ALASKA DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT OFFICE OF THE COMMISSIONER P.O. BOX 21149 JUNEAU, ALASKA 99802-1149 DECISION OF THE COMMISSIONER IN THE MATTER OF: ) PETITIONERS' REPRESENTATIVE ) HARVEY FRANKEL ) GREG OCZKUS and ) LAW OFFICE DAVID HENRY ) ) Petitioners ) ) Docket Nos. 99-TAX-013 99-TAX-014 ORDER ADDRESSING PETITIONERS’ MOTIONS TO JOIN NORTHRIM BANK AS INDISPENSABLE PARTY OR ASSESS NORTHRIM BANK Petitioners timely appealed separately issued November 17, 1999 Employment Security Tax (EST) notices of assessment. The notices cite AS 23.20.205 and/or 23.20.265 in holding each Petitioner liable to pay $23,529.00 in unemployment insurance taxes, interest, and penalties due from Alcan Environmental (“Alcan”). The liabilities arise from the first and second calendar quarters of 1997. EST imposed the assessments against Petitioners after concluding Petitioners had, under AS 23.20.240(f), responsible person duty-to-pay responsibilities for unemployment insurance liabilities owed by Alcan. Petitioners contend documents they have submitted before this matter goes to hearing create a prima facie showing that Northrim Bank (“Northrim”) is the responsible party incurring duty-to-pay liabilities. Petitioners argue Northrim usurped their authority with Alcan when Northrim executed a clause in a lending contract that gave Northrim control of Alcan‟s accounts receivables. Petitioners also argue Northrim‟s action negated responsible person status that might have otherwise attached to Petitioners for the two quarters in question. On May 19, 2000, Petitioners filed a motion “to join Northrim Bank as a necessary party or to order DOL to assess Northrim Bank.” In a simultaneously filed memorandum, Petitioners argue Rule 19 of Alaska Rules of Civil Procedure permits joining Northrim as a party to minimize the threat of multiplicity of actions and maximize potential for a meaningful decision. HARVEY FRANKEL / 99-TAX-013 DAVID HENRY / 99-TAX-014 Page 2 In a June 12, 2000 response, EST objects to Petitioners‟ motions. EST argues it “is unaware of any legal authority in the administrative process, which would require us to assess or enjoin a party as a liable party.” EST cites the cumulative remedies language of AS 23.20.245 in support of its opposition to Petitioners‟ motions. In an August 15, 2000 supplemental response, Petitioners continue to assert their position. In an August 24, 2000 memorandum, EST continues to refuse to assess Northrim Bank, unless ordered to do so through the hearing process. EST reasserts that no legal authority requires it to enjoin Northrim Bank as a third party. The matter is still in the initial appeal stage to the Department. The appeal addresses assessments that hold Petitioners, not Northrim, obligated under AS 23.20.240(f) for Alcan‟s liabilities. The appeal raises a novel issue of whether a creditor‟s action to exercise a lien or collateral encumbrance might invoke responsible person status upon the creditor and/or its officers and employees. Therefore, the Department will not resolve the Petitioners‟ appeal by issuing a summary judgment or directed decision. The Department will not assess Northrim herein. The question remaining is whether the Department should join Northrim to the hearing as a party subject to responsible person findings, conclusion, and decision. To address this question, the Department must look to the purpose of the Alaska Employment Security Act (“AESA”). “The AESA is a remedial statute with the primary purpose of „ameliorat[ing] the negative effects that involuntary unemployment has on both the unemployed individual and society as a whole.‟ State v. Boucher, 581 P. 2d 660, 662 (Alaska 1978). The Act specifically provides that its terms are to be liberally construed toward accomplishment of its purposes.” Estes v. D.O.L., Alaska Supreme Court. No. 2276, January 30, 1981. The purposes of the ASEA include "the accumulation of reserves for the payment of compensation to individuals with respect to their unemployment." AS 23.20.005. Purviance, Comm‟r Dec. 90H-TAX-031, March 13, 1992 notes the AESA promotes the full collection of outstanding tax liabilities. Purviance states: The Alaska Employment Security Act establishes a system designed to pay unemployment insurance benefits to those workers involuntarily unemployed. The benefits are paid from funds collected from both the employer and the employee. The funds withheld from the employee "are not simply a debt; they are part of the wages of the employee, held by the employer in trust for the government. 