The Tax Times: Corporation's Secretary Liability For Company's Tax Penalties Upheld by 11th Circ.

Monday, November 21, 2022

Corporation's Secretary Liability For Company's Tax Penalties Upheld by 11th Circ.

According to Law360, The Eleventh Circuit upheld a Florida jury's decision that a corporate secretary was responsible for the failure of her father's air conditioning company to pay employment taxes, saying jurors reasonably concluded that she had authority within the company.

Evidence showed that in her role at Scott Air Inc., Ashley Scott satisfied the Internal Revenue Service's definition of a responsible person in that she held a corporate office, controlled the company's finances and had power to make payments from company accounts, a three-judge panel said in a per curiam opinion.

"The Bottom Line Is The Record Contained Evidence That Scott Knew About The Company's Unpaid Payroll Taxes And Failed
To Pay Them, Even Though She Wrote Checks To Satisfy Similar Obligations During The Same Time Frame," The Opinion Said.

Three rounds of jury trials had resulted in an overall reduction of Scott's responsibility to pay IRS penalties for the company's tax failures, from a total of 13 quarters for which she was considered responsible to 2.

The IRS assessed Scott $680,000 in trust-fund penalties in 2010 for the company's failure to pay employment taxes over 13 quarters from 2004 to 2007, according to court filings. Scott appealed the decision twice, saying both times that the jury didn't have enough evidence to find that she was the person who should be considered responsible for paying the company's employment taxes, according to court filings.

The Eleventh Circuit sided with Scott in 2019, ordering a jury to reconsider its finding that Scott should pay nearly $620,000 of the penalties, saying the lower court did not clarify the legal authority of a corporate secretary.

The panel said that in addition to being a corporate officer of the company, Scott had power to spend its money. She admitted she could shop for supplies of up to $1,000 without her father's permission, according to the opinion. Scott was also in charge of the company's payroll and paid its unemployment taxes and child-support withholdings on the behalf of some employees.
Scott also signed the company's payroll tax returns during the two quarters she was found responsible, the panel said.

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