Could California assess corporate officers under section 6829 while the corporation itself remained in bankruptcy?

Plain-English summary

California legal staff concluded that the corporation's bankruptcy did not prevent section 6829 dual determinations against responsible corporate officers who had not filed personal bankruptcies.

The automatic stay protected only the debtor that filed. Staff said California could assess or collect from other parties jointly liable for the corporate taxes, provided the statutory requirements for responsible-person liability were met.

The memorandum also rejected the idea that an officer's own bankruptcy filing could count as an “attempt to pay” that defeated section 6829 willfulness. A filing stops collection and often produces little recovery; it was not treated as payment effort.

Common questions

Did the corporation's stay automatically cover its officers?

No.

Could California assess any officer automatically?

No. The memorandum required section 6829's responsibility and willfulness conditions to be met.

Did filing bankruptcy count as trying to pay the tax?

No, according to staff.

Citations and references

• California Revenue and Taxation Code section 6829 — responsible-person dual liability discussed
• Corporate Chapter 11 case later converted to Chapter 7 — debtor proceeding distinguished from the officers' status

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-1200.pdf

Original ruling text

State of California

Board of Equalization
Legal Division

(MIC:82)

170.1200

Memorandum
Mr. Robert O. Colivas
Tax Compliance Supervisor
Sacramento District Office (KH)

Date:

April 10, 1995

From :

Thomas Cooke
Staff Counsel

Telephone:

(916) 445-6496
CalNet 485-6496

Subject:

Section 6829 Determinations
R--- C--- B---, Inc.
Account No. SY -- XX-XXXXXX

To

:

Gary Jugum has requested that I respond to your memorandum to him dated March 28, 1995 concerning the issuance of Section 6829 dual determinations against the officers of the above corporate taxpayer. In your memorandum, you state that R--- C--- B---, Inc. filed a Chapter 11 bankruptcy petition on February 24, 19XX. The bankruptcy action was converted to Chapter 7 on December 9, 19XX. Taxes are due from this corporation for the periods April 1, 1992 through July 31, 1993. The Board is attempting to dual the corporate liability to two corporate officers for the period April 1, 1993 through June 30, 1993. The bankruptcy action is still open but the Board expects only a small dividend to be paid from the bankruptcy action. The bankruptcy "automatic stay" only restricts the issuance of determinations to individuals or entities that have filed bankruptcy. If a corporation has filed bankruptcy, the "automatic stay" does not prevent the Board from issuing determinations to, or collecting liabilities from, other parties who have not filed bankruptcy and who are jointly liable with the bankruptcy debtor for the taxes due. The Board may issue a dual determination to a corporate officer pursuant to Section 6829 after the corporation has filed bankruptcy unless the corporate officer has also filed bankruptcy in his or her personal capacity. We cannot recommend any remedy other than Section 6829 when a person responsible for the payment of taxes wilfully fails to pay those taxes. Section 6829 was specifically enacted to create a dual liability in these circumstances and it is our recommendation that a determination

Mr. Robert O. Colivas

-2-

April 10, 1995
170.1200

be issued to a corporate officer under this section if the Board's requirements for the issuance of such a determination are met. In your memorandum, you ask if a bankruptcy filing by a corporate officer (or other person responsible for the payment of taxes by an entity) can be interpreted as an attempt to pay the liability so as to preclude a dual determination pursuant to Section 6829? We believe that a bankruptcy filing cannot be interpreted as an attempt to pay a tax liability. The "automatic stay" imposed as a result of the bankruptcy filing prevents the Board from continuing its collection efforts against the bankrupt and the bankruptcy action often results in little or no recovery of the taxes owed by the taxpayer.

TJC:plh