## Facts

- Shannon Advertising, a Texas corporation, was owned equally by Michael McCray, Louis James Scott, Andrew Martin, and Leonard Raines.
- Scott served as chairman of the board and a vice president; he was not the officer who directly handled federal tax payments.
- Shannon failed to pay over employee withholding taxes for the first three quarters of 1982.
- The IRS assessed each owner a 100% trust-fund recovery penalty under 26 U.S.C. § 6672.
- McCray paid $750 toward the assessment and sued for a refund; the United States counterclaimed and joined Scott, Martin, and Raines as cross-defendants.
- McCray’s refund claim was dismissed by stipulation; Martin agreed to judgment for 100% liability; the district court granted summary judgment against Scott and Raines for the full § 6672 penalty.
- The summary-judgment record showed Scott knew by June 1982 that withholding taxes were unpaid and, after that, corporate funds were used to pay other creditors before paying the delinquent taxes.

## Issues

1. Whether summary judgment properly established that Scott was a “responsible person” who “willfully” failed to pay trust-fund taxes under 26 U.S.C. § 6672.
2. Whether the district court erred by entering judgment against Scott for the full penalty amount without reducing it by amounts paid by other jointly liable persons.

## Decision

- The Fifth Circuit affirmed summary judgment holding Scott liable for the § 6672 penalty.
- The court held the evidence established, as a matter of law, that Scott was a responsible person with sufficient authority to prevent nonpayment.
- The court held willfulness was shown because Scott knew of the delinquency and permitted payment of other creditors instead of the United States.
- The court affirmed entry of judgment for the full penalty amount against Scott, concluding the IRS may obtain separate full judgments against each responsible person and later credit aggregate payments to prevent double collection.

## Legal Principles

- A “responsible person” under 26 U.S.C. § 6672 includes an officer or director with status, duty, and authority over corporate finances sufficient to prevent default in paying withholding taxes, even if not the person who physically pays the taxes.
- “Willfulness” under § 6672 is satisfied when a responsible person, with knowledge that withholding taxes are unpaid, allows corporate funds to be used to pay other creditors; bad motive is not required.
- Reliance on other owners, employees, accountants, or lawyers does not defeat § 6672 liability once the person with authority knows of the tax delinquency.
- In multi-party § 6672 cases, the IRS may pursue a judgment for the full penalty amount against each responsible person, subject to later administrative abatement/crediting to ensure the government collects no more than 100% of the unpaid taxes.

## Conclusion

The Fifth Circuit held that a corporate officer with sufficient authority who knew payroll taxes were unpaid and permitted payment of other creditors was liable, as a matter of law, for the full § 6672 penalty, and that separate full judgments against multiple responsible persons are permissible so long as the IRS later credits payments to avoid double recovery.


McCray v. United States, 910 F.2d 1289 (5th Cir. 1990)