26 USC §7501. The HARVEY FRANKEL / 99-TAX-013 DAVID HENRY / 99-TAX-014 Page 3 'trust fund taxes' are for the exclusive use of the government and are not to be used to pay the employer's business expenses, including salaries, or for any other purpose." (Cite omitted). Gephart v. U.S., 818 F.2d 469, 472 (6th Cir. 1987). (Emphasis added). As such, the Act is to be strictly construed in favor of collection of the funds. Vermillion, Comm‟r Dec. 98-TAX-001, April 9, 1998 holds: AS 23.20.240 imposes joint and several liability on responsible persons conferring a co-debtor status to them for the company's tax liability. Establishing a management by consensus structure does not immunize corporate officers from application of AS 23.20.240. Consensus management is more likely to extend liability to additional persons rather than to eliminate individual responsibility for unpaid taxes. EST remains free to pursue liability collection against any one or more of the individuals having responsible person status with Intec. AS 23.20.245. Noll, Consolidated Comm‟r Decs. 98-TAX-010/011/012, September 24, 1999 and Gillas, Consolidated Comm‟r Decs. 98-TAX-013/014/015, December 3, 1999 confirmed Department policy that holds EST has the discretion to choose against whom it will pursue assessments under AS 23.20.240(f). Those decisions hold: EST may pursue recovery of duty-to-pay liabilities from one or more individuals without being excluded from concurrent or eventual pursuit of collection from others as long as no more than the total liable amount is collected cumulatively. AS 23.20.245. The discretionary assessment policy identified in Vermillion, Noll, and Gillas is consistent with the discretionary assessment aspects of federal employment tax withholding provisions. Under 26 U.S.C. §66721, the question is not whether one is a “more responsible person” or the “most responsible person,” but merely whether one is a responsible person. Contentions that another person is more responsible under §6672 are irrelevant and provide no cause of action. Howard v. United States, U.S. Court of Appeals, 5th Cir. No. 82-1461 (August 12, 1983); Ackerman v. U.S.A., U.S. District Ct., Central Dist. of CA No. CV 82-5596- WJR(Gx) (January 17, 1985). The facts there are other responsible persons and/or that the government failed to attempt to collect unpaid taxes from the delinquent corporation or other responsible person do not relieve another responsible person of personal liability for unpaid taxes. Hornsby v. United States, 588 F.2d 952, 954 (5th Cir. 1979). HARVEY FRANKEL / 99-TAX-013 DAVID HENRY / 99-TAX-014 Page 4 CONCLUSION To ensure full collection of tax liabilities in as efficient manner as possible, Department policy has recognized EST‟s discretion to pursue “any” responsible party to recover the liabilities. The policy is consistent with federal policy in similar matters. Petitioners provide no statute nor precedent cites that support a policy change consistent with the AESA mandate to accumulate reserves to pay unemployment insurance benefits. Petitioners‟ motions to assess Northrim or add Northrim as a party will be denied. EST retains the discretion to pursue any responsible party for relevant unemployment insurance tax liabilities. For the upcoming hearing, Petitioners retain the burden of establishing they were not responsible persons for the quarters in question. That burden includes citing legal authorities to support the arguments they advance. If Petitioners establish during the hearing that they are not responsible persons, EST‟s right to issue discretionary assessments would not limit the Department from directing EST to review other parties for responsible person status. DECISION Petitioners‟ motions to have the Department assess Northrim directly or add Northrim as a party to the hearings are DENIED. The issues to be heard remain whether Petitioners had authority, knowledge, and/or duties that rendered them responsible parties under AS 23.20.240(f) for the first and second calendar quarters of 1997. Dated and Mailed in Juneau, Alaska on October 25, 2000. ALASKA DEPARTMENT OF LABOR DWIGHT PERKINS (DEPUTY COMMISSIONER) FOR ED FLANAGAN COMMISSIONER _________ 1 NOTE: 26 U.S.C. §6672 includes a “willfulness” standard omitted by the Alaska Legislature from AS 23.20.240(f). Willfulness has been defined for federal purposes as a voluntary, conscious, and intentional act to prefer other creditors over the United States HARVEY FRANKEL / 99-TAX-013 DAVID HENRY / 99-TAX-014 Page 5 thus creating or perpetuating an unpaid tax liability. Klot v. United States, 602 F.2d 920, 923 (9th Cir. 1979); Maggy,560 F.2d at 1375; Teel v. United States, 529 F.2d 903, 905. However, “willfulness” is not relevant to assessments under AS 23.20.240(f). Hartung v. Alaska Dept. of Labor, Super. Ct. 3AN-96-07907 CI (September 5, 1997).
Pages to are hidden for
"northrim bank"Please download to view full document