Fred M. Dellorfano v. Commissioner of Revenue (October 27, 2010)

COMMONWEALTH OF MASSACHUSETTS

		      APPELLATE TAX BOARD


FRED M. DELLORFANO          v.      COMMISSIONER OF REVENUE	

		   
Docket No. C293862	          	 Promulgated:
							 October 27, 2010
							
	This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the appellee, the Commissioner of Revenue ("Commissioner"), to abate withholding taxes assessed against the appellant, Fred M. Dellorfano ("Mr. Dellorfano" or "appellant"), for the tax period beginning on October 1, 2002 through and including the tax period ending on November 30, 2003 ("tax periods at issue").  
	Commissioner Scharaffa heard this appeal and was joined by Chairman Hammond and Commissioners Egan, Rose, and Mulhern in a decision for the appellee. 
These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.  
	
Fred M. Dellorfano, pro se, for the appellant.
	Kevin M. Daly, Esq., Anne P. Hristov, Esq. and Julie A. Flynn, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
On the basis of the testimony and exhibits entered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
On August 17, 2004, the Commissioner issued to the appellant a Notice of Proposed Determination of Personal Liability and Deemed Assessment for unpaid withholding taxes of RTG TeleCom, Inc. ("RTG"), a Massachusetts domestic corporation, for the tax periods at issue.  Subsequently, on April 27, 2005, the Commissioner issued to the appellant a Notice of Determination of Personal Liability and Deemed Assessment for unpaid withholding taxes in the amount of $21,932.40, together with interest and penalties.  On June 20, 2005, the appellant timely filed with the Commissioner a Form CA-6, Application for Abatement, to appeal his assessment as a responsible person.  The Commissioner notified the appellant of her denial of this application by Notice of Abatement Determination dated October 12, 2007.  On December 6, 2007, the appellant seasonably filed a petition with the Board to contest the Commissioner's assessment.  On the basis of the forgoing facts, the Board found that it had jurisdiction to hear and decide this appeal.
The appellant testified to the events leading to the formation of RTG.  The appellant holds a law degree and an LL.M. degree in taxation, and he previously worked as a tax counsel within a certified public accounting firm.  While pursuing an M.B.A. degree at Suffolk University, the appellant met Peter Gianonatti, a fellow student who told the appellant that he was interested in purchasing a business.  At the time, the appellant was employed by Response Electric, an electrical company based in Massachusetts.  The appellant arranged a meeting between the three shareholders of Response Electric, Mr. Gianonatti and Mr. Gianonatti's colleague, Doug Muir.  In pursuing the possibility of purchasing Response Electric, Mr. Gianonatti requested that a certified public accountant ("CPA") review the books of the company.  The appellant engaged his former colleague, Frederick Ciampa, CPA, with whom he used to work at the certified public accounting firm, to review the books of Response Electric.  
Over the course of negotiations, Mr. Muir backed out of the deal, and Mr. Gianonatti decided that Response Electric was too large a company for his interests.  However, Mr. Gianonatti expressed interest in purchasing a smaller telecommunications division within Response Electric, and he asked the appellant to partner with him in this venture.  The appellant arranged a financing plan through his colleague, Winn Coffman, and he engaged another colleague, Attorney Lawrence Litwak, to serve as the new company's incorporator.  
As a result of the appellant's efforts, RTG, a Massachusetts corporation, was formed on October 12, 2001, with Mr. Gianonatti serving as Treasurer, the appellant's brother, Frank J. Dellorfano, serving as Clerk, and Pranati Kapadia, whom the appellant met in September, 2001 through a mutual friend, serving as President.  Serving as directors of RTG were Frank J. Dellorfano, Mr. Coffman, Ms. Kapadia, and Mr. Gianonatti.  The appellant testified that, when Mr. Coffman rescinded his financing, the appellant arranged for his brother, Frank J. Dellorfano, to provide the necessary capital.  On November 7, 2001, the appellant, in his capacity as Executive Vice President of RTG, signed a Security Agreement with his brother.  Frank J. Dellorfano thus became a 50-percent shareholder of RTG and, on November 9, 2001, he filed a Certificate of Change of Directors or Officers with the Secretary of the Commonwealth to remove Mr. Coffman as a director of RTG.  The appellant subsequently married Ms. Kapadia on September 1, 2002.  
The appellant and his relatives together owned a majority (89%) of RTG's shares --  Frank J. Dellorfano was a 50% shareholder, Ms. Kapadia was an 11% shareholder, and the Isola Capri Trust, a family trust in which the appellant was a life beneficiary and his children were the remainder beneficiaries, was a 28% shareholder.  In June of 2002, a tax-free exchange was made to transfer the stock of RTG for stock of RTG/ISI TeleCom, Inc. ("RTG/ISI"), which became the holding company of RTG and another subsidiary, ISI Internetworking Solutions, Inc. ("ISI").  The tax-free exchange resulted in the same ownership structure of RTG/ISI that had existed for RTG, with the appellant and his family owning 89% of RTG/ISI, and RTG/ISI owning 100% of the stock of both RTG and ISI.   
