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May 16, 1983

UNITED STATES OF AMERICA, Defendant, v. LEVIN WEST, Counterclaim Defendant

The opinion of the court was delivered by: SAROKIN

 In a democratic society, the laws must be enforced uniformly. Selective enforcement is contrary to the equality of treatment that is guaranteed to all persons. However, these principles do not prohibit the reasoned exercise of discretion in determining who shall be and who shall not be prosecuted and what claims shall and shall not be pursued.

 This matter portrays the government at its heartless, rigid, and Orwellian bureaucratic worst. The plaintiffs in this action were engaged in selfless, dedicated charitable activity. They gave of their time and themselves to assist those in need. They received no personal gain other than the satisfaction derived from their charitable endeavors.

 The compassionate federal government, and particularly the well-known, warmhearted Internal Revenue Service, has chosen to reward them with personal liability for the nonpayment of withholding taxes. In addition to the primary claim for the substantial taxes due, plaintiffs have been required to incur and to pay substantial amounts for legal fees to reverse the liability imposed upon them for such taxes.

 On September 15, 1980 a delegate of the Secretary of the Treasury made assessments, pursuant to Section 6672 of the Internal Revenue Code of 1954, and issued notices of assessments to, and made demands for payment upon William Hildebrand, Heman Adams and Martin Bressler. These assessments resulted from the alleged nonpayment of withholding taxes by the Friends of Clinton Hill (FCH) for a period in the 1970's when it was operating a neighborhood health center, a community center, and a day care center in Newark. Plaintiffs are three suburbanites who were members of FCH, a tax-exempt charitable corporation. They participated in the organization, devoting time, money, and business expertise, out of a desire to help the community improve its quality of life.

 The IRS has assessed plaintiffs Hildebrand and Adams the sum of $ 55,081.25 each for withholding taxes purportedly unpaid for the third and fourth quarters of 1973, all of 1974, and the first three quarters of 1975. Plaintiff Bressler has been assessed for the first three quarters of 1975 in the amount of $ 12,468.48, plus interest. The assessments were based on a determination by the United States that they were persons responsible for collecting, accounting for and paying over the withholding taxes and FICA taxes for FCH during the periods of assessment, who willfully failed to collect, account for and pay over such taxes.

 Plaintiffs moved for summary judgment alleging that they were not in control of the financial decisions of the corporation, that they did not act willfully, that their actions are supported by reasonable cause, and that they were denied due process. They also seek attorneys' fees. Defendant opposes this motion, contending that there are material issues of fact that preclude the granting of summary judgment.

 This court may only grant summary judgment if it appears that there are no genuine issues of material fact, and the party is entitled to judgment as a matter of law. Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977).

 Control of the Corporation

 The assessments were made pursuant to 26 U.S.C. § 6672:

(a) General rule. -- 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. No penalty shall be imposed uder section 6653 for any offense to which this section is applicable.

 The term "person" is defined in section 6671(b):

(b) Person defined. -- The term "person", as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

 Plaintiffs claim that they are not persons with a duty to account for and pay over the taxes. They argue that they had no control over the actions of the corporation, for the decisions were made by the urban representatives on the corporation's board of trustees. They contend that neither the structure of the corporation, nor the climate of Newark and the community organization would have permitted it. Further, plaintiffs argue that they did not want control of the corporation. They contend that they had no actual control of decisions, although there were "paper formalities" indicating that they did have control, and they did render advice to the corporation.

 The cases indicate that responsibility for penalties under section 6672 ("responsible persons") extends broadly to persons who exercised actual substantial control over ...

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