United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-2375
___________
Cyril C. Anuforo, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Commissioner of Internal Revenue, *
*
Appellee. *
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Submitted: May 11, 2010
Filed: August 4, 2010
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Before RILEY, Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.
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RILEY, Chief Judge.
Cyril C. Anuforo owned two home healthcare companies, Comfort Plus Health
Care, Inc. (Comfort Plus) and U.S. Central Comfort Plus Care Systems, Inc. (U.S.
Central). Anuforo repeatedly failed to file the companies’ tax returns in a timely
manner, and he also failed to make full payment of the employment taxes he withheld
from his employees. As a result, the Internal Revenue Service (IRS) assessed
penalties against Anuforo under 26 U.S.C. § 6672. Anuforo filed an action in the
district court challenging the penalties. The government counterclaimed, seeking to
reduce the penalties to judgment. The district court1 granted summary judgment to the
government on Anuforo’s claims and the government’s counterclaims. Anuforo
appeals, and we affirm.
I. BACKGROUND
A. Unpaid Taxes
Anuforo was the sole owner of Comfort Plus and U.S. Central, and Anuforo
was the person responsible for ensuring the companies’ employment taxes were paid.
Despite this responsibility, Anuforo consistently failed to pay each companies’
employment taxes.2 At issue in this case are several calendar quarters during which
Comfort Plus and U.S. Central failed to file timely returns and make full payment of
employment taxes. Comfort Plus failed to file timely employment taxes or make any
payment for eight calendar quarters at various times from 1999 through 2003.
Similarly, U.S. Central failed to make full payment of its employment taxes during
seven calendar quarters at various times from 1999 through 2003. Of these seven
calendar quarters, Anuforo filed all but one return late, and he made no payment at all
for five of the seven quarters.
Initially, the IRS worked with Anuforo on the delinquencies and short-payment
of taxes. In July 2000, the IRS agreed with Comfort Plus and U.S. Central to address
specific quarters of delinquent or underpaid taxes in 1999 through installment
1
The Honorable John R. Tunheim, United States District Judge for the District
of Minnesota, adopting the reports and recommendations of the Honorable Franklin
L. Noel, United States Magistrate Judge for the District of Minnesota.
2
These taxes are often referred to as “trust-fund” taxes because an employer
collects them from its employees and holds them in trust for the federal government.
See Stevens v. United States, 49 F.3d 331, 333 (7th Cir. 1995) (“These are called
‘trust fund taxes’ because the employer is required to segregate them from its other
assets until paying them over to the IRS.”). These employment taxes must be paid
quarterly.
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agreements. Under these agreements, Anuforo agreed to make installment payments
and to extend the time during which the IRS could assess penalties against him for his
failure to make payments during the specified periods in 1999. The agreements
provided the IRS could assess penalties for these periods until December 31, 2010.
Both companies defaulted on their agreements with the IRS when, for various
periods in 2000 and 2001, Comfort Plus and U.S. Central failed to file on time and to
pay their tax returns. The IRS repeatedly informed Anuforo he would be in default
if he failed to remain current on the companies’ tax obligations. On March 22, 2002,
the IRS mailed a letter to each company notifying them they were in default.
On June 4, 2002, Anuforo notified the IRS two of his employees had been
convicted of embezzling funds from his companies, and claimed the embezzlement
was the reason he was unable to pay his tax obligations. One employee admitted to
embezzling approximately $20,000 from both companies from August 15, 1999, until
2001. Anuforo later acknowledged the employee had repaid $21,000 by the second
quarter of 2002. A second employee admitted to taking $50,861.24 from Comfort
Plus from April 27, 2001, until January 18, 2002. This employee was required to pay
restitution in the amount of $165,040.74, but it is unclear from the record if restitution
was made. Comfort Plus’s income tax returns included deductions for fraud loss in
2001, 2002, and 2003. Despite the embezzlement, Comfort Plus and U.S. Central
filed tax returns in 2001 and 2002 acknowledging the companies’ payment of over $1
million in wages and hundreds of thousands of dollars in other expenses.