Mr. Ciampa was engaged to serve as the outside CPA for RTG to perform its audits, and Attorney Litwak served as corporate counsel.  At the hearing, Mr. Ciampa testified that it was his colleague, the appellant, who hired him.  Mr. Ciampa also testified that he was approached by the Board of Directors of RTG to recommend a Controller for RTG, and that he recommended a colleague, William Gardner.  Mr. Ciampa further explained that it was Mr. Dellorfano to whom he presented Mr. Gardner for hiring consideration.  Although not listed in the Articles of Organization, the appellant was named as RTG's Executive Vice President on several financial documents, particularly the aforementioned Security Agreement with Frank J. Dellorfano and two separate Promissory Notes executed in December, 2002, as well as other documents, including the minutes from the First Meeting of the Board of Directors.  The appellant, Ms. Kapadia and Mr. Gardner each had singular check-signing authority on RTG's two checking accounts maintained at Eastern Bank.  The appellant signed numerous payroll and operating checks during the periods at issue.  Moreover, the appellant testified that, while Ms. Kapadia was "brilliant," she was rendered nearly blind and deaf as a result of a brain tumor.  According to the appellant, he thus became the President's "eyes and ears" in their endeavors to grow the business of RTG.  
RTG's sole client was Verizon Services Group ("Verizon").  The relationship with Verizon was secured by a contract signed by the appellant as Vice President on January 31, 2003.  One of the employees of RTG, Ed Pagan, subsequently made an arrangement with Verizon to take Verizon's business away from RTG sometime in June, 2003.  Mr. Pagan also employed several RTG employees who had been working on that contract.  The loss of its sole client and its key employees led to the demise of RTG.  It was the appellant who signed the Business Discontinuation Form on behalf of RTG.
The Board heard the testimony of Mr. Gardner, who served as Controller of RTG during the tax periods at issue.  Mr. Gardner stated that it was the appellant who had hired him and that the appellant had made other hiring decisions as well, including the hiring of the appellant's son ("Fred III") as Mr. Gardner's assistant after the discovery of the unpaid federal taxes and the hiring of the appellant's sister, who performed some contract work for RTG.  Copies of electronic mail messages offered into evidence revealed that Fred III took charge of making tax payments and that he informed the appellant and Mr. Gardner when tax deposits and withholding payments were being made.  When the appellant, during his cross-examination of Mr. Gardner, attempted to classify the hiring of Fred III as Mr. Gardner's decision, Mr. Gardner replied, "I don't feel that's accurate.  It's your son."  
Mr. Gardner also explained that the appellant directed him as to which items to pay, including pay raises.  Mr. Gardner explained that he regularly communicated to the appellant the cash flow projections for RTG, which included RTG's withholding tax liabilities.  He explained that on a weekly basis he submitted to the appellant documents such as financial statements, contracts and billings and that he gave him "[b]asically a synopsis of everything that was happening at any given point in time."   Mr. Gardner also testified that Fred III met with the appellant daily to review cash flows and that Fred III compiled reports of RTG's finances, which were circulated to the appellant. 
Mr. Gardner testified that he became frustrated with the appellant's control over the company's finances and with being "kept out of the loop of what's going on financially" with RTG.  Mr. Gardner cited as examples payments to the appellant's brother, Frank, on the loan to RTG at the expense of other outstanding liabilities, including taxes.  Mr. Gardner was also frustrated by the appellant's decision to ignore the health insurance bills that benefited RTG employees while ensuring that the health insurance premiums for the appellant's brother, who was not employed by RTG, were paid.  In a letter he wrote to the Internal Revenue Service ("IRS") to protest his assessment as a responsible person for unpaid federal taxes, Mr. Gardner explained that:
The board of directors, Fred Jr., and Fred III had total and exclusive control of all cash disbursed on a daily basis (exhibit B-H).  My lack of control of cash disbursed can further be illustrated by the fact that my family's health insurance was cancelled on August 31, 2003 which has resulted in thousands of dollars of medical bills to me as my wife [ ] has diabetes and numerous other health issues.  You can be sure that if I had any control, I would under no circumstances fail to pay our company health insurance premium. 

