The Hidden Tax Trap of I.R.C. Section 6672

Two recent decisions of the United States Supreme Court examined section 6672 of the Internal Revenue Code. In Slodov v. United States, the Court expressed its views on the personal liability of business managers for unpaid taxes on employee wages. Discharging such liability because of the personal bankruptcy of the business manager was considered in United States v. Sotelo. The focal point of these cases—section 6672 of the Internal Revenue Code—provides for the potential liability of business managers for the employees’ share of taxes on wages (hereinafter trust fund taxes). Although Slodov and Sotelo are helpful in understanding the scope and effect of section 6672, they do not lessen its hidden-trap character. The problem of tax deficiencies for unpaid taxes on employee wages is of enormous magnitude. In fiscal year 1976, there were 28,599 businesses delinquent in such taxes in the Chicago district of the IRSA. This statistic translated into $88.9 million of unpaid trust fund taxes which resulted in section 6672 penalty assessments against individuals connected with 535 of those businesses. Whether the exceptional remedy given the government under section 6672 to pursue individuals for the unpaid trust fund taxes is necessary to protect federal revenues cannot be answered without an examination of the applications of section 6672 and possible defenses to such penalty assessments. This article will examine these issues and comment on what should be done to reconcile the need to protect federal revenues with the need to be fair to individuals responsible for collecting and paying over trust fund taxes. Part I examines the question of who can be liable under section n6672, Part II examines the concept of “willfulness” which is a prerequisite for liability, and Part III examines possible reforms

International Environmental Damage Control: Some Proposals for the Second Best of All Possible Worlds

Recent meetings of international law experts have produced considerable debate over the type of international regime necessary to effectively control pollution. Divergent views expressed range from the survival approach of Professor Falk to the grocery-list approach of Christian Herter Jr., Special Assistant to the Secretary of State for Environment. The grocery-list approach is an operational approach which involves doing what can be done by the use of available means including discussion to define common interests, international agreements based on those shared interests, unilateral action where appropriate and increased use of the UN for a variety of purposes such as environment monitoring and research. The survivalists recommend a central guidance system that includes capabilities for monitoring, quick reaction, rationing, zoning, standard-setting and enforcement. An attempt will be made in the following discussion to report some major causes of international pollution, to provide a framework for the legal analysis of specific pollution events, to evaluate the probable effectiveness of the existing international system in preventing further environmental damage and to suggest some beneficial changes in that system

Survey of Czechoslovak Laws Affecting East-West Trade

Between 1960 and 1967 all of the major codes of Czechoslovak laws were redrafted. The culminating work in the redrafting process was the New Economic Model (NEM) which became effective in January, 1967. Under the NEM, allocation of resources and trade decisions were to be made primarily on the basis of profitability. The key to the implementation of the profit motive was the new market price system, under which prices were eventually to be determined by supply and demand rather than set by administrative fiat. Bonuses were to be paid workers and managers based upon the profitability of their enterprise. After the 1968 Warsaw Pact Occupation of Czechoslovakia the NEM was abandoned, although the law was not repealed. The most recent Czechoslovak Five-Year Plan evidences the return to centralized planning by directive: it condemns the establishment of a market price system, fixes detailed goals for each industry and favors the integration of the Czechoslovak economy into COMECON. Although the NEM has been abandoned, the Warsaw Pact occupation has not caused the repeal of any of the other codes enacted in Czechoslovakia during its liberal period

Kentucky Law Survey: Kentucky Taxation

Certainly the most publicized developments in Kentucky tax law during the current survey period were those legislative reforms adopted by the special session of the Kentucky General Assembly in early 1979. Responding to demands for relief from rising tax burdens, the legislature enacted H.B. 44 to limit the impact of inflation on property taxes. These legislative changes were part of a nationwide wave of tax reform proposals engendered by voter approval of California\u27s Proposition Thirteen in June, 1978. In addition to H.B. 44, this article will examine selected judicial decisions involving the taxation of intercorporate dividends, the sales and use tax, the occupational license tax, and statutory provisions for allocation of corporate income

Report of Third Annual Seminar on Estate Planning

Reports from the UK/CLE Third Annual Seminar on Estate Planning held July 23-24, 1976

Survey of Czechoslovak Laws Affecting East-West Trade

Between 1960 and 1967 all of the major codes of Czechoslovak laws were redrafted. The culminating work in the redrafting process was the New Economic Model (NEM) which became effective in January, 1967. Under the NEM, allocation of resources and trade decisions were to be made primarily on the basis of profitability. The key to the implementation of the profit motive was the new market price system, under which prices were eventually to be determined by supply and demand rather than set by administrative fiat. Bonuses were to be paid workers and managers based upon the profitability of their enterprise. After the 1968 Warsaw Pact Occupation of Czechoslovakia the NEM was abandoned, although the law was not repealed. The most recent Czechoslovak Five-Year Plan evidences the return to centralized planning by directive: it condemns the establishment of a market price system, fixes detailed goals for each industry and favors the integration of the Czechoslovak economy into COMECON. Although the NEM has been abandoned, the Warsaw Pact occupation has not caused the repeal of any of the other codes enacted in Czechoslovakia during its liberal period

The Hidden Tax Trap of I.R.C. Section 6672

Two recent decisions of the United States Supreme Court examined section 6672 of the Internal Revenue Code. In Slodov v. United States, the Court expressed its views on the personal liability of business managers for unpaid taxes on employee wages. Discharging such liability because of the personal bankruptcy of the business manager was considered in United States v. Sotelo. The focal point of these cases—section 6672 of the Internal Revenue Code—provides for the potential liability of business managers for the employees’ share of taxes on wages (hereinafter trust fund taxes). Although Slodov and Sotelo are helpful in understanding the scope and effect of section 6672, they do not lessen its hidden-trap character. The problem of tax deficiencies for unpaid taxes on employee wages is of enormous magnitude. In fiscal year 1976, there were 28,599 businesses delinquent in such taxes in the Chicago district of the IRSA. This statistic translated into $88.9 million of unpaid trust fund taxes which resulted in section 6672 penalty assessments against individuals connected with 535 of those businesses. Whether the exceptional remedy given the government under section 6672 to pursue individuals for the unpaid trust fund taxes is necessary to protect federal revenues cannot be answered without an examination of the applications of section 6672 and possible defenses to such penalty assessments. This article will examine these issues and comment on what should be done to reconcile the need to protect federal revenues with the need to be fair to individuals responsible for collecting and paying over trust fund taxes. Part I examines the question of who can be liable under section n6672, Part II examines the concept of “willfulness” which is a prerequisite for liability, and Part III examines possible reforms

Kentucky Law Survey: Kentucky Taxation

Certainly the most publicized developments in Kentucky tax law during the current survey period were those legislative reforms adopted by the special session of the Kentucky General Assembly in early 1979. Responding to demands for relief from rising tax burdens, the legislature enacted H.B. 44 to limit the impact of inflation on property taxes. These legislative changes were part of a nationwide wave of tax reform proposals engendered by voter approval of California\u27s Proposition Thirteen in June, 1978. In addition to H.B. 44, this article will examine selected judicial decisions involving the taxation of intercorporate dividends, the sales and use tax, the occupational license tax, and statutory provisions for allocation of corporate income