Rock v. Department of Taxes

Rock v. Department of Taxes (97-398); 170 Vt. 1; 742 A.2d 1211

[Filed 10-Sep-1999]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as  formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the  Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 97-398


John Rock	                                 Supreme Court

	                                         On Appeal from
     v.	                                         Chittenden Superior Court

Department of Taxes	                         November Term, 1998



Shireen Avis Fisher, J.


       William H. Sorrell, Attorney General, and Danforth Cardozo, III,
  Special Assistant Attorney      General, Montpelier, for
  Plaintiff-Appellee.

       Francis X. Murray, South Burlington, for Defendant-Appellant.


PRESENT:  Dooley, Morse, Johnson and Skoglund, JJ., and Norton, Supr. J., 
  	  Specially Assigned


       SKOGLUND, J.  We explore today under what circumstances the Tax
  Department may  hold an individual personally liable for a corporation's
  delinquent trust taxes, especially those of  a small, closely held
  corporation.  Appellant John Rock appeals the superior court decision 
  affirming the Tax Department's ("Department") determination that he is
  personally liable for  outstanding trust taxes owed by Whitecaps, Inc.  He
  argues that the Department applied the  wrong legal standard in concluding
  he was personally responsible for the taxes, that the  Department
  erroneously inferred a duty to remit taxes from the mere fact of his
  position as  president, and that the Department denied him due process.  We
  affirm.

                                I. Background


       The Department made the following findings.  In January 1990,
  appellant and Christina  Czechut incorporated Whitecaps, Inc. as a Vermont
  corporation to operate a snack bar and  catering business in a building
  leased from the City of Burlington.  Appellant held seventy 

 

  percent of the shares and was the president and a director of the
  corporation.  He negotiated the  ten-year lease of the business premises,
  personally guaranteed start-up loans and lines of credit  for $40,000, and
  was a signatory on the corporate checking account with unrestricted
  authority  to sign checks.  Appellant signed some payroll checks and checks
  for purchase of business  equipment.  He co-owned a vehicle with the
  business and also shared a post office box with it,  i.e., his personal
  address doubled as the business address for Whitecaps as well as his other 
  businesses, Fresh Water Haulers, Inc., and Modern Septic Tank Service, Inc. 
  Although  appellant denied opening Whitecaps mail, the Department chose to
  believe instead Czechut's  testimony that he opened all types of mail sent
  to his address including correspondence from the  Tax Department.  He used
  his personal accountant of twenty years to provide accounting  services for
  Whitecaps.  Appellant signed an undated application to obtain a federal
  identification  number for Whitecaps and was the designated person for
  Whitecaps tax matters on the 1991  federal corporate income tax return. 
  Appellant's accountant prepared 1990 and 1991 corporate  tax returns.  The
  business did not file returns for subsequent tax years.  A W-2 form for
  1992  reflects that appellant received approximately $4,400 in wages from
  Whitecaps.

       Czechut held thirty percent of the corporation's shares.  She acted as
  the treasurer and a  director of the corporation.  She took primary
  responsibility for the daily operations of the  Whitecaps restaurant,
  although appellant renovated the restaurant space initially and stopped by 
  almost daily to assist with the business.  Moreover, despite appellant's
  denial that he had hiring  or firing authority, the Department found that
  he did have such authority because he participated  in hiring at least one
  employee, his son.  In September 1991, appellant and Czechut began living 
  together, and in January 1992 they jointly purchased real estate as their
  primary residence.  The  couple ceased living together in May 1993, and
  Czechut resigned her corporate office in April  1994.  During her
  involvement with the business, Czechut discussed Whitecaps business affairs 
  and tax liabilities with appellant, such as Czechut's settlement of
  previous past due tax liabilities - which are not at issue here - with a
  Department compliance officer.  Czechut and appellant 

 

  prepared rooms and meals tax returns together either at the office,
  restaurant, or home.  The  Department did not believe appellant's testimony
  that he and Czechut discussed the financial  affairs of C.J. Enterprises,
  Inc., a second restaurant business in which they each held fifty  percent
  of the shares, but never discussed financial matters concerning Whitecaps.