Mr. Gardner further testified that he performed duties for RTG and ISI, and as far as he was concerned, "[i]t was the same organization" and he had received instructions on which bills to pay and which checks to hold for both companies from the appellant.  Mr. Ciampa also testified that RTG/ISI, RTG and ISI were accounted for as one organization for both financial statement and tax purposes.  The appellant routinely circulated money from one company to the other to cover any shortfalls.  The appellee submitted into evidence over thirty ISI checks, which the appellant had signed and were payable to RTG.  The appellant also admitted that he had assigned several of ISI's accounts receivables to Danvers Savings Bank in order to generate cash, which he then transferred to RTG's accounts as needed.  The appellant also signed contracts on behalf of RTG's parent company, RTG/ISI, including a service contract on May 29, 2003 and a subcontractor agreement on July 28, 2003.  Mr. Gardner also testified that he performed duties for each of the companies, and that he considered the companies to be one organization controlled by one boss - the appellant.
Mr. Gardner's employment with RTG was terminated around November, 2003.  The circumstances surrounding Mr. Gardner's departure were not made clear at the hearing; the parties refer to the departure as a "layoff" resulting from RTG's financial struggles.  Evidence submitted does establish that the appellant signed Mr. Gardner's last payroll check and that the appellant directed Mr. Gardner in writing not to cash his check until adequate funds were deposited in RTG's payroll account to cover payroll checks.  At around this time, the appellant, together with Ms. Kapadia, applied for a personal loan to sustain RTG through its difficulties.  The appellant also sought the advice of his colleague, Mr. Ciampa, in hiring a bookkeeper after the departure of Mr. Gardner.
The Board heard the testimony of Renee Jacavanco, who served as the bookkeeper for RTG/ISI, RTG and ISI after the departure of Mr. Gardner.  Ms. Jacavanco corroborated the testimony of both Mr. Gardner and Mr. Ciampa that the entities RTG/ISI, RTG and ISI all operated out of the same office and shared the same employees.  Ms. Jacavanco testified several times, on both direct and cross examination, that the companies' finances were so intertwined that she often would not know which company's finances were being utilized to pay bills.  Ms. Jacavanco also testified that, while she was working for the companies, ISI was bringing in money from its contracts.  The appellee submitted into evidence an invoice from ISI to BR+A Consulting Engineers, Inc., which was signed by the appellant as Executive Vice President.  During his testimony, the appellant admitted that "ISI was operating and operating fairly successfully" during the third quarter of 2003, when RTG's business began to suffer after losing its contract with Verizon. 
Ms. Jacavanco testified that the appellant hired her and supervised her duties.  One of Ms. Jacavanco's first duties was to void several payroll checks and rework withholding tax returns.  She stated that this duty had been delegated to her by the appellant, who handed her the envelope containing the payroll checks and Massachusetts Department of Revenue withholding tax returns.  Ms. Jacavanco also testified that she soon became frustrated working for the companies, because when she recommended payment of what she deemed to be more important liabilities, particularly tax liabilities, the appellant directed her to pay other liabilities instead, such as lease payments for the appellant's vehicle and payments for credit card accounts personally guaranteed by the appellant.  Ms. Jacavanco ended her employment with the companies after only a few months.
The appellee offered into evidence an Application for Employer Identification Number for RTG/ISI, which the appellant had signed on June 25, 2002.  Mr. Ciampa also testified to the appellant's role when auditors from a CPA firm discovered RTG's unpaid federal and state withholding taxes in December of 2002.  According to Mr. Ciampa, RTG had a history of withholding tax delinquencies: "pretty much everybody was in shock because we had just gone through an era of a problem and it was starting up all over again."  Mr. Ciampa testified that he immediately notified the appellant about the discovery of the unpaid taxes and that the appellant accompanied him to the IRS office to discuss a payment plan.  On October 10, 2003, the appellant also faxed a note to an IRS Revenue Officer regarding the status of payments pursuant to a payment agreement which RTG had executed with the IRS.  The appellant also signed the 2002 Massachusetts Form 355C Combined Corporate Excise Return for ISI on September 15, 2003 in his capacity as Vice President.  Attached to this return was the 2002 federal Form 1120 U.S. Corporation Income Tax Return for RTG/ISI that showed the consolidation of RTG/ISI, RTG and ISI.