On March 1, 2004, and April 8, 2004, the IRS issued certified letters to
Anuforo, proposing penalties for U.S. Central’s and Comfort Plus’s unpaid taxes, and
providing 60 days to appeal the proposed penalties. On May 19, 2004, Anuforo filed
a timely appeal as to Comfort Plus, and an untimely appeal as to U.S. Central. The
IRS Appeals Office sustained the penalties on October 25, 2005. The IRS assessed
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penalties against Anuforo on February 14, 2005, for U.S. Central’s delinquent taxes,
and on December 26, 2005, for Comfort Plus’s delinquent taxes.
B. Litigation
On April 3, 2007, Anuforo filed a complaint in the district court pertaining to
the Comfort Plus penalties. Anuforo asserted two former employees embezzled from
his companies, causing the companies to become financially distressed and to default
on tax payments. Anuforo asserted he was “not vicariously liable for the criminal
conduct of the fraudulent employees and also not liable for the trust fund recovery
penalties for good cause.” Anuforo further argued the penalties were time barred.
The magistrate judge liberally construed Anuforo’s complaint as a claim for a refund
for amounts already paid. On November 13, 2007, the IRS Commissioner filed a
motion for summary judgment.
Anuforo filed an amended complaint on December 21, 2007, clarifying he was
also seeking relief with respect to the U.S. Central penalties. On December 31, 2007,
the government filed an answer and counterclaim asking the district court to reduce
the penalties to judgment. Anuforo answered the government’s counterclaim by
denying he willfully failed to collect or pay employment taxes and denying liability
for the penalties.
Anuforo filed a motion to compel the testimony of IRS Revenue Officer Jill
Dutcher (Officer Dutcher) and a “Request for Refusal or Continuance of Defendant’s
Motion for Summary Judgment.” The magistrate judge liberally construed Anuforo’s
motions and attached declaration as a Fed. R. Civ. P. 56(f) affidavit.3 On June 4,
3
Fed. R. Civ. P. 56(f) states,
If a party opposing the motion shows by affidavit that, for specified
reasons, it cannot present facts essential to justify its opposition, the
court may:
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2008, the magistrate judge held a hearing on the government’s motion for summary
judgment and Anuforo’s motion to compel. The magistrate judge denied Anuforo’s
motion to compel, and recommended the district court grant the government’s motion
for summary judgment. Anuforo timely filed objections to the magistrate judge’s
report and recommendation. The district court overruled Anuforo’s objections,
adopted the magistrate judge’s report and recommendation, granted the government’s
motion for summary judgment as to Anuforo’s claims involving Comfort Plus, and
affirmed the magistrate judge’s denial of Anuforo’s motion to compel.
The government filed a second motion, seeking summary judgment on its
counterclaims, and as to Anuforo’s requested relief from the U.S. Central penalties.
On January 14, 2009, the magistrate judge filed a report and recommendation advising
the district court to grant the government’s motion. The district court adopted the
magistrate judge’s report and recommendation, and granted the government’s motion
for summary judgment in its entirety.
Anuforo appeals the district court’s grants of summary judgment, claiming
(1) the penalties related to Comfort Plus are barred by statute, (2) Anuforo did not act
willfully, (3) there are genuine issues of material fact in dispute, (4) the district court
abused its discretion by denying Anuforo’s motion to compel Officer Dutcher’s
testimony, (5) Officer Dutcher’s statements and partial deposition testimony should
be stricken from the record, (6) the district court erred by improperly weighing the
evidence, (7) Anuforo is improperly being held vicariously liable for the conduct of
his employees, and (8) Anuforo is entitled to a theft-loss deduction to offset the
penalties.
(1) deny the motion;
(2) order a continuance to enable affidavits to be obtained,
depositions to be taken, or other discovery to be undertaken; or
(3) issue any other order.
