IN THE UNITED STATE COURT OF APPEALS
FOR THE FIFTH CIRCUIT
________________________
No. 98-11328
________________________
WILLIAM P. REMINGTON,
Plaintiff-Counter Defendant-Appellant,
versus
UNITED STATES OF AMERICA,
Defendant-Counter Claimant-Appellee.
_______________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
_______________________________________________________
April 13, 2000
Before WIENER and STEWART, Circuit Judges.1
WIENER, Circuit Judge:
This appeal presents the question whether Texas state
partnership law is preempted by 26 U.S.C. §§ 6671-72, two sections
of the Internal Revenue Code (“I.R.C.”) that govern the assessment
and collection of penalties for an employer’s failure to withhold
and remit taxes from employees’ wages.2 Finding no conflict
1
Judge John M. Shaw, District Judge of the Western District of
Louisiana, was a member of the panel that heard oral arguments but
because of his death on December 24, 1999, he did not participate
in this decision. This case is being decided by quorum. 28 U.S.C.
§ 46(d).
2
Several provisions of the I.R.C. require employers to collect
taxes from their employees. The most significant are I.R.C. §§
3102(a) (FICA) and 3402(a) (federal income tax). The withheld sums
are commonly referred to as “trust fund taxes” because such
between the state and federal laws and no congressional intent to
preempt state partnership law, we conclude that the state law has
not been preempted. The judgment of the district court is
therefore affirmed.
I.
FACTS & PROCEEDINGS
Plaintiff-Appellant William P. Remington was a partner in the
law firm Paxton, Barriball & Remington, a Texas general partnership
(the “partnership”). In 1986, Remington discovered that employment
tax returns (Form 941) had not been prepared and submitted when due
and that the related trust fund taxes had not been paid. He hired
a certified public accountant to prepare the returns which
Remington then signed and submitted. He did not, though, pay the
tax liability. Consequently, the IRS assessed the taxes and filed
liens against the partnership and against Remington “as [a] general
partner.”
After the IRS levied on Remington’s property to satisfy its
lien, he filed suit for wrongful levy. The IRS counterclaimed,
seeking to collect from Remington the remainder of the trust fund
taxes owed by the partnership. The parties filed cross-motions for
summary judgment, after which the district court granted the
government’s and denied Remington’s. Remington timely appealed.
collected sums are deemed to be a “special fund in trust for the
United States.” I.R.C. § 7501(a); see also Slodov v. United
States, 436 U.S. 238, 242-43 (1979).
2
II.
ANALYSIS
A. Jurisdiction
We have jurisdiction over appeals from final judgments of the
district court pursuant to 28 U.S.C. § 1291. We review the
district court’s grant of summary judgment de novo.3 Summary
judgment is appropriate when the pleadings and summary judgment
evidence present no genuine issue of material fact and the moving
party is entitled to judgement as a matter of law.4 This appeal
presents questions of law only; there are no genuine disputes of
material fact.
B. Preemption
Remington insists that the IRS cannot proceed against a
general partner under state partnership law to collect federal
taxes that a partnership should have but did not withhold from
employees’ wages and remit to the IRS. More specifically,
Remington argues that, taken together, I.R.C. §§ 6671(b) and
6672(a) are incompatible with, and therefore preempt, the provision
of the Texas Uniform Partnership Act that makes partners jointly
and severally liable for the debts of the partnership. Remington
concludes that when the IRS seeks to collect a partnership’s
3
See Estate of Bonner v. United States, 84 F.3d 196 (5th
Cir.1996).
4
See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S.
317 (1986).
3
payroll-related tax debt from a partner, its exclusive remedy is
the one set forth in I.R.C. § 6672. Like the other courts that
have considered this argument, we find it to be wholly without
merit.5
Employers are required to withhold and remit federal taxes
from the wages of their employees. If an employer fails to pay
over these trust fund taxes when due, it “shall be liable for the
payment of the tax required to be deducted and withheld . . . .”6
In the instant case, the employer was the partnership, and
Remington does not dispute that he was a general partner in that
partnership. Under § 15 of the Texas Uniform Partnership Act,7
“[a]ll partners are liable jointly and severally for all debts and
obligations of the partnership . . . .” Accordingly, under Texas
law, the IRS is entitled to collect the trust fund tax liability,
indisputably a partnership debt, from any one of the general
partners, including Remington.8 The partnership is the primary
obligor and its partners are jointly and severally liable on its
debts.
Nothing in I.R.C. §§ 6671 and 6672 changes this result. Under
5
See Livingston v. United States, 793 F. Supp. 251 (D. Idaho
1992); Baily v. United States, 355 F. Supp. 325 (E.D. Pa. 1973).
6
I.R.C. § 3403.