       In March 1994 when appellant learned that the bank loan to Whitecaps,
  which he had  personally guaranteed, was not being paid, he locked Czechut
  out of the Whitecaps' leased  premises and arranged for another business to
  sublease the premises, take over operation of the  restaurant, and assume
  payments on the Whitecaps bank loan.  According to the Department,  Czechut
  then resigned in part out of her disagreement with the sublease terms
  appellant had  negotiated.  On October 18, 1994, the Department sent a
  personal tax assessment letter, signed  by Earle Fennessey, to appellant
  for Whitecaps' outstanding withholding taxes, rooms and meals  taxes, and
  sales and use taxes, totaling at that point, including interest, penalties,
  and late fees:   $16,480.37.  See 32 V.S.A. §§ 5844(a) (withholding), 9279
  (rooms and meals), 9701(14) and  9703 (sales and use).  The Department held
  Czechut personally liable as well for the trust taxes,  but had been unable
  to collect from her.

       At issue in this case are withholding, sales and use, and rooms and
  meals taxes.  These  are commonly termed "trust taxes" because the business
  withholds or collects the taxes on behalf  of the state from a third party
  and holds them in trust until remittance to the state is due.  See 32 
  V.S.A. § 5844(b) (sums withheld deemed to be held in trust for state);
  Crossman Plumbing &  Heating v. Comm'r, 142 Vt. 179, 185-86, 455 A.2d 799,
  801 (1982) (vendor is tax collector on  behalf of state, purchaser is
  actual taxpayer of sales tax); see also Slodov v. United States, 436 U.S. 238, 241-42 (1978) (noting that withheld employee wage and FICA taxes are
  commonly  referred to as "trust fund taxes" to reflect code provision that
  such withholdings or collections  are deemed to be special fund in trust
  for United States).  The three types of taxes at issue in this  case have
  the same character in that the business collects the taxes on behalf of the
  state from  third persons, either employees or customers, and later must
  account for the sums 

 

  and remit them to the state.  See State v. Equinox House, Inc., 134 Vt. 59,
  61, 350 A.2d 357,  358 (1975).  The statutes in effect at the time of this
  dispute stated in pertinent part:

		
     Any person who fails to withhold the required tax or to pay it to 
     the commissioner as required . . . shall be personally and 
     individually liable for the amount of such tax; and if the person is a 
     corporate entity, the personal liability shall extend . . . to any 
     officer or agent of the corporation who as an officer or agent of the 
     corporation is under a duty to withhold the tax and transmit the 
     same to the commissioner.
  32 V.S.A. § 5844(a).
	
     All taxes required to be paid by operators and all increases, interest 
     and penalty thereon, shall become from the time due and payable 
     to the commissioner, a personal debt from the operator liable to 
     pay the same to the state of Vermont to be recovered in a civil 
     action.
  32 V.S.A. § 9280(a); see also 32 V.S.A. § 9202(4) (where operator is
  corporation, defining  operator to "include any officer or agent of such
  corporation who, as an officer or agent of the  corporation, is under a
  duty to pay the gross receipts tax to the commissioner as required by this 
  chapter).

     Persons required to collect tax . . . include every vendor of taxable 
     tangible personal property or services, every recipient of 
     amusement charges.  These terms shall also include any officer or 
     employee of a corporation or of a dissolved corporation who as 
     that officer or employee is under a duty to act for the corporation 
     in complying with . . . this chapter and any member of a 
     partnership.
  32 V.S.A. § 9701(14); see also 32 V.S.A. § 9703 (personal liability).

  "The language varies slightly with each tax, but the practical effect is
  the same":  the statutory  duty is imposed personally on the corporate
  officer who, within the corporate structure, has a  duty to collect and
  remit the taxes.  Equinox, 134 Vt. at 61, 350 A.2d  at 359.  In other words, 
  an officer's corporate duty becomes a statutory duty, "and personal
  liability attaches for  nonperformance."  Id.

       Appellant contested the tax assessment letter.  After an evidentiary
  hearing which   Fennessey presided over, the Department concluded that,
  contrary to appellant's testimony in  which he denied having any corporate
  responsibilities, his extensive financial and managerial  involvement in
  the business indicated otherwise.  From appellant's exercise of control
  over the  financial affairs of the business, the Department inferred that
  remittance of taxes fell within his 

 

  corporate duties.  He appealed this determination to the superior court on
  the same grounds as he  maintains in his appeal to this court, and the
  superior court affirmed.  The instant appeal  followed.