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II. DISCUSSION
A. Statute Barred Penalties
Anuforo claims the IRS penalties arising out of Comfort Plus are barred
because the government did not comply with statutory requirements. The Internal
Revenue Code (I.R.C.) states any person who is required to collect and pay over trust-
fund employment taxes, and willfully fails to do so, is liable for a penalty in an
amount equal to the total amount of tax not paid over. See I.R.C. § 6672(a). While
employers generally pay trust-fund employment taxes in quarterly installments, the
employment taxes are deemed to be filed on April 15 of the next calendar year. See
I.R.C. § 6501(b)(2). The Commissioner typically has three years from the date a
taxpayer files a return in which to assess penalties. See I.R.C. § 6501(a). However,
the taxpayer and the Secretary may agree in writing to an extended assessment period.
See I.R.C. § 6501(c)(4).
The IRS may not impose a penalty under I.R.C. § 6672(a) unless the Secretary
notifies the taxpayer in writing he is subject to an assessment of such a penalty. See
I.R.C. § 6672(b). Anuforo does not deny he received notice he was subject to
assessments for penalties, or that the IRS made the assessments. Instead, Anuforo
argues the government failed to provide Anuforo with notice and demand after the
assessments were completed. Pursuant to I.R.C. § 6303(a), the IRS is required to give
notice to each person liable for an unpaid tax, stating the amount and demanding
payment, within sixty days after the Commissioner conducts an assessment.
While the government does not concede it failed to give Anuforo notice and
demand under I.R.C. § 6303(a), it argues such notice was not required. The
government acknowledges such notice and demand would be required if the
government proceeded against Anuforo administratively. However, the government
insists “[e]very court of appeals that has addressed the issue has held that notice and
demand is not a prerequisite to the Government’s bringing a civil proceeding to reduce
assessments to judgment.”
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The government is correct our sister circuits have consistently held notice and
demand is required when the government wishes to proceed administratively, such as
by filing a tax lien under I.R.C. § 6321, or by administrative levy under I.R.C.
§ 6331(a). See, e.g., United States v. Berman, 825 F.2d 1053, 1060 (6th Cir. 1987)
(discussing I.R.C. §§ 6303(a), 6321, and 6331, and emphasizing the necessity of
notice and demand “to protect the taxpayer . . . where the summary powers of the IRS
to collect taxes administratively are concerned”). However, notice and demand are
not required when the government files a civil action because the filing of the action
allows the taxpayer sufficient time to consider and pay any tax that is due before a
judgment or lien can be placed upon his property. See, e.g., Stevens v. United States,
49 F.3d 331, 337 (7th Cir. 1995) (“It is only when the government wants to proceed
administratively, as by filing a tax lien, that notice and demand are required. Their
absence is irrelevant in a refund suit with counterclaim.” (internal citations omitted));
Purcell v. United States, 1 F.3d 932, 941 (9th Cir. 1993) (similar); United States v.
McCallum, 970 F.2d 66, 69-70 (5th Cir. 1992) (holding “failure to give Section
6303(a) notice is not a bar to the government’s bringing a civil action against” a
taxpayer to collect unpaid taxes); United States v. Chila, 871 F.2d 1015, 1018-19
(11th Cir. 1989) (similar); Berman, 825 F.2d at 1060 (similar); cf. Jersey Shore State
Bank v. United States, 479 U.S. 442, 447 (1987). Even if the government did fail to
serve notice and demand of the assessments upon Anuforo, the government may still
bring its counterclaim against Anuforo regarding the Comfort Plus penalties.4
4
In his reply brief Anuforo argued, for the first time, the government failed to
bring its civil suit within the three-year time limit provided in I.R.C. § 6501(a).
