Form St 04-21 - Recommendation For Decision (Page 5 of 7) in pdf

Form St 04-21 - Recommendation For Decision Page 5

The statute does not define the concept of willful failure. However, in applying

the penalty tax, the Illinois courts look to federal cases involving § 6672 of the Internal

Revenue Code

which contains language similar to the Illinois statute. Branson, supra, at

254, Dept of Revenue v. Joseph Bublick & Sons, 68 Ill.2d 568 (1977). The key to liability

under IRC § 6672 is control of finances within the employer corporation including the

power to control the allocation of funds to other creditors in preference to the withholding

tax obligations. Haffa v. U.S., 516 F.2d 931 (7

Cir. 1975). The issue of willfulness is

concerned with the state of the responsible person’s state of mind. Sawyer v. U.S., 831

F.2d 755 (7

Cir. 1987) “Willful failure to pay taxes has generally been defined as

involving intentional, knowing and voluntary acts or, alternatively, reckless disregard for

obvious or known risks.” Branson, supra, at 255.

Being a corporate officer does not, per se, impose the duty to collect, account for

and pay over the withheld taxes. Monday v. U.S, 421 F.2d 1210, (7

Cir. 1970).

However, an officer may have that duty even though he does not have the treasury

function. Id. He has the duty if he has general control over corporate business affairs and

participates in decisions concerning payment of creditors. Id.

The NPL issued to Taxpayer was for sales tax liabilities incurred by ABC during

the months of January 2000 through March of 2000. During these months, he was no

longer president and CEO of ABC because he resigned in August of 1999, over four

months before the liabilities were incurred by ABC. Therefore, he was not an officer or

employee of ABC when the liabilities were incurred or when they became due to be paid

to the Department. That being the case, he could not have general control over the

corporate affairs of ABC or participate in its management during the periods at issue in

26 U.S.C. § 6672.

Form St 04-21 - Recommendation For Decision Page 5