                               II. Discussion

         A.  Legal Standard for Determining Duty to Pay Trust Taxes


       On appeal, appellant primarily argues that the Department used the
  wrong legal standard  in holding him personally responsible for Whitecaps's
  outstanding trust taxes.  Relying on  Equinox, appellant articulates the
  test for personal liability as whether the corporation ever  specifically
  delineated tax remittance as an officer's duty, in contrast to the
  Department's  enunciation of the standard as whether a corporate officer
  had authority to remit tax payments or  had control of the company's
  financial and managerial affairs.  He further contends that in direct 
  contravention of our holding in Equinox, the Department inferred his duty
  to collect and remit  taxes solely from his position as president.

       We review the case under the same standard as applied in the
  intermediate appeal to the  superior court.  Thus, we will not set aside
  the Department's findings of fact unless clearly  erroneous.  While
  conclusions of law are not so protected, we accord deference to the 
  Department's construction of tax statutes so long as they are being
  construed rather than  reconstructed.  See Tarrant v. Department of Taxes,
  10 Vt. L.W. 88, 90 (1999).

       In Equinox, as here, the State sought to impose personal liability on
  the president of the  corporation for outstanding income withholding, sales
  and use, and rooms and meals taxes under  the respective statutes
  authorizing such liability for nonperformance of a duty to withhold or 
  collect and then remit such taxes.  See 134 Vt. at 61, 350 A.2d  at 358.  In
  that case, we affirmed  dismissal of the complaint for failure to state a
  cause of action.  In light of the fact that "Vermont  statutes confer no
  express duties upon corporate presidents and treasurers as such, leaving
  their  delineation to bylaws and director resolutions," we held that "the
  failure of the State to allege  such duties . . . leaves the complaint
  lacking in an allegation necessary to impose

 

  liability."  See id. at 62, 350 A.2d  at 359.

       Appellant misconstrues our holding in Equinox to require a definitive
  assertion by the  corporation, such as a bylaw or director's resolution,
  defining tax remittance as a particular  officer's duty before that officer
  can be held liable for nonperformance.  We inserted the  parenthetical
  phrase "leaving their delineation to bylaws and directors resolutions" not
  as an  exclusive standard for determining which officers have a corporate
  duty to remit taxes, but rather  to emphasize the way in which the
  particular complaint at issue was deficient and to provide an  example of
  the type of allegation that would suffice.  The example was illustrative,
  not  exhaustive.  Equinox therefore did not narrowly circumscribe the
  manner of proof on the  corporate duty element, as the appellant would have
  it.  Indeed, were appellant's interpretation of  the personal liability
  statutes correct, mere silence by the corporation would effectively
  eviscerate  the statutory remedy against corporate officers and employees
  for nonpayment of the taxes they  collect and hold in trust for the state.

       Appellant further protests the Department and superior court's
  reliance on the standard  articulated by federal courts interpreting the
  analogous "responsible person" statute, 26 U.S.C. §  6672: (FN1) that
  general authority and control to act for the corporation, especially
  regarding  payment of creditors and disbursal of funds, is sufficient to
  find a corresponding duty.  See, e.g.,  United States v. Landau, 155 F.3d 93, 100 (2d Cir. 1998) (stating "responsible person" test as  whether
  individual has significant control over enterprise's finances); Godfrey v.
  United States,  748 F.2d 1568, 1576 (Fed. Cir. 1984) (absent evidence
  chairman of board had or exercised  control of collection, accounting for,
  and payment over of taxes, he was not

 

  "responsible person" liable for failure to pay over withholding taxes);
  Schwinger v. United  States, 652 F. Supp. 464, 466 (E.D.N.Y. 1987) (duty
  for ensuring that withheld taxes are  remitted to government generally
  found in high-level corporate officials charged with control  over
  corporate business affairs who participate in decisions concerning payment
  of creditors and  disbursal of funds).  He claims that both the Department
  and superior court erred by employing  this federally-derived standard,
  and, alternatively, that even if it were permissible to turn to the 
  federal legal standard to evaluate existence of a duty under the state
  statute, the Department and  superior court then erred by failing to assess
  the facts under the willfulness prong of the federal  personal liability
  statute.