Anuforo misreads this statutory provision. Internal Revenue Code § 6501(a) states,
“no proceeding in court without assessment for the collection of such tax shall be
begun after the expiration of [the three-year assessment] period.” This provision
permits the IRS to file a suit to collect taxes, even without assessment, so long as it
is brought within the three-year assessment period. See Berman, 825 F.2d at 1060
(“[S]ection 6501(a) recognizes that a suit to collect taxes may be brought without
assessment having been made.”). In this case, the IRS completed assessments before
filing suit, and as a result, this statutory provision does not apply. Anuforo does not
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B. Willfulness
Anuforo argues the court does not “have jurisdiction to consider whether
Anuforo is liable under Section 6672(a),” because the IRS failed to show Anuforo
acted willfully. This is an incorrect statement of the law. The district court had
jurisdiction over Anuforo’s claims pursuant to 26 U.S.C. § 7422 and 28 U.S.C.
§ 1346(a)(1), and jurisdiction over the government’s counterclaims under 28 U.S.C.
§§ 1340, 1345, and 26 U.S.C. § 7402(a). We have jurisdiction over this appeal under
28 U.S.C. § 1291. Despite Anuforo’s attempt to frame this issue in terms of
jurisdiction, he is essentially arguing he should not be held liable for penalties under
I.R.C. § 6672(a) because the IRS has not proven Anuforo acted willfully.
Internal Revenue Code Section 6672 imposes personal liability against any
person in a corporation who is responsible for payment of trust-fund employment
taxes and willfully fails to make payments. Section 6672(a) provides,
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.
I.R.C. § 6672(a); see also Slodov v. United States, 436 U.S. 238, 246-50 (1978). “The
responsible person has the burden to show that he did not willfully fail to pay over the
federal employment taxes.” Olsen v. United States, 952 F.2d 236, 239 (8th Cir. 1991).
appeal the district court’s finding the assessments were completed within the three-
year period.
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In order for nonpayment to be willful, an “evil or fraudulent intent” is not
required. Hartman v. United States, 538 F.2d 1336, 1341 (8th Cir. 1976). “It is
sufficient if the person acts or fails to act consciously and voluntarily and with
knowledge or intent that as a result of his action or inaction trust funds belonging to
the government will not be paid over but will be used for other purposes.” Id. “A
responsible person also acts willfully by proceeding with a ‘reckless disregard of a
known or obvious risk that trust funds may not be remitted to the government.’”
Olsen, 952 F.2d at 240 (quoting Wood v. United States, 808 F.2d 411, 415 (5th Cir.
1987)). “Evidence that the responsible person had knowledge of payments to other
creditors, including employees, after he was aware of the failure to pay over
withholding taxes is proof of willfulness as a matter of law.” Id. The record in this
case is replete with evidence Anuforo had knowledge of his outstanding trust-fund
employment tax debts, and nevertheless continued to make payments to other
creditors and to employees. As a consequence, Anuforo’s conduct was willful as a
matter of law.
C. Genuine Issues of Material Fact
Anuforo argues the district court erred in granting summary judgment against
him because there are genuine issues of material fact in dispute. Anuforo specifically
argues genuine issues of material fact exist because (1) Anuforo denied the IRS’s
allegations that he owed penalties; (2) Anuforo disputed the amounts of the penalties;
(3) IRS records setting forth the amounts owed conflict with one another; and
(4) Anuforo contested the IRS’s position that no money intended for the payment of
taxes was involved in the embezzlement. “Summary judgment is appropriate when
there are no genuine issues of material fact, and the moving party is entitled to
judgment as a matter of law.” Gander Mtn. Co. v. Cabela’s, Inc., 540 F.3d 827, 831
(8th Cir. 2008) (quoting Bearden v. Int’l Paper Co., 529 F.3d 828, 831 (8th Cir.
2008)). “We review de novo the district court’s grant of summary judgment, viewing
the evidence in the light most favorable to the nonmoving party.” Id.
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Anuforo’s unsupported, self-serving allegations and denials are insufficient to
create a genuine issue of material fact. See id.; Conolly v. Clark, 457 F.3d 872, 876
(8th Cir. 2006). Anuforo is the responsible person who willfully failed to pay over
trust-fund taxes, and as a result, he is subject to penalties under I.R.C. § 6672(a) as
a matter of law. We reject Anuforo’s contention that his bare denial of liability is
sufficient to create a genuine issue of material fact to defeat summary judgment.