On the basis of the above evidence, the Board found that the appellant was instrumental in the founding of RTG, having engaged a colleague to serve as its CPA, another colleague to serve as incorporator, and his brother to provide the financing.  The appellant, together with his relatives, also owned 89% of the stock of RTG through their ownership interest in the parent company, RTG/ISI.  The three named officers and directors of RTG - Ms. Kapadia, Frank Dellorfano and Mr. Gianonatti - were the appellant's wife, brother, and colleague, respectively.  Although he tried to shield himself from liability by not being listed in the Articles of Organization, the appellant was nonetheless cited as RTG's Executive Vice President on key business documents, particularly on the contract with Verizon and on the minutes from the First Meeting of the Board of Directors, a meeting which he presided over in that capacity.  The appellant also had hiring and firing power over essential employees who handled RTG's finances, as evidenced by his hiring and supervision of Mr. Gardner and Ms. Jacavanco, according to their credible testimony, as well as the hiring of his son, Fred III, as Mr. Gardner's assistant.  On the basis of these findings, the Board found that the appellant had and exercised significant control over the business operations of RTG.   
More importantly, the Board gave particular weight to evidence related to the appellant's involvement in the financial affairs of RTG.  The appellant was acutely involved in the finances of RTG.  It was the appellant who signed the Security Agreement and the Promissory Notes with Frank J. Dellorfano; he also applied for a personal loan to cover the expenses of RTG during its financial difficulties.  As Mr. Gardner testified and numerous electronic mail communications offered into evidence revealed, the appellant was updated on a daily basis as to the cash situation of RTG.  He also had check-signing authority on RTG's checking accounts, and he signed numerous payroll and operating checks during the periods at issue.  Further, Mr. Ciampa testified, and the Board so found, that he immediately notified the appellant about the discovery of unpaid withholding taxes and that it was the appellant who accompanied him to the IRS to negotiate a payment plan and who continued to correspond and oversee payments pursuant to the IRS payment agreement.  On the basis of these findings, the Board found that the appellant was fully aware of RTG's tax obligations and liabilities at issue in this appeal and that he had authority and control over whether these liabilities would be paid. 
The Board also found it significant that the entities RTG, ISI and RTG/ISI operated as one consolidated, intertwined unit, with the appellant as the controlling force.  Tax returns entered into evidence reveal that the three entities were consolidated for tax purposes, while all three witnesses - Ms. Jacavanco, Mr. Garnder and Mr. Ciampa - testified that the three entities operated out of the same office, shared the same employees, and their finances were so intertwined that the bookkeeper had difficulty determining which company's finances were being utilized to pay bills.  The appellant's control over the companies was illustrated by his involvement in signing contracts on behalf of RTG's parent company, RTG/ISI, including a service contract on May 29, 2003 and a subcontractor agreement on July 28, 2003.  The appellant routinely circulated money from one company to the other to cover any shortfalls, as evidenced by the appellant signing checks and assigning accounts receivables belonging to ISI to Danvers Savings Bank in order to generate cash, which he then had transferred to RTG's payroll account.  Invoices and credible testimony demonstrated that ISI was operating successfully during the periods at issue.  On the basis of these findings, the Board found that the appellant possessed and exercised significant control over the disbursement of funds for not only RTG but also ISI and RTG/ISI.
The Board thus found that the appellant had knowledge of the unpaid taxes at issue and the authority to pay those tax liabilities.  However, the evidence showed that the appellant directed Mr. Gardner and Ms. Jacavanco to pay other liabilities instead, including credit cards which the appellant had personally guaranteed, lease payments for the appellant's vehicle, and health insurance premiums for the appellant's brother.  He had the power to decide which bills were paid, and he chose to pay other bills rather than the taxes at issue.  For these reasons, and as will be explained in the Opinion, the Board ultimately found that the appellant was a person responsible for the unpaid withholding taxes of RTG during the tax periods at issue.  Accordingly, the Board issued a decision for the appellee in this appeal. 