       The superior court cited Schwinger in its decision, and, while the
  Department supported  its conclusions with Equinox, its findings closely
  tracked federal factors for determining  existence of a duty to remit such
  taxes.  See Landau, 155 F.3d  at 100-101 (factors include  whether person is
  officer or board director, owns shares or possesses entrepreneurial stake
  in  company, actively manages company day to day, has hiring and firing
  authority, controls order  in which outstanding debts are paid, controls
  daily bank accounts and disbursement records, and  has check-signing
  authority); White v. United States, 372 F.2d 513, 516-17 (Ct. Cl. 1967) 
  (citing similar factors; noting additionally that defendant drew weekly
  salary, used his address  for most business mail, ordered materials and
  supplies, conducted business correspondence,  negotiated all contracts, and
  prepared invoices); Cassidento v. United States, 90-1 T.C.M.  (CCH) 50, 171
  (D. Conn. 1990) (silent partner, who visited two related businesses
  regularly,  loaned money to corporations and guaranteed credit extended to
  them, and issued personal check  to IRS in partial satisfaction of trust
  tax liability, had duty).  Since Equinox does not detail  factors to
  consider in determining existence of a duty to remit trust taxes and the
  Legislature has  not acted in the interim to further define corporate
  officers' duties, neither the Department nor  the superior court erred by
  reviewing federal cases.  Although federal precedent would not be  binding
  in this instance, we have often looked to federal case law as instructive
  in developing 

  

  similar areas of state law.  See, e.g., Rule v. Tobin, 168 Vt. 166, 169,
  719 A.2d 869, 871  (1998) (looking, in absence of helpful state precedent,
  to federal cases interpreting federal civil  rule of procedure); State v.
  Austin, 165 Vt. 389, 393-94, 685 A.2d 1076, 1079-80 (1996)  (although it is
  axiomatic that federal district court decisions are not binding on this
  court, well-reasoned decisions have persuasive value); In re D.L., 164 Vt.
  223, 228 n.3, 669 A.2d 1172,  1176 (1995) (noting that decision draws on
  federal case law for analysis and support of state  separation of powers
  jurisprudence as Vermont and United States Supreme Court have same 
  judicial powers).

       The superior court was careful to recount the differences as well as
  the similarities  between the Vermont and federal statutes.  The starkest
  discrepancy between the two statutes is  that for personal liability to
  attach under federal law, beyond a duty to remit trust taxes, there  must
  be a willful failure to do so.  Thus, careful attention to the statutory
  distinction explains  why the Department and superior court did not
  undertake a willfulness analysis.  Nevertheless,  an analysis of whether
  the Legislature meant liability to depend also on some form of scienter or 
  intent would have been helpful.  If the Legislature did not intend for the
  personal liability statute  to contain a scienter requirement, then, absent
  such a requirement to balance the broadest  reaching interpretations of a
  duty to remit taxes under federal case law, (FN2) wholesale  adoption of
  the federal factors for determining existence of a duty might extend the
  force and  operation of the personal liability statutes beyond the clear
  import of the language and legislative  intent.  Cf.

 

  International Bus. Machs. v. Department of Taxes, 133 Vt. 269, 277, 336 A.2d 158, 163  (1975) (noting well-settled rule that doubts are resolved
  against taxing power and in favor of  taxpayer).

       In addition to case law construing analogous federal provisions, we
  often review other  state's interpretations of similar statutes.  Here, the
  relative paucity of reported state trust tax  cases, see Annotation,
  Construction, Application, and Effect, with Respect to Withholding,  Social
  Security, and Unemployment Compensation Taxes, of Statutes Imposing
  Penalties for Tax  Evasion or Default, 22 A.L.R.3d 8 (1969, Supp. 1998),
  compared with the abundance of federal  cases, probably turned the
  Department and superior court's attention to federal law.  Few as the 
  state cases are that have considered personal liability for trust taxes
  beyond a simple tracking of  the federal factors, we find it instructive to
  examine them.

       The Oregon Supreme Court noted, without endorsing, its state
  department of revenue's  inclusion of "knowledge of the nonpayment of the
  withholding taxes" as a factor in determining  corporate officer liability
  for failure to pay over withholding taxes, see Olson v. Department of 
  Revenue, 744 P.2d 240, 245 (Or. 1987), even though that state's statute,
  like ours, contains only  a duty element, not a willfulness one.  See id.
  at 241 (citing ORS 316.162(3)(b)).  In contrast to  this approach, the Ohio
  Supreme Court rejected outright the notion that a "willfulness" 
  requirement should be read into the state statute imposing personal
  liability on corporate officers  for unremitted sales tax, stating that it
  would be contrary to rudimentary statutory rules of  construction.  See
  Lawrence v. Lindley, 418 N.E.2d 1351, 1353 n.2 (Ohio 1981).  We agree  with
  this approach.  Since the Vermont statute contains no scienter element to
  impose liability,  we cannot add one.  See State v. O'Neill, 165 Vt. 270,
  275, 682 A.2d 943, 946 (1996); State v.  Fuller, 163 Vt. 523, 528, 660 A.2d 302, 305 (1995).