Anuforo’s second and third alleged genuine issues of material fact both involve
the amount of penalty for which Anuforo is liable. The government conducted
assessments of the amounts Anuforo owed. An IRS assessment under I.R.C. § 6672
is presumed to be correct. See Riley v. United States, 118 F.3d 1220, 1221 (8th Cir.
1997). “This presumption applies even if the assessment is based on an estimate, so
long as the method for making the assessment is reasonable and logical.” Ferguson
v. United States, 484 F.3d 1068, 1077 (8th Cir. 2007); see also Dodge v. Comm’r, 981
F.2d 350, 353 (8th Cir. 1992) (“[T]he assessment is intended to be an estimate. It is
expected to be rational, not flawless.”).
Anuforo attempts to show issues of fact exist by pointing to various documents
listing different figures for the amounts Anuforo owes. First, Anuforo directs us to
a table which allegedly sets forth a different penalty amount than the amount in the
assessment. This table is not part of the record, and we will not consider it. See
Huelsman v. Civil Ctr. Corp., 873 F.2d 1171, 1175 (8th Cir. 1989) (“An appellate
court can properly consider only the record and facts before the district court and thus
only those papers and exhibits filed in the district court can constitute the record on
appeal.”). Anuforo also claims he received two additional documents which provided
different penalty amounts. The first document, dated January 4, 2005, is a proposed
assessment of trust fund recovery penalties, and it included proposed penalties for
three quarters for which penalties were not actually assessed. The second document,
dated October 25, 2005, is a notice from the IRS Appeals Office stating it considered
Anuforo’s protest to the proposed penalties and decided to sustain the proposed
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penalty. The notice further explained the IRS would “assess a Trust Fund Recovery
Penalty as determined by the Area Director.” The fact these two documents suggested
proposed penalties different from the final penalties actually assessed does not create
a genuine issue of material fact as to the amounts now owed under the final
assessments, which Anuforo has not shown are unreasonable, irrational, or illogical.
Anuforo’s fourth alleged issue of material fact involves a disagreement between
Anuforo and the IRS as to whether the companies’ embezzlers took money meant for
the payment of taxes. Only factual disputes “that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). This is not a material
factual dispute because, even if Anuforo’s assertion—that the embezzlers took money
intended for the payment of taxes—was correct, Anuforo would still be liable for the
penalties under I.R.C. § 6672. See Olsen, 952 F.2d at 241 (recognizing the circuit
courts of appeals are divided as to whether a reasonable cause defense may militate
against a finding of willfulness, but noting “[t]his court has held that reasonable cause
is no part of the definition of willfulness”); see also Muck v. United States, 3 F.3d
1378, 1382 (10th Cir. 1993) (noting the circuit split and finding the reasonable cause
defense “appears inconsistent with [the Tenth Circuit’s] insistence that (bad) motive
is not a pertinent inquiry under § 6672”).
D. Motion to Compel
After the government filed its first motion for summary judgment, Anuforo
filed a motion to compel Officer Dutcher’s deposition testimony.5 The magistrate
judge liberally construed the motion as a Fed. R. Civ. P. 56(f) affidavit, but denied
Anuforo’s request. Anuforo appealed, and the district court affirmed the denial.
5
Anuforo later filed a second motion to compel, but he did not appeal the
magistrate judge’s denial of this motion to the district court, and it is not properly on
appeal before this court.
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Anuforo now challenges the district court’s denial. “We review for an abuse of
discretion the district court’s refusal to allow further discovery prior to ruling on a
motion for summary judgment.” Nord v. Kelly, 520 F.3d 848, 852 (8th Cir. 2008).
