Unpaid president of nonprofit organization was not responsible person.

• Author: O'Driscoll, David

In 1989, L agreed to become the unpaid president of C, a nonprofit social club, after its president resigned. C had been experiencing financial problems and employed several full-time paid staff members to manage its affairs, including a general manager, a bookkeeper-secretary and a catering manager.

L did not sign payroll checks, because C had outsourced its payroll administration to ADP. During L's tenure as president, ADP used an outdated signature stamp bearing L's predecessor's name.

During L's term, creditors called each day to seek payment; C was required to pay for all new purchases with cash. Both C's staff and the board of directors decided whom to pay.

At a special board meeting on March 7, 1990, a consultant L hired informed the board of the seriousness of C's financial problems and its failure to pay trust fund taxes. L had not been aware of the tax problem prior to the meeting. Thereafter, L instructed ADP to ensure that all trust fund taxes were paid. One week later, due to C's failure to pay its taxes, L formally tendered his resignation as president, but later agreed to continue as "acting president." C filed for bankruptcy in June 1990. The IRS sought to collect $48,265 in C's unpaid trust fund taxes from L.

Sec. 6672(a) provides 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 over.... Under this provision, the financially "responsible persons" of a business entity who fail to ensure that payroll withholding taxes and Social Security taxes are paid are subject to a penalty in the amount of the unpaid taxes. The assessment of such a penalty against an individual gives rise to a rebuttable presumption of correctness in favor of the government; see Psaty, 442 F2d 1154 (3d Cir. 1971). To avoid Sec. 6672 liability, a taxpayer bears the burden of coming forward and proving by a preponderance of the evidence that he is not a responsible person within meaning of the statute, or that he did not willfully fail to remit the trust fund taxes; see Brounstein, 979 F2d 952 (3d Cir. 1992). The burden on the taxpayer is not altered...