       Turning to the duty element, the Legislative history is uninformative
  concerning the  purpose behind the statutes imposing personal liability for
  unremitted trust taxes.  Nonetheless,  we conclude that the underlying
  purpose of these statutes is the same as the federal responsible-person
  statute.  While the Legislature chose not to include the scienter element
  present in the 

 

  comparable federal statute, it is evident that the Legislature designed the
  state trust tax statutes  along the same lines as the federal one:  "[T]o
  cut through the organizational form and impose  liability upon those
  actually responsible for . . . failure to . . . pay over the tax." 
  Godfrey, 748 F.2d  at 1574 (emphasis added).  As a result, whereas the
  federal statute utilizes two elements,  duty and willfulness, to establish
  a sufficient nexus between nonpayment and the person or  persons ultimately
  deemed responsible for failing to pay the trust taxes, our statute employs
  a  single element, duty, to accomplish the same purpose.  See Schwinger,
  652 F. Supp.  at 467.   Again, we refer to cases from other states for
  illumination on this point.

       Rather than employing the very specific federal elements comprising a
  duty to remit trust  taxes, the Indiana Supreme Court maintains three more
  general considerations - the first two of  which we likewise mentioned as
  relevant considerations in Equinox.  See Department of State  Revenue v.
  Safayan, 654 N.E.2d 270, 273 (Ind. 1995).  First, Indiana looks at the
  "person's  position within the power structure of the corporation," second,
  at the "authority of the officer or  employee as established by the
  articles of incorporation, bylaws, or . . . employment contract,"  and
  third, at "whether the person actually exercised control over the finances
  of the business."   Id.; cf. Equinox, 134 Vt. at 60-61, 350 A.2d  at 358-59. 
  Whereas federal courts take a more or  less cohesive view of the first
  consideration, i.e., that titular authority is not sufficient by itself to 
  establish a duty, they have varied in the expansiveness with which they
  construe the last  consideration.  Federal courts have gone beyond evidence
  of actual control over the  corporation's finances to consider almost any
  indicia of managerial control or fiscal authority  sufficient to satisfy
  the duty element.  The Indiana court recognizes that the very specific
  factors  enumerated by federal courts, and followed by many state courts,
  may be a relevant part of the  inquiry but only insofar as they demonstrate
  the individual actually exercised control over  corporate finances.  See
  Safayan, 654 N.E.2d  at 273 n.3 (using factor of hiring and firing power  as
  example).

 

       We agree with and adopt this approach. (FN3) Thus, for instance, the
  managerial  functions set forth as federal factors, like hiring and firing
  authority, may be relevant in some  cases but not in others.  We can
  envision circumstances under which the fact that an individual  has the
  power to hire and fire employees, combined with other facts, may indicate
  that the  person regularly took responsibility for employee withholding
  taxes.  The Department's findings  include the fact that appellant in this
  case exercised hiring authority by hiring his son. Its  conclusions do not
  analyze how the fact is relevant to the duty inquiry in this case.  We
  conclude  that, standing alone, the fact demonstrates little in relation to
  his control of the finances.

       As for appellant's contention, however, that the Department inferred
  he had a duty to  remit the trust taxes at issue from the mere fact of his
  status as president of the corporation, a  quick review of the record and
  the Department's findings demonstrates to the contrary that they  are
  replete with factors establishing appellant's authority and control over
  the corporation's  finances and his frequent exercise of that authority and
  control.  By adopting the three-part  inquiry set forth above (position of
  person in corporation, person's authority as established in  bylaws or
  contract, and person's actual exercise of control over finances), with
  specific federal  factors having potential but not automatic relevancy, we
  deliberately place the focus of the  inquiry on substance over form - a
  focus that while professed at the federal level is lost in much  of the
  case law.  Thus, holding a corporate office alone does not create a duty
  under the personal  liability statutes to remit trust taxes.  Nor does
  authority to sign checks on behalf of a  corporation - particularly in the
  context of a closely held corporation where most corporate  officers are
  likely to have authority to make disbursements, see In re Coveney, 217 B.R. 362, 
 
 

  365 (D. Mass. 1998) - establish a solid foundation upon which to base a
  liability determination.   See Schwinger, 652 F. Supp.  at 467.  And, even
  in a closely held corporation such as the one  involved here, the small
  number of shareholders and their often close relationship is not 
  sufficient in and of itself to circumvent corporate identity.  See Coppa v.
  Taxation Div. Dir., 8  N.J. Tax 236, 245 (N.J. Tax 1986).

