It must have been in my second year under the Peace Tower atop The Hill, that a visiting professor, an Irish-American of formidable erudition and even more formidable capacity for good Bourbon (an Old Forester kind of guy), told us the story of the last Serjeant-at-Law in England (and the story has been told of many other persons, localities and dates). The Serjeant, an Irishman from the South, when asked by the Judge if he was familiar with the doctrine “qui fecit per alium fecit per se”, replied,  ”Why, Your Honour, in Ballyjamesduff we speak of little else.”

Well, that line might not come amiss when considering Section 6751(b), of which I had never spoken at all before my blogpost “Penalty Kick”, 7/16/14.

And that discussion might have faded into obscurity had not my esteemed colleague, Joel  E. Miller, Esq., sent me a copy of the decision in US of A v. Jacob Rozbruch et al., 11 Civ 6965, decided by Magistrate Judge Gabriel Gorenstein, USDCSDNY, 7/9/14.

While there is an interesting New York City cooperative apartment priority-of-lien issue in the case, the parties duck that issue in the best approved manner by not asking MJ Gorenstein to decide it, Decision, at p. 6. And he doesn’t.

But IRS is seeking TFRPs against Jacob and Mrs Jacob, as responsible persons of Jacob’s professional corporation known as “Ortho”.

Jacob’s counsel interpose the Section 6751(b) defense. Agreeing that Jacob and Mrs Jacob owed but didn’t pay, they say IRS hasn’t shown that the requisite intermediate supervisor signed off on the imposition of the Section 6672 100% chop, which is called a penalty throughout the Code and Regs.

MJ Gorenstein has a dozen cases that say that just because something is called a penalty doesn’t make it so. Besides, Section 6671(a), not cited by IRS counsel but picked up by the keen eyes of MJ Gorenstein (or his clerk), says TFRPs are to be assessed and collected as taxes. Decision, at p. 11-12.

Remember our eminent Chief Justice’s skating and sand-dancing in National Federation of Independent Business V. Sebelius, 132 S. Ct. 2566 (2012), where a tax might be a penalty or maybe a penalty might be a tax?

Anyway, MJ Gorenstein doesn’t need 193 pages to deal with the issue. You don’t need no Section 6751(b) sign-off for TFRPs, because Section 6671(a) says you don’t, and besides, the 6672 “penalty” isn’t, it’s a device to collect from defaulting trustees what is due to the beneficiaries, namely the Federal fisc as to income tax and the FICA and FUTA accounts of the employees from whose wages the trust funds were withheld.

Looks like we’re going to see more Section 6751(b) arguments. Just not for TFRPs.