UNITED STATES OF AMERICA, PETITIONER V. MESSINA BUILDERS AND CONTRACTORS CO. No. 86-1007 In the Supreme Court of the United States October Term, 1986 Petition for a Writ of Certiorari to the United States Court of Appeals for the Eighth Circuit The Solicitor General, on behalf of the United States, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Eighth Circuit in this case. TABLE OF CONTENTS Opinions below Jurisdiction Statutes involved Question presented Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-15a) is reported at 801 F.2d 1029. The opinion of the district court (App., infra, 17a-23a) is unreported. JURISDICTION The judgment of the court of appeals (App., infra, 16a) was entered on September 23, 1986. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTES INVOLVED The relevant portions of Sections 3505 and 6303 of the Internal Revenue Code (26 U.S.C.) are set out in a statutory appendix (App., infra, 24a-25a). QUESTION PRESENTED Section 3505 of the Internal Revenue Code provides that, where a lender furnishes funds directly or indirectly to an employer for the payment of wages, the lender in certain circumstances may be personally liable if the required employment taxes are not withheld from those wages and paid over to the IRS. The question presented is whether, as a prerequisite to the government's maintenance of a civil suit to collect the lender's personal liability in such circumstances, the IRS must have sent to the lender, within 60 days of making an assessment of the unpaid taxes against the employer, a copy of the tax bill that is required to be sent to the employer under Section 6303(a). STATEMENT 1. Respondent is a general contractor. In December 1981 respondent entered into two subcontracts with the owner of C&C Plumbing Co., whose employees performed work on the contracts until the owner was financially unable to continue. C&C Plumbing filed employment tax returns for the second and third quarters of 1982 reporting taxes due on the wages paid to C&C employees for their work on the project, but no taxes were paid. Shortly thereafter, the IRS made assessment for the unpaid taxes. The assessments were made in September and October of 1982 and in July and August of 1983. App., infra, 3a-4a, 19a-20a. In June 1984, the United States brought this action against respondent /1/ in the United States District Court for the Western District of Missouri alleging that respondent had supplied funds to C&CR under circumstances that rendered it personally liable under Section 3505 of the Internal Revenue Code in an amount equal to a portion of the unpaid employment taxes. /2/ Respondent moved for summary judgment, contending that the government was precluded from suing it because the Commissioner had not provided it with notice of the tax assessments against C&C Plumbing within the 60-day period specified in Section 6303(a) of the Code. That section provides that the Commissioner, as soon as practicable after making a tax assessment, and in any event within 60 days, must "give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof." Respondent submitted that, if the instant suit were successful, it would be a "person liable for the unpaid tax" within the meaning of Section 6303(a). Respondent accordingly argued that the Commissioner was required, within 60 days of making the assessments against C&C Plumbing, to send respondent as well as C&C Plumbing a copy of the tax bill described in Section 6303(a). See App., infra, 4a, 21a. The district court granted respondent's motion for summary judgment (App., infra, 17a-23a). Relying on United States v. Associates Commercial Corp., 721 F.2d 1094 (7th Cir. 1983), and United States v. Merchants National Bank, 772 F.2d 1522 (11th Cir. 1985), petition for cert. pending, No. 85-1480, the district court held that the notice and demand for payment specified in Section 6303(a) must be sent, not only to the taxpayer against whom social security and withholding taxes have been assessed, but also to third parties against whom the government might seek to establish personal liability, in a civil suit commenced under Section 3505, for an amount equal to any part of the withholding taxes. Since the government had not notified respondent of the assessments against C&C Plumbing within 60 days of making the assessments, the district court held that the government's suit was barred. 2. The court of appeals affirmed, one judge dissenting (App., infra, 1a-15a). The court noted (id. at 5a) that the Third Circuit in United States v. Jersey Shore State Bank, 781 F.2d 974 (1986), cert. granted, No. 85-1736 (argued Dec. 8, 1986), and the Ninth Circuit in United States v. Hunter Engineers & Constructors, Inc., 789 F.2d 1436 (1986), petition for cert. pending, No. 86-209, have held that the government is not required to provide a third-party lender with notice under Section 6303(a) as a prerequisite to a suit to collect the lender's liability under Section 3505. The court declined to follow those decisions, however, but rather "agree(d) with the view held by the Seventh Circuit in Associates, and followed by the Eleventh Circuit in Merchants, that the IRS must provide timely notice to a third-party lender when proceeding under section 3505(b)" (App., infra, 14a (footnote omitted)). The court stated that "many aspects of (the government's) arguments are persuasive * * * , (but) these considerations must bow to the plain language and meaning of the statute" (id. at 6a). Judge Fairchild dissented, concluding that the reasoning of the Third Circuit in Jersey Shore and the Ninth Circuit in Hunter was "more persuasive" (App., infra, 14a-15a). He took issue with the majority's statement that the "plain language" of the statute compelled a ruling in respondent's favor, noting two particular deficiencies in that statement. "It seems a natural reading of Section 6303(a)," Judge Fairchild said, "that 'each person liable for the unpaid tax' means each person whose liability has been determined by the assessment referred to." He further noted that "Section 3505 does not, literally, make the third-party provider 'liable for the unpaid tax,' but 'liable * * * in a sum equal to the taxes.'" App., infra, 15a. REASONS FOR GRANTING THE PETITION 1. This case presents a question identical to that now pending before the Court in Jersey Shore State Bank v. United States, No. 85-1736 (argued Dec. 8, 1986). That question is whether the government, as a prerequisite to its maintenance of a civil suit to collect a lender's personal liability under Section 3505, must have sent to the lender, within 60 days of making an assessment of social security and withholding taxes against the employer, a copy of the tax bill that is required to be sent to the employer under Section 6303(a). For the reasons stated in our brief and argument in Jersey Shore, we believe that the court of appeals there correctly concluded that Section 6303(a) does not require such notice and, accordingly, that the decision below is erroneous. Because the two cases present identical legal questions, the outcome here should be controlled by the result in Jersey Shore, and there is no need for the Court to grant plenary review in this case. It would therefore be appropriate for the Court to hold this case along with the pending petitions in United States v. Merchants National Bank, No. 85-1480, and Hunter Engineers & Constructors, Inc. v. United States, No. 86-209, pending the outcome in Jersey Shore. CONCLUSION The petition for a writ of certiorari should be disposed of as appropriate in light of this Court's decision in Jersey Shore State Bank v. United States, No. 85-1736. Respectfully submitted. CHARLES FRIED Solicitor General DECEMBER 1986 /1/ The government also asserted a claim under Section 3505 against Mike Messina, respondent's president, but the parties later agreed to dismiss him as a defendant in this action (App., infra, 17a n.1). /2/ Unless otherwise noted, all statutory references are to the Internal Revenue Code (26 U.S.C.), as amended (the Code or I.R.C.). APPENDIX