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BENSON, BRIAN J. (1984)(F)(W/H)

Topic Code: R241Responsible Party (W/H)(I)(C)          Document Reference:

RE: Brian J. Benson Withholding Tax Assessments/Responsible Party Docket Nos. 84-51-2D-A and 84-266-2D-A

Hugh M. Field

Attorney at Law

Court Square Building

Suite 300

620 Lafayette Street

PO Box 176

Waterloo, IA 50704

Dear Mr. Field:

The Tax Review Committee of the Iowa Department of Revenue has met to consider the above captioned Protest and has determined that your Protest be sustained.

Mr. Benson received two assessments from the Iowa Department of Revenue assessing him as responsible party for Createaform, Ltd.; the first assessment dated December 1, 1983 and the second dated July 27, 1984. Mr. Benson has protested both assessments which will both be addressed in this Letter of Finding since the issues are common to both Protests.

As of the last report to the Department of Revenue Createaform, Ltd. was subject to the United States Bankruptcy Court.

The term responsible party is defined in Section 422.4(13), Code of Iowa and 730 IAC 38.1(8). Section 422.4(13) states in pertinent part:

The term 'withholding agent' shall also include an officer or employee of a corporation or association, or a member or employee of a partnership, who as such officer, employee, or member has the responsibility to perform an act under 422.16 and who subsequently knowingly violates the provisions of section 422.16.

730 IAC 38.1(8) further defines responsible party as follows:

The term 'responsible party' shall have the same meaning as withholding agent as defined in section 422.4 of the Code. A withholding agent includes an officer or employee of a corporation or association, or a member or employee of a partnership, who as such officer, employee, or member has the responsibility to perform acts covered by section 422.16 of the Code. An individual who is a 'responsible party' by law cannot relieve himself or herself of that responsibility by attempting to delegate such responsibility to another corporate officer or employee.

Every business which is an employer must have some person who has the duty of withholding and paying those taxes which the law requires an employer to withhold and pay. There shall be more than one such person, but there must be at least one. The fact that any individual may not have been the only responsible person would not excuse him or her from the responsibility of paying withholding taxes. Any withholding agent as defined in this subrule, who knowingly violates the provisions of section 422.16 of the Code will be held liable for the tax due.

In support of this rule the Department cites Pacific National Insurance Co. v. United States, 1970, (9th Cir.), 422 F.2d 26, cert. denied, 398 U.S. 937; R. E. Dougherty v. United States, 1971, 327 F.Supp. 202; and Gefen v. United States, (5th Cir.) 1968, 400 F.2d 476.

A review of the statutory language, departmental rule and case law reveals that the determination of whether an individual is "a responsible party" rests primarily upon the facts of a particular case. The Department's investigation of the Protest and Mr. Benson's response to the Department's Questionnaire Relative to Iowa Withholding Tax Assessment indicates that Mr. Benson was the comptroller of Createaform, Ltd., possessed at least some authority to sign checks on behalf of Createaform, Ltd. (apparently only with the direction and approval of the president of the company) and is a minority stockholder owning 100 shares of 75,100 shares issued. Mr. Benson was not an officer or a director of the corporation nor was Mr. Benson listed as a responsible party on the form filed with the Department of Revenue. The facts as developed do not support a finding that Mr. Benson is a responsible party for the purpose of these Protests. Accordingly, the Tax Review Committee finds that Brian J. Benson is not a responsible party for Createaform, Ltd.

A copy of this letter of finding will be sent to the Hearing Officer which will constitute authority for the Hearing Officer to dismiss the above two captioned Protests.

Sincerely, Robert J. Egge Attorney at Law Appeals Section 515/281-8276