Remington v. United States

IN THE UNITED STATE COURT OF APPEALS

FOR THE FIFTH CIRCUIT

________________________

No. 98-11328
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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.

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.