STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

DAVID M ZUEHLKE & ASSOCIATES INC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 464970, Hearing No. S0300206AP


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

DECISION

The decision of the administrative law judge is affirmed. Accordingly, David M. Zuehlke is personally liable for the payment of delinquent unemployment insurance contributions, as set forth in the initial determination.

Dated and mailed November 29, 2005
zuehlda . ssd : 105 : 1   ER 451

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

MEMORANDUM OPINION


Wisconsin Stat. § 108.22(9) has four conditions which must be met before one may be held personally liable for his or her corporation's delinquent unemployment taxes. The individual must have at least 20 percent ownership interest in the company; the individual must have control or supervision of or responsibility for making the tax payments; the individual must "willfully" fail to make such payments or insure that they are made; and the department must have previously attempted to collect the delinquent taxes in question from the corporation itself. At hearing, the appellant conceded the first, second, and fourth conditions, leaving the issue to be whether he willfully failed to make the payments in question.

In the personal liability context, as the administrative law judge indicated, willfulness requires only that one's decision be "intentional, knowing and voluntary." That is, for willfulness to be present one need only know the monies in question are due and pay other creditors instead of the department. The Fifth Circuit has indicated, for example, that a taxpayer has a duty to insure that taxes are paid before payments are made to other creditors, once the taxpayer is aware of the corporation's liability to the government. Mazo v. United States, 591 F.2d 1151, 1157 (1979). Both of the necessary conditions are present in this case. The appellant conceded at hearing that it was his responsibility to see that taxes owed by the corporation were paid. He was reporting the corporation's payroll but not paying the taxes on the payroll, because the business was failing. He also admitted that he knew the payments were not being sent along with the reports. The appellant's failure to pay the taxes thus must be considered knowing.

The failure will be voluntary as well, if the appellant made payments to other creditors during the time period in question, and he concedes that he did. Specifically, he continued to do business with certain vendors "on and off" and they were paid "on and off." He indicated as well that the telephone bill was paid at times. While the latter bill is certainly not significant, it still shows a preference by the appellant for a creditor over the required tax payments to the department. The appellant conceded as well that he had 6-7 employees per quarter during this time, and that they were paid their wages. For these reasons, the commission agrees with the appeal tribunal that the appellant meets all of the Wis. Stat. § 108.22(9) conditions for personal liability.

The appellant cannot genuinely dispute that all of the conditions of Wis. Stat. § 108.22(9) are satisfied. He argues instead that an agreement he signed with a Wisconsin Department of Revenue agent "settled" the entirety of the state's claims against him. In addition to the Department of Workforce Development, the state Department of Revenue and the Internal Revenue Service also have been seeking monies from him. There is no evidentiary basis upon which to conclude, however, that the agreement between the appellant and the Department of Revenue includes the appellant's personal liability for taxes owed the Department of Workforce Development.

The supreme court has "long recognized that administrative agencies are creations of the legislature and that they can exercise only those powers granted by the legislature." Martinez v. DILHR, 165 Wis. 2d 687, 697, 478 N.W.2d 582 (1992), citing Thomson v. Racine, 242 Wis. 591, 597, 9 N.W.2d 91 (1943). In more recent parlance, the powers of state administrative agencies "are limited by the statutes creating them and defining their authority." Ledger v. Waupaca Board of Appeals, 146 Wis. 2d 256, 263, 430 N.W.2d 370 (Ct. App. 1988). The Department of Revenue's general authority extends to property, personal property, death, income, and franchise taxes. Its general authority and obligations do not extend to unemployment insurance taxes. Thus, nothing suggests that the Department of Revenue had the authority to enter into the agreement the appellant claims it did. Neither is there any evidence suggesting that the Department of Revenue agent who "signed off" on the agreement drafted by the appellant, intended the agreement to address anything other than taxes the appellant owed to the Department of Revenue. For these reasons, the commission cannot conclude that the agreement satisfies the appellant's debt in the current proceeding.

cc:
Attorney Michael J. Mathis
Winkel Law Office



 

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