       Here, the Department developed a record that went well beyond officer
  status and check-signing authority.  Appellant was intimately involved
  with the business financially, including  setting up and guaranteeing loans
  and appearing on federal documents as the designated person  for tax
  matters.

       Appellant simply ignores the weight of the evidence against him. 
  Ultimately, we are led  to the conclusion that appellant attempts to frame
  as a legal question what is more properly  characterized as a credibility
  determination made by the Department as the finder of fact.   Appellant
  testified that he had no responsibilities as president of the corporation -
  testimony that  the Department did not find credible in light of
  appellant's numerous activities related to the  corporation's financial
  matters.  The Department rejected appellant's denial that he frequently 
  discussed Whitecaps' finances with Czechut, regularly prepared tax
  documents together with  Czechut, and routinely opened Whitecaps mail.  The
  decision how to resolve contradictory  evidence is properly left to the
  province of the fact finder.  See State v. Tenney, 143 Vt. 213,  216, 464 A.2d 747, 748 (1983).  The Department properly viewed appellant's actual
  authority  and control over the corporation's financial affairs as evidence
  of his duty to pay over the trust  taxes to the state. B. Due Process

       Finally, appellant asserts he was denied due process because the
  Department used an  administrative adjudicator to review his own initial
  determination imposing personal liability on  appellant for Whitecaps'
  trust tax deficiencies.  We first note that appellant's portrayal of the 
  initial letter is not precisely accurate.  The letter stated that the
  Department had determined 

 

  appellant was under a duty to remit trust taxes, not that Fennessey had
  made the determination.   Fennessey's signature did appear on the form
  letter as Director of Compliance.  More  importantly, appellant has shown
  no actual or potential bias by Fennessey. See Richard v.  Richard, 146 Vt.
  286, 288,  501 A.2d 1190, 1911 (1985) (requiring disqualification of
  assistant  judge who had socialized for decade with litigant as judge's
  participation would cast doubt on  impartiality of proceedings).  Absent
  such bias, it is well settled that a hearing officer may both  initiate and
  then adjudicate a case without violating due process because agency
  directors can act  on the recommendations of investigators without losing
  their judicial balance.  See Department of  Taxes v. Tri-State Indus.
  Laundries, 138 Vt. 292, 296, 415 A.2d 216, 219 (1980).

       Affirmed.

				       FOR THE COURT:

				       ___________________________________
				       Associate Justice



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                                  Footnotes


FN1.  "Any person required to collect, truthfully account for, and pay over
  any tax imposed by this title who willfully fails  to collect such tax, or
  truthfully account for and pay over such tax, or willfully attempts in any
  manner to evade or defeat any  such tax or the payment thereof, shall, in
  addition to other penalties provided by law, be liable to a penalty equal
  to the total  amount of the tax evaded, or not collected, or not accounted
  for and paid over."  26 U.S.C. § 6672(a).

FN2.  We note that in the development of federal case law the duty element
  was construed broadly based on the fact the  willfulness element existed to
  narrow the scope of responsible persons.  Expansion of the duty element was
  then accompanied  by erosion of the willfulness element.  Compare White,
  372 F.2d  at 520-21 (willfulness means deliberate choice voluntarily, 
  consciously, and intentionally made to prefer other creditors over
  government), with Godfrey, 748 F.2d  at 1577 (willful  conduct includes
  reckless disregard of obvious risk).  Federal courts now widely apply the
  recklessness standard as a  subspecies of willfulness.  See, e.g., Denbo v.
  United States, 988 F.2d 1029, 1034 (10th Cir. 1993) (holding director of
  closely  held corporation liable for disregarding known risk when he relied
  on president's assurances "instead of doing more" to ensure  taxes
  remitted).

FN3.  In adopting this approach, we do not thereby endorse the remainder of
  the Safayan decision.  After carefully  articulating a standard more
  constrained than the federal one, the court then proceeds to more or less
  ignore its own newly  wrought test in the particular case at hand.  See 654 N.E.2d  at 274-75 (where passive investor in closely held restaurant 
  venture later became active trying to save it from bankruptcy, court relied
  on federal cases stating that existence of authority  over finances,
  regardless of actual exercise thereof, is determinative of liability).