OPINION
The question presented in this appeal is whether the appellant was a person responsible for the unpaid withholding tax liabilities of RTG, together with the related interest and penalties, for the tax periods at issue.  The withholding tax is commonly referred to as a trustee tax, because it is a tax which a person or entity withholds from its employees and is obligated to remit to the Commonwealth.  See G.L. c. 62B, § 2.
Responsible person liability in Massachusetts is governed by G.L. c. 62C, § 31A, which provides that:
[i]f a person fails to pay to the commissioner any required tax of a corporation or partnership and such person is personally and individually liable therefor to the commonwealth under . . . section sixteen of chapter sixty-four H, . . . the commissioner shall so notify such person in writing . . . .  After the expiration of thirty days from the date of such notification, such person shall be personally and individually liable for the tax . . . . 

(emphasis added).  G.L. c. 62B, § 5, applying specifically to withholding taxes, provides as follows:
Every employer who fails to withhold or pay to the commissioner any sums required by this chapter to be withheld or paid shall be personally and individually liable therefore to the commonwealth.  The term "employer" . . . includes an officer or employee of a corporation, or a member or employee of a partnership or limited liability company, who as such officer, employee or member is under a duty to withhold and pay over taxes in accordance with this section . . . . 
 
The Commissioner has promulgated a regulation which describes a "responsible person" as "any person who is or was under a duty to pay over taxes imposed on a corporation or partnership by M.G.L. chs. 62B, 64G, 64H, and 64I."  830 CMR 62C.31A.1(2).  The regulation defines "duty to pay over taxes" as "an obligation to remit taxes that arises from a person's position, function, or responsibility undertaken on behalf of a corporation."  Id.  Determination of who is a responsible person is made on a case-by-case basis after analyzing the "facts and circumstances of the individual case."  830 CMR 62C.31A.1(4).
In Brown v. Commissioner of Revenue, 424 Mass. 42 (1997), the Supreme Judicial Court ruled that, absent express authority pursuant to the terms of an individual's employment, no ready legal formula identified circumstances giving rise to an obligation to remit taxes on behalf of a corporation.  Id. at 44.  In upholding the Board's consideration of federal cases on this issue, the Court in Brown noted a "close parallel between the State and Federal statutes concerning the duty to pay over."  Id.  Citing relevant federal cases with approval, the Court observed that "the issue to pay over [taxes] turns on whether the facts demonstrate that the person assessed had the authority to have the taxes paid."  Id. (citing United States v. Rem, 38 F.3d 634, 642 (2nd Cir. 1994); Purcell v. United States, 1 F.3d 932, 937 (9th Cir. 1993); Barnett v. IRS, 988 F.2d 1449, 1454-55 (5th Cir.), cert. denied, 510 U.S. 990 (1993); and O'Connor v. United States, 956 F.2d 48, 50-51 (4th Cir. 1991)).  
Factors drawn from federal case law which have guided the Board in making responsible person determinations include:
(1) the contents of the corporate by-laws; (2) the authority of the individual in question to sign checks; (3) the identity of the individuals who signed the tax returns; (4) the payment of other creditors, besides the taxing authority; (5) the identity of the officers, directors, and principal stockholders of the corporation; (6) the identity of the individual who hires and fires employees; and, most importantly, (7) the identity of the individual with significant control over the corporation's financial affairs.

