statute's purpose of assuring payment by third parties of withheld taxes. Pp. 436 U. S. 246-250.

2. Neither § 6672 nor § 7501 impresses a trust on the after-acquired funds of an employer for payment of overdue withholding taxes absent tracing of those funds to taxes collected, and petitioner therefore was not liable under § 6672 for using those funds for purposes other than payment of the overdue withholding taxes. Pp. 436 U. S. 253-259.

(a) Section 6672 was not intended to impose an absolute liability without personal fault for failure to "pay over" amounts that should have been collected and paid over so that petitioner could not be liable unless he failed to pay funds held in trust for the United States. Pp. 436 U. S. 253-254.

(b) Nothing in the language or legislative history of § 6672 suggests that the effect of the "pay over" requirement was to impress a trust on the corporations' after-acquired cash, and the history of § 7501 makes clear that it was not. Since the very reason for adding § 7501 to the Code was that, under existing law, the liability of the person collecting and withholding the taxes was merely a debt, § 6672, whose predecessor was enacted while the debt concept of liability prevailed, hardly could have been intended to impose a trust on after-acquired cash. Although the trust concept of § 7501 may inform the scope of the duty imposed by § 6672, the language of § 7501 makes clear that there must be a nexus between the funds collected and the trust created. Pp. 436 U. S. 254-256.

(c) A construction of §§ 7501 and 6672 as imposing a trust on all after-acquired property without regard to the interests of others in those funds would conflict with the priority rules applicable to the collection

Page 436 U. S. 240

of back taxes, which give secured parties interests in certain proceeds superior to tax liens. Pp. 436 U. S. 256-259.

552 F.2d 159, reversed.

BRENNAN, J., delivered the opinion of the Court, in which STEWART, MARSHALL, POWELL, REHNQUIST, and STEVENS, JJ., joined. REHNQUIST, J., filed a concurring opinion, post, p. 436 U. S. 260. WHITE, J., filed an opinion dissenting in part, in which BURGER, C.J., and BLACKMUN, J., joined, post, p. 436 U. S. 261.

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