Under Rule 56(f), a party opposing summary judgment may “seek a
continuance and postpone a summary judgment decision,” but “the party opposing
summary judgment is required to file an affidavit with the district court showing what
specific facts further discovery might uncover.” Roark v. City of Hazen, Ark., 189
F.3d 758, 762 (8th Cir. 1999). In this case, Anuforo’s counsel filed an affidavit,
claiming Officer “Dutcher’s testimony [wa]s very material and essential to competent
rebuttal by [Anuforo] of IRS’s Motion for Summary Judgment.” Anuforo did not set
forth “specific facts further discovery might uncover,” or what information further
discovery might reveal. Id. As a result, the district court did not abuse its discretion
in denying Anuforo’s request for further discovery before granting the government’s
motion for summary judgment.
E. Request to Strike Statements and Deposition Testimony
Anuforo claims the IRS refused to secure Officer Dutcher for a deposition and
should not be allowed to use information provided by Officer Dutcher to support its
motion for summary judgment. Anuforo seeks to have “any information provided by
[Officer] Dutcher, whether declarations or partial testimony,” stricken from the record.
Anuforo waived this claim by not raising it below. See, e.g., United States v. Alvarez-
Sanchez, 511 U.S. 350, 360 n.5 (1994) (declining to address an argument not raised
below).
F. Weighing Evidence
Anuforo claims the district court erred by weighing evidence before granting
summary judgment, and by not giving sufficient weight to Anuforo’s Rule 56(f)
affidavit. Anuforo specifically argues the district court’s statement that “[t]he IRS has
presented overwhelming evidence, much of it IRS forms filed and signed by
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[Anuforo] himself, demonstrating Comfort Plus’ failure to pay taxes,” demonstrates
“the Court weighed evidence in the summary judgment record contrary to law.” We
disagree. The district court’s statement merely reflects its finding Anuforo was liable
under I.R.C. § 6672 as a matter of law. The district court did not err in granting the
government’s motion for summary judgment. See Gander Mtn. Co., 540 F.3d at 831
(“[A] properly supported motion for summary judgment is not defeated by self-
serving affidavits.”); Conolly, 457 F.3d at 876.
G. Vicarious Liability
Anuforo claims, by holding him liable for these tax penalties, the government
is holding Anuforo vicariously liable for the criminal conduct of his employees.
Anuforo’s claims are not supported by the facts. The parties dispute the amount of
money the employees embezzled. One employee admitted to embezzling
approximately $20,000,6 and the other employee admitted to embezzling nearly
$51,000. While the embezzlement was taking place, however, Anuforo was paying
hundreds of thousands of dollars to creditors other than the IRS.
During discovery, Anuforo admitted he engaged in a practice of pro-rating the
companies’ limited resources, making some tax payments, and paying other creditors
to enable the companies to “remain in business, with the hope that the companies
would eventually overcome their financial difficulties and pay off completely all tax
liabilities.” Trying to stay in business is not an excuse for willful failure to pay over
taxes. See Olsen, 952 F.2d at 241; Sorenson v. United States, 521 F.2d 325, 328 (9th
Cir. 1975) (“We hold that payment of net wages in circumstances where there are no
available funds in excess of net wages from which to make withholding is a willful
failure to collect and pay over under § 6672.”).
6
Anuforo acknowledged the employee had repaid $21,000 by the second quarter
of 2002.
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H. Theft-Loss Deduction
Anuforo argues he is entitled to a theft-loss deduction under I.R.C. § 165(a) to
offset his penalties. Section 165(a) of the Internal Revenue Code states, “There shall
be allowed as a deduction any loss sustained during the taxable year and not
compensated for by insurance or otherwise.” However, Anuforo has not presented
any evidence or applicable law to establish he is entitled to such a deduction. In this
case, the corporations were the taxpayers who sustained a loss from the
embezzlement, not Anuforo. Comfort Plus already sought and obtained fraud loss
deductions in the amount of $132,032 for its 2001 tax return; $5,808 for its 2002 tax
return; and $174 for its 2003 tax return. We therefore find no basis upon which to
grant Anuforo’s requested relief.
III. CONCLUSION
We affirm the judgment of the district court.
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