Mandell v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1994-1, 11-12 (citing Datlof v. U.S., 252 F.Supp. 11, aff'd, 370 F.2d 655 (3rd Cir. 1966), cert. denied, 387 U.S. 906 (1967), and Hochstein v. U.S., 900 F.2d 543 (2nd Cir. 1990)).  
The factor most probative of a duty to pay over taxes is "significant control over disbursement of the company's funds."  Gadoury v. United States, 77 F.3d 460 (1st Cir. 1996).  If a taxpayer has significant authority over the expenditure of funds and the payment of bills, courts have ruled that he is responsible for the failure to withhold or pay over the tax, regardless of his official title or whether he is as an officer within the company.  Godfrey v. United States, 748 F.2d 1568, 1575 (Fed. Cir. 1984); Maggy v. United States, 560 F.2d 1372 (9th Cir. 1977).  For example, in Mandell, the Board found the appellant, who was not a corporate officer, director, or shareholder of the corporation, was nonetheless a responsible person.  The taxpayer in that appeal handled the corporate finances, wrote virtually all of the checks, paid the corporation's bills, had discretion over which bills were paid, and was aware of the company's sales tax liability.  Mandell, Mass. ATB Findings of Fact and Reports at 1994-13.  Essentially, the taxpayer "acted as and in fact was the key financial person in the corporation."  Id. at 12.  See also Slodov v. United States, 436 U.S. 238 (1978); Monday v. United States, 421 F.2d 1210, 1218 (7th Cir.), cert. denied, 400 U.S. 831 (1970) ("[A] responsible person is anyone with the power and responsibility within the corporate structure for seeing that the withheld taxes are remitted."); Rem, 38 F.3d at 642.
In the instant appeal, the Board found numerous examples of the appellant exerting control over the organization and operational functions of RTG.  As detailed in the Findings, the appellant was instrumental in the founding of RTG by engaging his own colleagues to serve as CPA and incorporator, securing the financing and presiding over its first Board of Directors meeting.  The three named officers and directors of RTG were the appellant's wife, brother, and colleague, and the appellant and his relatives together owned 89% of the stock of RTG through their ownership interests in RTG/ISI, the parent corporation which wholly owned RTG.  The fact that he was not named as an officer or director in the Articles of Organization was not, under the facts of this appeal, determinative of the appellant's authority and control over RTG's daily functions, where he was named as the Executive Vice President on several key corporate documents and, according to credible testimony, he wielded hiring, firing and supervisory authority over essential employees, particularly Mr. Gardner, Fred III as Mr. Gardner's assistant, the appellant's sister, and Ms. Jacavanco who paid the corporate bills.  The Board thus found and ruled that the appellant had and exercised significant control over the operations of RTG.   
More importantly, the Board found ample evidence establishing the appellant's control over RTG's finances during the tax periods at issue.  The Board found that the appellant held and exercised check-signing authority and that he was informed on a regular, if not daily, basis as to the financial status of RTG by several sources, including Fred III.  The appellant even took steps to alleviate the finances of RTG, including transferring money from ISI to RTG and applying for a personal loan on behalf of RTG.  The Board also found that the appellant, who holds an LL.M. degree in taxation and had previously worked as a tax counsel for a certified public accounting firm, was informed of the liabilities, and that he negotiated and oversaw RTG's payment plan with the IRS.  The Board thus found and ruled that the appellant was aware of RTG's tax liabilities and that he held the requisite authority to effect their payment.  