7
TEX. CIV. STAT. ANN. art. 6132b § 15.
8
See Ballard v. United States, 17 F.3d 116, 118 (5th Cir.
1994) (“state law . . . determines when a partner is liable for the
obligations —— including employment taxes —— of his partnership.”).
4
these provisions, a “penalty” equal to the amount of the tax that
should have been collected and remitted is imposed on the
responsible person or persons who willfully failed to collect and
remit the tax.9 These provisions were enacted primarily to deal
with the problem of the insolvent corporate tax debtor. Unlike
general partners, who are jointly and severally liable for
partnership debts, the owners and managers of a corporation —— its
shareholders, directors, and officers —— are generally shielded
from personal liability to creditors by state corporation law.
Experience has taught that when a corporation was approaching
insolvency, there would be too great a temptation to pay corporate
creditors out of the funds that were supposed to be held in trust
for the government. It is likely that this experience and others
influenced Congress to enact §§ 6671-72.
It is true that by their terms I.R.C. §§ 6671-72 apply to all
types of business organizations, from the sole proprietorship to
the general partnership to the multinational corporation. In some
cases, such as the general partnership, the provisions create an
alternative source of responsibility to the one already imposed by
state law. In other cases, such as the business corporation, the
provision imposes additional responsibility that supplements
liability imposed by state law. We discern no indication that
Congress intended to eliminate or restrict state law liability for
9
See generally Mazo v. United States, 591 F.2d 1151 (1979).
5
the payment of trust fund taxes; the only indication we find is to
the contrary, i.e., that §§ 6671-72 were intended to create an
additional avenue for the collection of trust fund taxes.
Moreover, If Remington’s preemption argument were accepted,
then the IRS, as a creditor, would stand in a worse position vis-a-
vis a general partnership than would any other creditor of that
partnership. All creditors other than the IRS could look to the
joint and several liability of the partners to collect a
partnership debt from any one or more of them; but, the IRS would
only be able to collect the outstanding tax debt from the
partnership itself or from the partner or partners —— not
necessarily all partners —— responsible for withholding the trust
fund taxes. Unlike every other creditor, the IRS would not be
allowed to collect the partnership debt from a general partner who
was not a responsible person under I.R.C. §§ 6671-72. This result
would run contrary to the very purpose of §§ 6671-72, namely, “to
facilitate, not restrict, the collection of these important trust
fund taxes.”10
We conclude that I.R.C. § 6672(a) is an alternative or
supplemental collection provision, not a preempting substitute for
primary responsibility under state law. We find nothing to suggest
that Congress intended for that section of the I.R.C. to preempt
state partnership law. Neither is there a conflict between state
10
Livingston v. United States, 793 F. Supp. 251, 254 (D. Idaho
1992).
6
and federal law that would render compliance with both impossible.11
We hold, therefore, that I.R.C. §§ 6671-72 do not preempt § 15 of
the Texas Uniform Partnership Act; rather they complement it.
C. Time Bar
Remington also contends that the IRS did not timely initiate
collection. The IRS is required to initiate collection within ten
years following assessment of the tax.12 Remington urges that the
taxes were “assessed” when the return was filed and that the date
on which the return was filed is a disputed fact. If this dispute
were resolved in his favor, Remington argues, it would establish
that the IRS did not initiate its collection effort within ten
years, making its effort to collect the taxes time-barred. In
short, Remington maintains that there is a disputed issue of
material fact that precludes summary judgment.
Although it is true that the filing of a return starts the
running of the three-year period within which the IRS can assess
taxes,13 I.R.C. § 6502(a)(1) makes clear that it is the “assessment”
itself that, once made, starts the running of the ten-year period
within which the IRS can commence efforts to collect an assessed
tax. The law is well established that the filing of a return does
not constitute the assessment of the tax: “The ‘assessment,’
11
See California v. ARC America Corp., 490 U.S. 93 (1989).
12
See I.R.C. § 6502(a).
13
See I.R.C. § 6501.
7
essentially a bookkeeping notation, is made when the Secretary or
his delegate establishes an account against the taxpayer on the tax
rolls.”14 In this case there is no dispute about the date of the
assessment; accordingly, even if there is a disputed issue of fact
regarding the date that Remington filed his return, that fact does
not affect the date of the assessment and therefore is not material
to the resolution of this case. As such, it does not preclude
summary judgment.
III.
CONCLUSION
We hold that the IRS timely initiated collection proceedings
and that I.R.C. §§ 6671-72 do not preempt state partnership law.
The judgment of the district court is, in all respects
AFFIRMED.
14
See Laing v. United States, 423 U.S. 161, 170 n.13 (1976);
see also I.R.C. § 6203; 26 C.F.R. § 301.6203-1.
8