Conway v. United States

No. 10-40485 (5th Cir. July 19, 2011)
Pursuant to 26 U.S.C. § 6672, the CEO of an airline is personally responsible for excise taxes the airline collected from passengers during his tenure but did not turn over to the United States. The airline’s Chapter 11 bankruptcy filing (later converted to Chapter 7) did not change the CEO’s status as a “responsible person” because during the bankruptcy proceedings, the airline continued to make some excise tax payments in the normal course of business without needing bankruptcy court approval. Even if court approval had been required, the CEO had the authority and duty to seek court approval to pay the taxes.
Procedural context:
This is an appeal from the grant of summary judgment.
The United States sought to recover from National Airlines’ former CEO excise taxes National collected from passengers during the former CEO’s tenure but did not turn over to the United States. The taxes in question were accrued both pre- and post-National’s bankruptcy filing. The former CEO argued that he was not a responsible person under 26 U.S.C. § 6672 despite the fact that he was the founder, president, and chairman of the board, was one of the largest individual stockholders, had the most individual authority for the airline, and was authorized to sign checks on the airline’s accounts. Post-bankruptcy, National paid some excise taxes in the normal course of business. Other excise taxes were deferred by legislation passed after 9-11 to assist the airline industry. The CEO argued that after the legislation, the taxes due were no longer “ordinary course” payments. The CEO never sought court approval to pay the deferred taxes once they came due.
E. Grady Jolly, Catharina Haynes, and James E. Graves, Jr.

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