On the basis of these findings, the Board found and ruled that, during the tax periods at issue, the appellant held and exercised significant control over the disbursement of RTG's funds sufficient to render him a person responsible for the payment of the liabilities at issue.  This authority over the corporate finances extended to the other related entities, ISI and RTG/ISI, which the Board found operated on a consolidated basis with RTG for tax and operational purposes, with the appellant at the helm.  However, when it was suggested to him that he pay RTG's tax liabilities, the appellant instead directed the payment of other RTG liabilities, including credit cards personally guaranteed by the appellant and health insurance premiums for his brother.  The Board thus found and ruled that the appellant, who had the authority to direct payment of the tax liabilities at issue, deliberately chose to pay RTG's other non-tax liabilities instead.  
It is important to point out that control over the relevant operations of the corporation need not be exclusive, so long as the taxpayer's control is significant.  Gephart v. United States, 818 F.2d 469, 473 (6th Cir. 1987); Caterino v. United States, 794 F.2d 1, 5 (1st Cir. 1986).  See also, United States v. Kim, 111 F.3d 1351, 1362 (7th Cir. 1997) (quoting Thomas v. United States, 41 F.3d 1109, 1114 (7th Cir. 1994) ("[A]ll that is required is that the individual 'could have impeded the flow of business to the extent necessary to prevent the corporation from squandering the taxes it withheld from its employees.'")).  Responsible person status essentially "encompasses all those connected closely enough with the business to prevent the default from occurring."  Bowler v. United States, 956 F.2d 723, 738 (7th Cir. 1992) (citing Adams v. United States, 504 F.2d 73, 76 (7th Cir. 1974)).  
In the instant appeal, the appellant contended that he was not a person responsible for RTG's tax liabilities because another individual, Mr. Gardner, held the official title and duties of Controller during the tax periods at issue.  However, as the above cases make clear, the taxpayer need not have exclusive control over the relevant operations of the corporation.  Responsible person liability encompasses all within the company who could have effected payment of the liabilities but did not.  Thus, whether or not Mr. Gardner was also a person responsible for the payment of RTG's tax liability is not dispositive for purposes of the appellant's appeal.  Moreover, while he portrayed himself as involved solely with business development of RTG, the credible evidence offered reveals that the appellant's authority extended into operational and, more importantly, financial matters, particularly those involving the tax liabilities at issue in this appeal.  In fact, the appellant wielded hiring and supervisory authority over Mr. Gardner and even hired his own son to keep watch over Mr. Gardner after the withholding liabilities were first discovered.  Therefore, while he was not listed in the corporate by-laws, the appellant's actual authority nonetheless was readily apparent from the manner in which he exerted control over RTG's operations and finances.  See Mandell, Mass. ATB Findings of Fact and Reports at 1994-11-12.
On the basis of its findings, the Board found and ruled that the appellant was a person responsible for RTG's tax liabilities at issue.  Accordingly, the Board issued a decision for the appellee in this appeal.

   				APPELLATE TAX BOARD

				By: 				______	undefinedundefined_______
				    Thomas W. Hammond, Jr., Chairman



A true copy,


Attest:	______		_____
	    Clerk of the Board

  "Fred Jr." refers to the appellant.
 Amounts for which the Commissioner may determine that the person responsible is individually and personally liable include any interest and penalties imposed.  Berenson v. Commissioner of Revenue, 413 Mass. 831, 832 (1992).

ATB 2010-972